Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 9, 2022

Documents

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to 
Commission File Number: 001-40887
Life Time Group Holdings, Inc.
(Exact name of registrant as specified in its charter)
Delaware 47-3481985
(State or other jurisdiction of
incorporation or organization)		 (I.R.S. Employer
Identification No.)
2902 Corporate Place
Chanhassen, Minnesota 55317
(952) 947-0000
(Address of principal executive offices, including zip code; Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share LTH The New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒     No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒ 
As of November 7, 2022, the registrant had 194,188,729 shares of common stock outstanding, par value $0.01 per share.

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TABLE OF CONTENTS
Page
2
Table of Contents
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
September 30,
2022		 December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents $ 107,069  $ 31,637 
Accounts receivable, net 12,281  6,464 
Center operating supplies and inventories 44,084  41,007 
Prepaid expenses and other current assets 44,829  48,883 
Income tax receivable —  3,533 
Total current assets 208,263  131,524 
Property and equipment, net 2,772,385  2,791,464 
Goodwill 1,233,176  1,233,176 
Operating lease right-of-use assets 2,148,828  1,864,528 
Intangible assets, net 173,492  174,241 
Other assets 65,403  61,742 
Total assets $ 6,601,547  $ 6,256,675 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 72,951  $ 71,308 
Construction accounts payable 118,671  83,311 
Deferred revenue 32,296  33,871 
Accrued expenses and other current liabilities 167,457  147,920 
Current maturities of debt 15,046  23,527 
Current maturities of operating lease liabilities 50,746  46,315 
Total current liabilities 457,167  406,252 
Long-term debt, net of current portion 1,775,248  1,775,719 
Operating lease liabilities, net of current portion 2,206,753  1,909,883 
Deferred income taxes 43,941  55,213 
Other liabilities 13,265  18,216 
Total liabilities 4,496,374  4,165,283 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.01 par value per share; 500,000 shares authorized; 193,991 and 193,060 shares issued and outstanding, respectively.
 1,940  1,931 
Additional paid-in capital 2,780,190  2,743,560 
Accumulated deficit (666,602) (651,083)
Accumulated other comprehensive loss (10,355) (3,016)
Total stockholders’ equity 2,105,173  2,091,392 
Total liabilities and stockholders’ equity $ 6,601,547  $ 6,256,675 

See notes to unaudited condensed consolidated financial statements.
3
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2022 2021 2022 2021
Revenue:
Center revenue $ 479,995  $ 372,000  $ 1,307,498 $ 933,690
Other revenue 16,386  13,040  42,404 23,835
Total revenue 496,381  385,040  1,349,902 957,525
Operating expenses:
Center operations 295,253  231,996  814,383 625,322
Rent 63,213  52,513  179,166 154,552
General, administrative and marketing 57,139  45,304  175,650 126,896
Depreciation and amortization 56,400  57,977  171,680 177,005
Other operating (income) expense (31,358) 14,796  (56,605) 30,660
Total operating expenses 440,647  402,586  1,284,274 1,114,435
Income (loss) from operations 55,734  (17,546) 65,628 (156,910)
Other (expense) income:
Interest expense, net of interest income (27,696) (39,849) (84,732) (176,144)
Equity in earnings (loss) of affiliate 95  (28) 129 (412)
Total other expense (27,601) (39,877) (84,603) (176,556)
Income (loss) before income taxes 28,133  (57,423) (18,975) (333,466)
Provision for (benefit from) income taxes 3,401  (11,981) (3,456) (58,867)
Net income (loss) $ 24,732  $ (45,442) $ (15,519) $ (274,599)
Income (loss) per common share:
Basic $ 0.13  $ (0.36) $ (0.08) $ (2.00)
Diluted $ 0.12  $ (0.36) $ (0.08) $ (2.00)
Weighted-average common shares outstanding:
Basic 193,918  145,196  193,364 145,196
Diluted 198,381  145,196  193,364 145,196

See notes to unaudited condensed consolidated financial statements.
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Table of Contents
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2022 2021 2022 2021
Net income (loss) $ 24,732  $ (45,442) $ (15,519) $ (274,599)
Foreign currency translation adjustments, net of tax of $0
 (6,015) (2,404) (7,339) 323
Comprehensive income (loss) $ 18,717  $ (47,846) $ (22,858) $ (274,276)

See notes to unaudited condensed consolidated financial statements.
