Life Time Reports First Quarter Fiscal 2023 Financial Results

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. 

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 %

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

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

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