Life Time Reports First Quarter Fiscal 2023 Financial Results
Life Time Group Holdings (NYSE: LTH) reported a 30.2% increase in revenue to $510.9 million for Q1 2023, up from $392.3 million in Q1 2022. Net income turned positive at $27.5 million, recovering from a loss of $38.0 million a year prior. Adjusted EBITDA surged 195.8% to $120.1 million. The company raised its full-year Adjusted EBITDA guidance by $30 million, now projected between $470 million and $490 million. Membership growth was robust, with a net increase of approximately 39,000 members, bringing total memberships to 813,500. Operating cash flow also improved significantly, totaling $74.3 million compared to $9.1 million in the same quarter last year.
- Revenue increased by 30.2% to $510.9 million.
- Net income increased to $27.5 million from a loss of $38.0 million.
- Adjusted EBITDA rose by 195.8% to $120.1 million.
- Full-year Adjusted EBITDA guidance raised by $30 million to $470-$490 million.
- Net center memberships increased by approximately 39,000, totaling 813,500.
- Center operations expenses increased by 14.4% to $274.1 million.
- Rent expenses rose by 18.8% to $66.5 million.
- Revenue increased by
30.2% to from$510.9 million in the first quarter of 2022$392.3 million - Net income increased to
from a net loss of$27.5 million in the first quarter of 2022$38.0 million - Adjusted EBITDA increased by
195.8% to from$120.1 million in the first quarter of 2022$40.6 million - Life Time raises full year fiscal 2023 Adjusted EBITDA guidance by
to$30 million $470 -$490 million
Financial Summary
Three Months Ended | |||||
($ in millions, except memberships and per membership data) | |||||
2023 | 2022 | Percent | |||
Revenue | 30.2 % | ||||
Center operations expenses | 14.4 % | ||||
Rent | 18.8 % | ||||
General, administrative, and marketing expenses (1) | (36.2) % | ||||
Net income (loss) | NM | ||||
Adjusted EBITDA | 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 | 15.0 % |
NM - Not meaningful | |
(1) | The three months ended |
First Quarter 2023 Information
- Revenue increased due to strong growth in membership dues and in-center revenues, which included the continued ramp of our centers and higher member utilization of our in-center offerings.
- Net center memberships increased by approximately 39,000, which exceeded the approximately 25,000 increase in net center memberships during the first quarter of 2022. Total memberships, which includes our digital on-hold memberships, increased approximately
9% to 813,500. - Center operations expenses increased primarily due to additional staffing requirements to support increased usage in existing and new centers, expanded programming, increased labor costs and utility cost inflation.
- General, administrative and marketing expenses declined primarily due to higher non-cash share-based compensation expense in the prior year period and the benefits from our operational efficiency efforts that we experienced in the current year period.
- Net income included tax-effected one-time net benefits of
, primarily from a$8.5 million gain on sale-leasebacks and a$5.1 million gain related to the sale of two triathlon events, and also included$3.6 million of tax-effected non-cash share-based compensation expense. Net loss in the prior year period included tax-effected one-time net benefits of$4.2 million , primarily related to a gain on sale-leasebacks, and also included$26.1 million of tax-effected non-cash share-based compensation expense. Excluding the impact of these net benefits and expenses, net income improved by$19.9 million .$67.3 million - Net income and Adjusted EBITDA improved significantly as we experienced greater flow through of our increased revenue and benefited from our ongoing margin expansion efforts.
New Center Openings
- The Company opened three new centers in the first quarter of 2023.
- As of
March 31, 2023 we operated a total of 164 centers. - The Company plans to open seven additional new centers in 2023, resulting in a total of 10 new centers for the year.