5
Table of Contents
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
Common Stock Additional Paid-In
Capital		 Accumulated Deficit Accumulated Other Comprehensive Loss Total
Equity
Shares Amount
Balance at June 30, 2022 193,796  $ 1,938  $ 2,772,393  $ (691,334) $ (4,340) $ 2,078,657 
Net income —  —  —  24,732  —  24,732 
Other comprehensive loss —  —  —  —  (6,015) (6,015)
Share-based compensation —  —  5,803  —  —  5,803 
Stock option exercises 195  2  1,994  —  —  1,996 
Balance at September 30, 2022 193,991  $ 1,940  $ 2,780,190  $ (666,602) $ (10,355) $ 2,105,173 

Common Stock Additional Paid-In
Capital		 Accumulated Deficit Accumulated Other Comprehensive Loss Total
Equity
Shares Amount
Balance at December 31, 2021 193,060  $ 1,931  $ 2,743,560  $ (651,083) $ (3,016) $ 2,091,392 
Net loss —  —  —  (15,519) —  (15,519)
Other comprehensive loss —  —  —  —  (7,339) (7,339)
Share-based compensation —  —  33,214  —  —  33,214 
Stock option exercises 309  3  3,187  —  —  3,190 
Equity issuance costs —  —  (270) —  —  (270)
Issuance of common shares in connection with the vesting of restricted stock units 622  6  (6) —  —  — 
Settlement of accrued compensation liabilities through the issuance of share-based compensation awards —  —  505  —  —  505 
Balance at September 30, 2022 193,991  $ 1,940  $ 2,780,190  $ (666,602) $ (10,355) $ 2,105,173 

Common Stock Additional Paid-In
Capital		 Stockholder Note
Receivable		 Accumulated Deficit Accumulated Other Comprehensive Loss Total
Equity
Shares Amount
Balance at June 30, 2021 145,196  $ 1,452  $ 1,564,591  $ (15,000) $ (300,871) $ (503) $ 1,249,669 
Net loss —  —  —  —  (45,442) —  (45,442)
Other comprehensive loss —  —  —  —  —  (2,404) (2,404)
Share-based compensation —  —  1,794  —  —  —  1,794 
Cancellation of stockholder note receivable —  —  (11,355) 15,000  —  —  3,645 
Dividends on preferred stock —  —  (6,126) —  —  —  (6,126)
Balance at September 30, 2021 145,196  $ 1,452  $ 1,548,904  $ —  $ (346,313) $ (2,907) $ 1,201,136 

Common Stock Additional Paid-In
Capital		 Stockholder Note
Receivable		 Accumulated Deficit Accumulated Other Comprehensive Loss Total
Equity
Shares Amount
Balance at December 31, 2020 145,196  $ 1,452  $ 1,569,905  $ (15,000) $ (71,714) $ (3,230) $ 1,481,413 
Net loss —  —  —  —  (274,599) —  (274,599)
Other comprehensive income —  —  —  —  —  323  323 
Share-based compensation —  —  2,924  —  —  —  2,924 
Settlement of accrued compensation liabilities through the issuance of share-based compensation awards —  —  3,844  —  —  —  3,844 
Cancellation of stockholder note receivable —  —  (11,355) 15,000  —  —  3,645 
Dividends on preferred stock —  —  (16,414) —  —  —  (16,414)
Balance at September 30, 2021 145,196  $ 1,452  $ 1,548,904  $ —  $ (346,313) $ (2,907) $ 1,201,136 

See notes to unaudited condensed consolidated financial statements.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
2022 2021
Cash flows from operating activities:
Net loss $ (15,519) $ (274,599)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 171,680  177,005 
Deferred income taxes (10,957) (63,467)
Share-based compensation 33,214  6,959 
Non-cash rent expense 27,304  11,546 
Impairment charges associated with long-lived assets 153  2,455 
(Gain) loss on disposal of property and equipment, net (98,498) 3,515 
Loss on debt extinguishment —  40,993 
Write-off of discounts and debt issuance costs —  18,325 
Amortization of debt discounts and issuance costs 5,898  7,761 
Changes in operating assets and liabilities 14,055  57,614 
Other (2,010) (3,429)
Net cash provided by (used in) operating activities 125,320  (15,322)
Cash flows from investing activities:
Capital expenditures (409,946) (201,741)
Acquisitions, net of cash acquired —  (9,139)
Proceeds from sale-leaseback transactions 373,451  73,981 
Other (985) (1,291)
Net cash used in investing activities (37,480) (138,190)
Cash flows from financing activities:
Proceeds from borrowings 8,657  1,907,577 
Repayments of debt (21,993) (1,602,164)
Proceeds from revolving credit facility 710,000  134,000 
Repayments of revolving credit facility (710,000) (228,000)
Repayments of finance lease liabilities (1,043) (1,133)
Increase in debt discounts and issuance costs (43) (45,151)
Proceeds from stock option exercises 3,190  — 
Other (476) — 
Net cash (used in) provided by financing activities (11,708) 165,129 
Effect of exchange rates on cash and cash equivalents (700) 15 
Increase in cash and cash equivalents 75,432  11,632 
Cash and cash equivalents – beginning of period 31,637  33,195 
Cash and cash equivalents – end of period $ 107,069  $ 44,827 

See notes to unaudited condensed consolidated financial statements.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
454
1. Nature of Business and Basis of Presentation
Nature of Business
Life Time Group Holdings, Inc. (collectively with its direct and indirect subsidiaries, “Life Time,” “we,” “our,” or the “Company”) is a holding company incorporated in the state of Delaware. Life Time Group Holdings, Inc. changed its name from LTF Holdings, Inc. effective on June 21, 2021. As a holding company, Life Time Group Holdings, Inc. does not have its own independent assets or business operations, and all of our assets and business operations are through Life Time, Inc. and its direct and indirect subsidiaries. We are primarily dedicated to providing premium health, fitness and wellness experiences at our athletic country club destinations and via our comprehensive digital platform and portfolio of iconic athletic events – all with the objective of inspiring healthier, happier lives. We design, build and operate our athletic country club destinations that are distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. As of September 30, 2022, we operated 156 centers in 29 states and one Canadian province.
