Life Time Group Holdings, Inc. reported that fourth-quarter revenue increased 18.2 percent to $558.8 million due to continued strong growth in membership dues and in-center revenue.

  • Center memberships increased by 38,010, or 5.2 percent, in the quarter, when compared to December 31, 2022, and decreased sequentially from September 30, 2023 by 21,115, consistent with typical seasonality.
  • Total subscriptions, which include center memberships and digital on-hold memberships, increased 4.9 percent from December 31, 2022 to 814,936.

Center operations expenses increased 13.6 percent to $288.3 million in Q4, said to be primarily due to increased operating costs related to new and ramping centers as well as growth in memberships and in-center business revenue.

General, administrative and marketing expenses increased 41.3 percent to $54.1 million in the fourth quarter, said to be primarily due to higher share-based compensation expense in the period and lower incentive compensation expenses last year as the company did not meet its threshold performance under its short-term and long-term incentive programs in 2022.

Net income increased $10.0 million to $23.7 million in Q4, reportedly due to improved business performance in the current period, partially offset by higher share-based compensation expense.

Adjusted net income increased $20.4 million to $38.0 million.

The company said Adjusted net income and Adjusted EBITDA improved significantly as it experienced greater flow-through of increased revenue and benefited from the structural improvements to the business that have improved its margins.

Full-Year 2023 Information

  • Revenue increased 21.6 percent to $2.22 billion due to continued strong growth in membership dues and in-center revenue.
  • Center operations expenses increased 10.9 percent to $1.18 billion.
  • General, administrative and marketing expenses decreased 6.0 percent to $201.1 million.
  • Net income increased $77.9 million to $76.1 million primarily due to improved business performance in the current year, partially offset by a $66.9 million tax-effected gain on sale-leaseback transactions in the prior year, higher share-based compensation in the current year, and a $10.9 million tax-effected loss from sale-leasebacks in the current year.
  • Adjusted net income increased $171.3 million to $129.7 million.

Bahram Akradi, founder, chairman and CEO, stated: “I am thrilled to report that we achieved our operating and strategic objectives and exceeded our financial goals in 2023. We set record levels of revenue and adjusted EBITDA, improved our balance sheet, and further reduced our net debt leverage ratio. We also increased member engagement through our strategic programming initiatives, as highlighted by the increase to 135 average visits per membership compared to 124 in 2022 and, most notably, 108 in 2019 before the pandemic. The increase is a clear indication that our members are more engaged with higher retention as a key outcome. We are off to a great start in 2024 and expect to build on our progress and success this year by executing our plan to be free cash flow positive after all capital expenditures beginning in the second quarter, further improving our balance sheet, reducing our net debt leverage ratio, and continuing to grow our revenue and adjusted EBITDA.”

New Center Openings
The company opened one new center in the fourth quarter of 2023 and a total of 11 centers for the year. As of December 31, 2023, Life Time operated a total of 171 centers.

Outlook

Life Time Additional Commentary

  • Expects to continue to reduce net debt leverage ratio towards its target of 3.0x by December 31, 2024;
  • Expects to be free cash flow positive beginning in the second quarter of 2024;
  • Plans to open 9-10 new centers in 2024;
  • Expects rent expense to include non-cash rent expense of $35 million to $40 million for the year;
  • Anticipates being able to offset a large portion of our 2024 cash taxes by utilizing a portion of our net operating loss carryforwards from the pandemic; and
  • Continues to actively monitor the sale-leaseback market and intends to resume transactions once terms are in line with our long-term financial objectives.

Image courtesy Life Time Group Holdings, Inc.