Cash Flow Highlights
- As of
March 31, 2023 the Company had total cash and cash equivalents of , and$35.3 million in outstanding borrowings under its$85.0 million revolving credit facility.$475 million - Net cash provided by operating activities totaled
for the quarter ended$74.3 million March 31, 2023 , compared to in the quarter ended$9.1 million March 31, 2022 . - Free cash flow before growth capital expenditures totaled
for the quarter ended$26.6 million March 31, 2023 , compared to for the quarter ended$(35.3) million March 31, 2022 . - Growth capital expenditures, net of construction reimbursements, center maintenance capital expenditures and corporate capital expenditures totaled
,$123.0 million and$32.9 million , respectively, for the quarter ended$14.9 million March 31, 2023 , compared to ,$66.4 million and$16.4 million , respectively, for the quarter ended$27.9 million March 31, 2022 .
Sale-Leasebacks
- The Company completed a transaction for one property for gross proceeds of approximately
in the first quarter of 2023 and a second transaction for one property for gross proceeds of approximately$33.0 million in$45 million April 2023 . The final property from the Company's previously announced letters of intent is expected to be completed bySeptember 30, 2023 for gross proceeds of approximately .$45 million - The Company remains on track to complete
in sale-leaseback transactions in 2023.$300 million
2023 Outlook
Second Quarter 2023 Guidance
Percent | |||||
Three Months Ended | Three Months Ended | Change | |||
(Using | |||||
($ in millions) | (Guidance) | (Actual) | midpoints) | ||
Revenue | 23 % | ||||
Net income (loss) | NM | ||||
Adjusted EBITDA | 98 % |
Full-Year 2023 Guidance
Year Ended | Percent | Year Ended | |||||
Year Ended | Change | ||||||
(Guidance as of | (Using | (Guidance as of | |||||
($ in millions) | (Actual) | midpoints) | |||||
Revenue | 23 % | ||||||
Adjusted EBITDA | 70 % | ||||||
Rent | 12 % |
Conference Call Details
A conference call to discuss the Company's first quarter financial results is scheduled for today. How to participate:
- Date: Tuesday, April 25, 2023
- Time: 10:00 a.m. ET (
9:00 a.m. CT ) U.S. dial-in number: 1-877-451-6152- International dial-in number: 1-201-389-0879
- Webcast: LTH 1Q 2023
A link to the live audio webcast of the conference call and an accompanying presentation is available at https://ir.lifetime.life/.
Replay Information
A recorded replay of the webcast will be available after
- Online: https://ir.lifetime.life
U.S. replay number: 1-844-512-2921- International replay number: 1-412-317-6671
- Replay ID: 1373 8036
About Life Time®
Life Time (NYSE: LTH) empowers people to live healthy, happy lives through its portfolio of more than 160 athletic country clubs across the United States and
Use of Non-GAAP Financial Measures and Key Performance Indicators
This press release includes certain financial measures that are not presented in accordance with generally accepted accounting principles in
Adjusted EBITDA is defined as net income (loss) before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of the Company's ongoing operations, including incremental costs related to COVID-19. Free cash flow before growth capital expenditures is defined as net cash provided by (used in) operating activities less center maintenance capital expenditures and corporate capital expenditures.
The Company presents these non-GAAP financial measures because management believes that these measures assist investors and analysts in comparing the Company's operating performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of the Company's ongoing operating performance. Investors are encouraged to evaluate these adjustments and the reasons the Company considers them appropriate for supplemental analysis. In evaluating the non-GAAP financial measures, investors should be aware that, in the future, the Company may incur expenses that are the same as or similar to some of the adjustments in the Company's presentation of its non-GAAP financial measures. There can be no assurance that the Company will not modify the presentation of non-GAAP financial measures in future periods, and any such modification may be material. In addition, the Company's non-GAAP financial measures may not be comparable to similarly titled measures used by other companies in the Company's industry or across different industries.
The non-GAAP financial measures have limitations as analytical tools, and investors should not consider these measures in isolation or as substitutes for analysis of the Company's results as reported under GAAP.