COVID-19 Impact
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, the United States declared a National Public Health Emergency and we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding COVID-19. We re-opened our first center on May 8, 2020 and continued to re-open our centers as state and local governmental authorities permitted. With the exception of our three Canadian centers, which were temporarily closed during a portion of January 2022, all of our centers were open during the three and nine months ended September 30, 2022.
Initial Public Offering
On October 12, 2021, Life Time Group Holdings, Inc. consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock at a public offering price of $18.00 per share, resulting in total gross proceeds of $702.0 million, which was reduced by underwriting discounts and other offering and issuance expenses of $28.0 million, of which approximately $0.3 million was recognized during 2022, for net proceeds of $674.0 million. The shares of the Company’s common stock began trading on The New York Stock Exchange (the “NYSE”) under the symbol “LTH” on October 7, 2021. A registration statement on Form S-1 relating to the offering of these securities was declared effective by the Securities and Exchange Commission (the “SEC”) on October 6, 2021.
On November 1, 2021, Life Time Group Holdings, Inc. consummated the sale of nearly 1.6 million additional shares of its common stock at the IPO price of $18.00 per share pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $28.4 million, which was reduced by underwriting discounts and other offering expenses of $1.3 million, for net proceeds of $27.1 million. We used these net proceeds, as well as the remaining portion of the net proceeds we received in connection with the IPO after the $575.7 million (including a $5.7 million prepayment penalty) partial pay down of our Term Loan Facility (as defined in Note 6, Debt), for general corporate purposes.
Basis of Presentation
The unaudited condensed consolidated financial statements include the accounts of Life Time Group Holdings, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In recording transactions and balances resulting from business operations, we use estimates based on the best information available. We revise the recorded estimates when better information is available, facts change, or we can determine actual amounts. These revisions can affect our consolidated operating results. All adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods have been included.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. A summary of our significant accounting policies is included in Note 2 to our annual consolidated financial statements.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
2. Summary of Significant Accounting Policies
Recently Adopted Accounting Pronouncements
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standard Update (“ASU”) 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” to increase the transparency of government assistance, including with respect to the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance and the effect of the assistance on an entity’s financial statements. The amendments are to be applied either (1) prospectively to all applicable transactions that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. We adopted this ASU as of January 1, 2022 and applied it prospectively. The adoption of this ASU did not have any impact on our financial position, results of operations or cash flows.
New Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope,” which provides implementation guidance associated with ASU 2020-04 and clarifies certain optional expedients in Topic 848. The guidance in ASU 2020-04 is effective for all entities as of March 12, 2020 and may be applied through December 31, 2022. We are still evaluating the impact of ASU 2020-04, but we do not expect that the adoption of this ASU will have a material impact on our consolidated financial statements.
Fair Value Measurements
The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
The carrying amounts related to cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value.
Fair Value Measurements on a Recurring Basis. We had no material remeasurements of such assets or liabilities to fair value during the three and nine months ended September 30, 2022 and 2021.
Financial Assets and Liabilities. At September 30, 2022, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes (each of which is defined in Note 6, Debt) was approximately $269.9 million, $839.2 million and $404.8 million, respectively. At December 31, 2021, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes was approximately $277.0 million, $957.4 million and $494.0 million, respectively. The carrying amount of our outstanding Mortgage Notes and Construction Loan (each of which is defined in Note 6, Debt) at September 30, 2022 and December 31, 2021 approximates fair value. The fair value of our debt is based on the amount of future cash flows discounted using rates we would currently be able to realize for similar instruments of comparable maturity. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. For more information regarding our debt, see Note 6, Debt.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Fair Value Measurements on a Nonrecurring Basis. Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to our long-lived assets, goodwill and intangible assets, which are remeasured when the derived fair value is below carrying value on our condensed consolidated balance sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. If we determine that impairment has occurred, the carrying value of the asset would be reduced to fair value and the difference would be recorded as a loss within operating income in our condensed consolidated statements of operations.
During both the three and nine months ended September 30, 2022 and 2021, we determined that certain projects were no longer deemed viable for construction, and that the previously capitalized site development costs associated with these projects were impaired. Accordingly, as it relates to these long-lived assets, we recognized impairment charges of $0.2 million and $0.7 million for the three months ended September 30, 2022 and 2021, respectively, and $0.2 million and $2.5 million for the nine months ended September 30, 2022 and 2021, respectively. Fair value remeasurements are based on significant unobservable inputs (Level 3). Fixed asset fair values are primarily derived using a discounted cash flow (“DCF”) model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally include our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate.
3. Supplemental Balance Sheet and Cash Flow Information
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
September 30,
2022		 December 31,
2021
Property held for sale $ 4,988  $ — 
Construction contract receivables 8,106  14,949 
Deferred membership origination costs 972  3,150 
Prepaid expenses 30,763  30,784 
Prepaid expenses and other current assets $ 44,829  $ 48,883 
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
September 30,
2022		 December 31,
2021
Real estate taxes $ 39,170  $ 32,955 
Accrued interest 31,846  35,006 
Payroll liabilities 27,133  23,243 
Utilities 9,945  7,022 
Self-insurance accruals 20,303  18,921 
Corporate accruals 32,772  24,741 
Current maturities of finance lease liabilities 921  1,374 
Other 5,367  4,658 
Accrued expenses and other current liabilities $ 167,457  $ 147,920 
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Supplemental Cash Flow Information
Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:
Nine Months Ended
September 30,
2022 2021
Accounts receivable $ (6,056) $ (3,604)
Center operating supplies and inventories (3,140) (3,836)
Prepaid expenses and other current assets 2,166  (3,243)
Income tax receivable 3,533  4,372 
Other assets 638  1,950 
Accounts payable 2,069  17,709 
Accrued expenses and other current liabilities 19,954  60,270 
Deferred revenue (1,467) (16,777)
Other liabilities (3,642) 773 
Changes in operating assets and liabilities $ 14,055 $ 57,614
Additional supplemental cash flow information is as follows:
Nine Months Ended
September 30,
2022 2021
Net cash paid for income taxes, net of refunds received $ 3,628  $ 221 
Cash payments for interest, net of capitalized interest 82,607  82,228 
Capitalized interest 11,228  2,476 
Non-cash activity:
Issuance of Series A Preferred Stock (as defined in Note 10, Income (Loss) Per Share) in connection with the extinguishment of a related party secured loan —  108,591 
See Note 7, Leases, for supplemental cash flow information associated with our lease arrangements for the three and nine months ended September 30, 2022 and 2021.
4. Goodwill and Intangibles
The goodwill balance was $1,233.2 million at both September 30, 2022 and December 31, 2021.
Intangible assets consisted of the following:
September 30, 2022
Gross Accumulated Amortization Net
Trade name $ 163,000  $ —  $ 163,000 
Other 16,735  (6,243) 10,492 
Total intangible assets $ 179,735  $ (6,243) $ 173,492 
December 31, 2021
Gross Accumulated Amortization Net
Trade name $ 163,000  $ —  $ 163,000 
Other 16,327  (5,086) 11,241 
Total intangible assets $ 179,327  $ (5,086) $ 174,241 
Other intangible assets at September 30, 2022 and December 31, 2021 include a facility license as well as trade names and customer relationships associated with our race registration and timing businesses.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Amortization expense associated with intangible assets for the three months ended September 30, 2022 and 2021 was $0.3 million and $0.2 million, respectively, and was $1.2 million and $0.6 million for the nine months ended September 30, 2022 and 2021, respectively. Amortization expense associated with intangible assets is included in Depreciation and amortization in our condensed consolidated statements of operations.
There were no goodwill or intangible asset impairment charges recorded during the three and nine months ended September 30, 2022 and 2021.