Please note that the Company has not provided the most directly comparable GAAP financial measure, or a quantitative reconciliation thereto, for the Adjusted EBITDA forward-looking guidance for 2023 included in this press release in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. Providing the most directly comparable GAAP financial measure, or a quantitative reconciliation thereto, cannot be done without unreasonable effort due to the inherent uncertainty and difficulty in predicting certain non-cash, material and/or non-recurring expenses or benefits; legal settlements or other matters; and certain tax positions. The variability of these items could have an unpredictable, and potentially significant, impact on our future GAAP financial results.
The Company includes a center, for comparable center revenue purposes, beginning on the first day of the 13th full calendar month of the center's operation, in order to assess the center's growth rate after one year of operation.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of federal securities regulations. Forward-looking statements in this press release include, but are not limited to, the Company's plans, strategies and prospects, both business and financial, including its financial outlook for the second quarter and full year 2023, growth, cost efficiencies and margin expansion, improvements to its balance sheet and leverage, capital expenditures, consumer demand, industry and economic trends, expected number of new center openings and successful signings and closings of sale-leaseback transactions (including the amount, pricing and timing thereof). These statements are based on the beliefs and assumptions of the Company's management. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning the Company's possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking.
Factors that could cause actual results to differ materially from those forward-looking statements included in this press release include, but are not limited to, risks relating to our business operations and competitive and economic environment, risks relating to our brand, risks relating to the growth of our business, risks relating to our technological operations, risks relating to our capital structure and lease obligations, risks relating to our human capital, risks relating to legal compliance and risk management and risks relating to ownership of our common stock and the other important factors discussed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
(In thousands, except per share data) | |||
(Unaudited) | |||
Three Months Ended | |||
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 |
CONSOLIDATED BALANCE SHEETS | |||
(In thousands, except per share data) | |||
(Unaudited) | |||
|
| ||
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 | |
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, | 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 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(In thousands) | |||
(Unaudited) | |||
Three Months Ended | |||
2023 | 2022 | ||
Cash flows from operating activities: | |||
Net income (loss) | $ 27,460 | $ (37,966) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 58,197 | 58,107 | |
Deferred income taxes | 6,333 | (3,885) | |
Share-based compensation | 5,622 | 21,438 | |
Non-cash rent expense | 9,028 | 6,009 | |
Impairment charges associated with long-lived assets | — | 227 | |
Gain on disposal of property and equipment, net | (6,693) | (28,597) | |
Amortization of debt discounts and issuance costs | 1,966 | 1,945 | |
Changes in operating assets and liabilities | (23,650) | (5,638) | |
Other | (3,915) | (2,578) | |
Net cash provided by operating activities | 74,348 | 9,062 | |
Cash flows from investing activities: | |||
Capital expenditures | (170,814) | (110,754) | |
Proceeds from sale-leaseback transactions | 32,676 | 79,666 | |
Other | 1,287 | 4,805 | |
Net cash used in investing activities | (136,851) | (26,283) | |
Cash flows from financing activities: | |||
Proceeds from borrowings | 7,916 | 3,198 | |
Repayments of debt | (3,701) | (5,745) | |
Proceeds from revolving credit facility | 345,000 | 230,000 | |
Repayments of revolving credit facility | (280,000) | (200,000) | |
Repayments of finance lease liabilities | (244) | (358) | |
Proceeds from stock option exercises | 3,456 | — | |
Other | (102) | (476) | |
Net cash provided by financing activities | 72,325 | 26,619 | |
Effect of exchange rates on cash and cash equivalents | 6 | 61 | |
Increase in cash and cash equivalents | 9,828 | 9,459 | |
Cash and cash equivalents—beginning of period | 25,509 | 31,637 | |
Cash and cash equivalents—end of period | $ 35,337 | $ 41,096 |
Non-GAAP Measurements and Key Performance Indicators
See "Use of Non-GAAP Financial Measures and Key Performance Indicators" for a discussion of the Non-GAAP financial measures reconciled below.
Key Performance Indicators | |||
($ in thousands, except for Average Center revenue per center membership) | |||
(Unaudited) | |||
Three Months Ended | |||
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 | |||
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 |
(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 |
(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 | |||
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 | |||
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 | |||
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 | |
Net income | |
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 |
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