5. Revenue
Revenue associated with our membership dues, enrollment fees, and certain services from our in-center businesses is recognized over time as earned. Revenue associated with products and services offered in our cafes and spas, as well as through e-commerce, is recognized at a point in time. The following is a summary of revenue, by major revenue stream, that we recognized during the three and nine months ended September 30, 2022 and 2021:
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2022 2021 2022 2021
Membership dues and enrollment fees $ 335,717  $ 261,033  $ 916,895 $ 653,584
In-center revenue 144,278  110,967  390,603 280,106
Total center revenue 479,995  372,000  1,307,498 933,690
Other revenue 16,386  13,040  42,404 23,835
Total revenue $ 496,381  $ 385,040  $ 1,349,902 $ 957,525
The timing associated with the revenue we recognized during the three months ended September 30, 2022 and 2021 is as follows:
Three Months Ended September 30, 2022 Three Months Ended September 30, 2021
Center
Revenue		 Other
Revenue		 Total
Revenue		 Center
Revenue		 Other
Revenue		 Total
Revenue
Goods and services transferred over time $ 419,758 $ 16,386 $ 436,144 $ 324,350 $ 13,040 $ 337,390
Goods and services transferred at a point in time 60,237 — 60,237 47,650 — 47,650
Total revenue $ 479,995 $ 16,386 $ 496,381 $ 372,000 $ 13,040 $ 385,040
The timing associated with the revenue we recognized during the nine months ended September 30, 2022 and 2021 is as follows:
Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021
Center
Revenue		 Other
Revenue		 Total
Revenue		 Center
Revenue		 Other
Revenue		 Total
Revenue
Goods and services transferred over time $ 1,137,643 $ 42,404 $ 1,180,047 $ 813,425 $ 23,835 $ 837,260
Goods and services transferred at a point in time 169,855 — 169,855 120,265 — 120,265
Total revenue $ 1,307,498 $ 42,404 $ 1,349,902 $ 933,690 $ 23,835 $ 957,525
Contract liabilities represent payments or consideration received in advance for goods or services that the Company has not yet transferred to the customer. Contract liabilities consist primarily of deferred revenue for fees collected in advance for membership dues, enrollment fees, personal training and other center services offerings, as well as our media and athletic events. Contract liabilities at September 30, 2022 and December 31, 2021 were $34.4 million and $35.9 million, respectively.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Contract liabilities that will be recognized within one year are classified as deferred revenue in our condensed consolidated balance sheets. Deferred revenue at September 30, 2022 and December 31, 2021 was $32.3 million and $33.9 million, respectively, and consists primarily of prepaid membership dues, personal training and other in-center services, and enrollment fees. The $1.6 million decrease was primarily driven by deferred registrations received in prior periods for athletic events that took place in the current period.
Contract liabilities that will be recognized in a future period greater than one year are classified as a component of Other liabilities in our condensed consolidated balance sheets. Long-term contract liabilities at September 30, 2022 and December 31, 2021 were $2.1 million and $2.0 million, respectively, and consist primarily of deferred enrollment fees.
6. Debt
Debt consisted of the following:
September 30,
2022		 December 31, 2021
Term Loan Facility, maturing December 2024 $ 273,625 $ 273,625
Revolving Credit Facility, maturing December 2026 — —
Secured Notes, maturing January 2026 925,000 925,000
Unsecured Notes, maturing April 2026 475,000 475,000
Mortgage Notes, various maturities 123,579 145,572
Construction Loan, maturing February 2026 8,657 —
Other debt 4,122 4,122
Fair value adjustment 1,327 1,818
Total debt 1,811,310 1,825,137
Less unamortized debt discounts and issuance costs (21,016) (25,891)
Total debt less unamortized debt discount and issuance costs 1,790,294 1,799,246
Less current maturities (15,046) (23,527)
Long-term debt, less current maturities $ 1,775,248 $ 1,775,719
Senior Secured Credit Facility
In June 2015, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a senior secured credit facility with a group of lenders led by Deutsche Bank AG as the administrative agent. On January 22, 2021, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into an eighth amendment to the credit agreement governing our senior secured credit agreement (the “Credit Agreement”). Pursuant to such eighth amendment to the Credit Agreement, Life Time, Inc. and such other subsidiaries, among other things, (i) entered into a new term loan facility (the “Term Loan Facility”) and incurred new term loans in an aggregate principal amount of $850.0 million and (ii) extended the maturity on the vast majority of commitments under the revolving portion of our senior secured credit facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). On December 2, 2021, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a ninth amendment to the Credit Agreement. Pursuant to such ninth amendment, Life Time, Inc. and such other subsidiaries increased the commitments under the Revolving Credit Facility to $475.0 million and extended the maturity of the Revolving Credit Facility to December 2, 2026, except that the maturity will be: (a) September 22, 2024 if we have not refinanced or amended the Term Loan Facility in a manner set forth in such amendment by such date; (b) October 16, 2025 if we have at least $100.0 million remaining outstanding on the senior secured notes (the “Secured Notes”) that mature in January 2026 on such date; and (c) January 14, 2026 if we have at least $100.0 million remaining outstanding on the senior unsecured notes (the “Unsecured Notes”) that mature in April 2026 on such date.
Upon the exercise of an accordion feature and subject to certain conditions, borrowings under the Credit Facilities may be increased subject, in certain cases, to meeting a first lien net leverage ratio. The Credit Facilities are secured by a first priority lien (on a pari-passu basis with the Secured Notes described below) on substantially all of our assets.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Term Loan Facility
The $850.0 million Term Loan Facility, which matures in December 2024, initially amortized at 0.25% quarterly, which required us to make three mandatory quarterly principal repayments of approximately $2.1 million during the year ended December 31, 2021. On October 13, 2021, we used a portion of net proceeds we received in connection with the IPO to pay down $575.7 million (including a $5.7 million prepayment penalty) of our Term Loan Facility. As a result of the pay down, we are no longer required to make quarterly principal payments on the Term Loan Facility prior to its maturity. At September 30, 2022, the Term Loan Facility loan balance was $273.6 million, with interest due at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.75% or base rate plus 3.75%, in either case subject to a 1.00% rate floor.
Revolving Credit Facility
Our Revolving Credit Facility provides for a $475.0 million revolver and matures in December 2026, or earlier as detailed above under “—Senior Secured Credit Facility.” At September 30, 2022, there were no outstanding borrowings on the Revolving Credit Facility and there were $31.7 million of outstanding letters of credit, resulting in total revolver availability of $443.3 million, which was available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.25% or base rate plus 3.25%.
The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the nine months ended September 30, 2022 was 4.97% and $43.1 million, respectively. The highest month-end balance during that same period was $100.0 million.
Secured Notes
On January 22, 2021, Life Time, Inc. issued the Secured Notes in an aggregate principal amount of $925.0 million. These notes mature in January 2026 and interest only payments are due semi-annually in arrears at 5.75%. Life Time, Inc. has the option to call the Secured Notes, in whole or in part, on one or more occasions, beginning on January 15, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to January 15, 2023, Life Time, Inc. may redeem up to 40.00% of the aggregate principal amount of the Secured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 105.75% of the principal amount of the Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Secured Notes and the related guarantees are our senior secured obligations and are secured on a first-priority basis by security interests on substantially all of our assets.
Unsecured Notes
On February 5, 2021, Life Time, Inc. issued the Unsecured Notes in the original principal amount of $475.0 million. The Unsecured Notes mature in April 2026 and interest only payments are due semi-annually in arrears at 8.00%. Life Time, Inc. has the option to redeem the Unsecured Notes, in whole or in part, on one or more occasions, beginning on February 1, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to February 1, 2023, Life Time, Inc. may redeem up to 40.00% of the aggregate principal amount of the Unsecured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 108.00% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Unsecured Notes and the related guarantees are our general senior unsecured obligations and will rank equally in right of payment with all of our existing and future senior indebtedness without giving effect to collateral arrangements.
Mortgage Notes
Certain of our subsidiaries have entered into mortgage facilities with various financial institutions (collectively, the “Mortgage Notes”), which are collateralized by certain of our related real estate and buildings, including one of our corporate headquarters properties. The Mortgage Notes have varying maturity dates from February 2024 through August 2027 and carried a weighted average interest rate of 4.72% and 4.70% at September 30, 2022 and December 31, 2021, respectively. Payments of principal and interest on each of the Mortgage Notes are payable monthly on the first business day of each month. The Mortgage Notes contain customary affirmative covenants, including but not limited to, payment of property taxes, granting of lender access to inspect the properties, maintenance of the properties, providing financial statements, providing estoppel certificates and lender consent to leases. The Mortgage Notes also contain various customary negative covenants, including, but not limited to, restrictions on transferring the property, change in control of the borrower and changing the borrower’s business or principal place of business. As of September 30, 2022, we were
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
either in compliance in all material respects with the covenants associated with the Mortgage Notes or the covenants were not applicable.
During the nine months ended September 30, 2022, we closed on a sale-leaseback transaction that included certain properties that served as collateral for one of the Mortgage Notes. Accordingly, we used a portion of the net cash proceeds we received from the sale-leaseback transaction to pay off in full the then outstanding principal balance of $4.6 million associated with this Mortgage Note. For more information regarding the sale-leaseback transactions that were consummated during the nine months ended September 30, 2022, see Note 7, Leases.
Construction Loan
On January 22, 2021, we closed on a construction loan (the “Construction Loan”) providing up to $28.0 million to partially finance the construction of a Life Time Living location. The Construction Loan has a maturity date of February 15, 2026 and is collateralized by the property. Borrowings under the Construction Loan bear interest at a variable annual rate of no less than 4.80%. Interest only payments are due monthly beginning April 15, 2022 and continuing through February 15, 2024. Beginning March 15, 2024, based on the principal balance due as of February 15, 2024, monthly principal and interest installment payments will be due in an amount sufficient to fully amortize the principal balance at maturity. At September 30, 2022, there were $8.7 million of outstanding borrowings on the Construction Loan. There were no outstanding borrowings as of December 31, 2021.
Debt Discounts and Issuance Costs
Unamortized debt discounts and issuance costs associated with the Term Loan Facility, Secured Notes, Unsecured Notes and Construction Loan of $21.0 million and $25.9 million are included in Long-term debt, net of current portion on our condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively.
Unamortized revolver-related debt issuance costs of $3.3 million and $4.0 million are included in Other assets on our condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively.
Debt Covenants
We are required to comply with certain affirmative and restrictive covenants under our Credit Facilities, Secured Notes and Unsecured Notes. We are also required to comply with a first lien net leverage ratio covenant under the Revolving Credit Facility, which requires us to maintain a first lien net leverage ratio, if 30.00% or more of the Revolving Credit Facility commitments are outstanding shortly after the end of any fiscal quarter (excluding all cash collateralized undrawn letters of credit and other undrawn letters of credit up to $20.0 million). During the first three quarterly test periods of 2022, certain financial measures used in the calculation of the first lien net leverage ratio will be calculated on a pro forma basis by annualizing the respective financial measures recognized during those test periods.
As of September 30, 2022, we were either in compliance in all material respects with the covenants under the Credit Facilities, or the covenants were not applicable.
Future Maturities of Long-Term Debt
Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at September 30, 2022 were as follows:
October 2022 through September 2023 $ 15,046
October 2023 through September 2024 64,033
October 2024 through September 2025 286,140
October 2025 through September 2026 1,421,714
October 2026 through September 2027 19,953
Thereafter 3,097
Total future maturities of long-term debt $ 1,809,983
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
7. Leases
Lease Cost
Lease cost included in our condensed consolidated statements of operations for the three months ended September 30, 2022 and 2021 consisted of the following:
Three Months Ended
September 30,		 Classification in Condensed
Consolidated Statements of Operations
2022 2021
Lease cost:
Operating lease cost $ 60,761 $ 50,987 Rent
Short-term lease cost 610 281 Rent
Variable lease cost 1,842 1,245 Rent
Finance lease cost:
Amortization of right-of-use assets 336 380 Depreciation and amortization
Interest on lease liabilities 22 42 Interest expense, net of interest income
Total lease cost $ 63,571 $ 52,935
Lease cost included in our condensed consolidated statements of operations for the nine months ended September 30, 2022 and 2021 consisted of the following:
Nine Months Ended
September 30,		 Classification in Condensed
Consolidated Statements of Operations
2022 2021
Lease cost:
Operating lease cost $ 173,670 $ 150,475 Rent
Short-term lease cost 1,485 747 Rent
Variable lease cost 4,011 3,330 Rent
Finance lease cost:
Amortization of right-of-use assets 1,026 1,119 Depreciation and amortization
Interest on lease liabilities 79 140 Interest expense, net of interest income
Total lease cost $ 180,271 $ 155,811
Operating and Finance Lease Right-of-Use Assets and Lease Liabilities
Operating and finance lease right-of-use assets and lease liabilities were as follows:
September 30, 2022 December 31, 2021 Classification on Condensed
Consolidated Balance Sheets
Lease right-of-use assets:
Operating leases $ 2,148,828 $ 1,864,528 Operating lease right-of-use assets
Finance leases (1)
1,180 2,073 Other assets
Total lease right-of-use assets $ 2,150,008 $ 1,866,601
Lease liabilities:
Current
Operating leases $ 50,746 $ 46,315 Current maturities of operating lease liabilities
Finance leases 921 1,374 Accrued expenses and other current liabilities
Non-Current
Operating leases 2,206,753 1,909,883 Operating lease liabilities, net of current portion
Finance leases 298 757 Other liabilities
Total lease liabilities $ 2,258,718 $ 1,958,329
(1)     Finance lease right-of-use assets were reported net of accumulated amortization of $2.8 million and $2.4 million at September 30, 2022 and December 31, 2021, respectively.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Remaining Lease Terms and Discount Rates
The weighted-average remaining lease terms and discount rates associated with our operating and finance lease liabilities at September 30, 2022 were as follows:
September 30, 2022
Weighted-average remaining lease term (1)
Operating leases 18.0 years
Finance leases 1.4 years
Weighted-average discount rate
Operating leases 8.23%
Finance leases 6.06%
(1)    The weighted-average remaining lease term associated with our operating and finance lease liabilities does not include all of the optional renewal periods available to us under our current lease arrangements. Rather, the weighted-average remaining lease term only includes periods covered by an option to extend a lease if we are reasonably certain to exercise that option.
Sale-Leaseback Transactions
During the nine months ended September 30, 2022, we entered into and consummated sale-leaseback transactions involving nine properties with two unrelated third parties. Under these transactions, we sold nine properties with a combined net book value of $285.6 million for $375.0 million, which was reduced by transaction costs of $1.5 million, for net cash proceeds of $373.5 million. The estimated fair value of the properties sold was $385.1 million. Accordingly, the aggregate sales price associated with these arrangements was increased by $10.1 million, which resulted in the recognition of a gain of $98.0 million on these transactions. This gain is included in Other operating (income) expense in our condensed consolidated statements of operations.
Supplemental Cash Flow Information
Supplemental cash flow information associated with our operating and finance leases is as follows:
Nine Months Ended
September 30,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 146,366 $ 137,942
Operating cash flows from finance leases 79 140
Financing cash flows from finance leases 1,043 1,133
Non-cash information:
Right-of-use assets obtained in exchange for initial lease liabilities:
Operating leases 316,071 194,021
Finance leases 142 1,150
Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities:
Operating leases 7,366 (5,357)
Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions 10,090 9,500
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
Maturities of Operating and Finance Lease Liabilities
The maturities associated with our operating and finance lease liabilities at September 30, 2022 are as follows:
Operating Leases Finance Leases Total
October 2022 through September 2023 $ 220,452 $ 964 $ 221,416
October 2023 through September 2024 235,766 262 236,028
October 2024 through September 2025 238,287 43 238,330
October 2025 through September 2026 241,690 2 241,692
October 2026 through September 2027 242,275 1 242,276
Thereafter 3,316,891 — 3,316,891
Total lease payments 4,495,361 1,272 4,496,633
Less: Imputed interest 2,237,862 53 2,237,915
Present value of lease liabilities $ 2,257,499 $ 1,219 $ 2,258,718
8. Stockholders’ Equity
2021 Equity Incentive Plan
In connection with the IPO and effective October 6, 2021, we adopted the 2021 Incentive Award Plan (the “2021 Equity Plan”), under which we may grant cash and equity-based incentive awards to our employees, consultants and directors. The maximum number of shares of our common stock available for issuance under the 2021 Equity Plan is equal to the sum of (i) approximately 14.5 million shares of our common stock, (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 4% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year and (B) such lesser amount as determined by our board of directors, and (iii) the approximately 1.0 million shares of our common stock that were available for issuance under the 2015 Equity Plan as of October 6, 2021. Effective January 1, 2022, the number of shares of our common stock available for issuance under the 2021 Equity Plan increased by approximately 7.7 million shares pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence. Additionally, the number of shares of our common stock available for issuance under the 2021 Equity Plan may increase with respect to awards under the 2015 Equity Plan and any other prior equity incentive plans of the Company or its predecessor which are forfeited or lapse unexercised and which following the effective date of the 2021 Equity Plan are not issued under such prior plan; provided, however, no more than 14.5 million shares may be issued upon the exercise of incentive stock options. The share reserve formula under the 2021 Equity Plan is intended to provide us with the continuing ability to grant equity awards to eligible employees, directors and consultants for the ten-year term of the 2021 Equity Plan.
As of September 30, 2022, approximately 19.1 million shares were available for future awards to employees and other eligible participants under the 2021 Equity Plan.
2021 Employee Stock Purchase Plan
In connection with the IPO and effective October 6, 2021, we adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at periodic intervals, with their accumulated payroll deductions. The ESPP consists of two components: an Internal Revenue Service (“IRS”) Code section 423 (“Section 423”) component, which is intended to qualify under Section 423 of the IRS Code and a non-Section 423 component, which need not qualify under Section 423 of the IRS Code. The aggregate number of shares of our common stock that has initially been reserved for issuance under the ESPP is equal to (i) approximately 2.9 million shares of our common stock, and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 1% of the aggregate number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of our shares of common stock as determined by our board of directors; provided that in no event will more than 29.0 million shares of our common stock be available for issuance under the Section 423 component of the ESPP. Our board of directors determined that no additional shares would become available under the ESPP as of January 1, 2022 pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence. Our board of directors or the compensation committee will have authority to interpret the terms of the ESPP and determine eligibility of participants.
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LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table amounts in thousands except per share data)
The ESPP will permit participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation, which includes a participant’s gross base compensation for services to us. On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of our common stock. The option will expire at the end of the applicable offering period and will be exercised on each purchase date during such offering period to the extent of the payroll deductions accumulated during the offering period. We expect to have consecutive offering periods of approximately six months in length commencing on each June 1 and December 1 during the term of the ESPP. The purchase price for a share of our common stock will be 90% of the fair market value of a share on the enrollment date for such offering period or on the purchase date, whichever is lower, and subject to adjustment by our board of directors or compensation committee. Participants may voluntarily end their participation in the ESPP prior to the end of the applicable offering period and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the option purchase price, subject to the certain participation limitations. Participation will end automatically upon a participant’s termination of employment. No offering periods commenced under the ESPP during the three and nine months ended September 30, 2022.
Stock Options
During the nine months ended September 30, 2022, the Company granted approximately 1.0 million stock option awards under the 2021 Equity Plan. These options have a 10-year contractual term from the date of grant and vest in four ratable annual installments on each of the first four anniversaries of the grant date, subject to continuous employment or service from the grant date through the applicable vesting date. The exercise price associated with each of these awards is not less than the fair market value per share of our common stock at the time of grant. The fair value of the options granted during the nine months ended September 30, 2022 was calculated using the Black-Scholes option pricing model. Approximately 0.2 million and 0.3 million of stock options were exercised during the three and nine months ended September 30, 2022, respectively. No stock options were exercised during the three and nine months ended September 30, 2021. As of September 30, 2022, options to purchase approximately 25.1 million shares of our common stock were outstanding, of which approximately 21.8 million were exercisable.
Share-based compensation expense associated with stock options for the three months ended September 30, 2022