Life Time Group Holdings Swings To Q4 Profit On 31 Percent Revenue Gain

Life Time Group Holdings, Inc. reported that fourth-quarter 2022 revenue increased 31.1 percent to $472.7 million, citing strong growth in membership dues and in-center revenues, which was driven by its pricing strategy, increased memberships and higher utilization of in-center offerings by members.

Average monthly dues per center membership increased approximately 20 percent to $162. Net center memberships declined approximately by 3,500, consistent with typical seasonality, and far less than the approximately 13,000 decline in the fourth quarter of 2019.

Center operations expenses increased 16.0 percent to $253.8 million in the quarter, primarily due to added staffing to support increased center usage, expanded programming and new center openings, as well as labor and utility cost inflation.

General, administrative and marketing expenses declined 89.2 percent to $38.3 percent, primarily due to higher non-cash share-based compensation expense in the prior year period. Excluding non-cash share-based compensation expense and one-time items in both periods, general, administrative and marketing expenses declined by $6.4 million primarily due to lower expenses associated with management incentive compensation. Rent expenses increase 19.5 percent to $66.1 million.

LTH posted net income of $13.7 million, including $3.4 million of tax-effected non-cash share-based compensation expense and $0.5 million of one-time tax-effected expenses. A $304.8 million net loss in the prior-year period included $258.3 million of tax-effected non-cash share-based compensation expense and $12.6 million of one-time tax-effected additional interest expense incurred in connection with the partial pay down of a term loan. Excluding the impact of these expenses, net income improved by $51.2 million.

Net income and Adjusted EBITDA improved significantly as LTH experienced greater flow-through of increased revenue and benefited from initial margin expansion efforts.

Full-year revenue increased 38.3 percent to $1.82 billion due to strong growth in membership dues and in-center revenues, which was driven by the company’s pricing strategy, continued center membership recovery, higher utilization of in-center offerings by members after the adverse impacts of COVID-19, and supported by strategic investments in the business, and the opening of 10 new centers.

Center operations expenses increased 26.5 percent, primarily due to added staffing to support increased center usage, expanded programming and new center openings, as well as labor and utility cost inflation.

General, administrative and marketing expenses declined 55.5 percent due to higher non-cash share-based compensation expense in the prior-year period. Excluding non-cash share-based compensation expense and one-time items in both periods, general, administrative and marketing expenses increased by $19.6 million primarily due to increased labor to enhance and broaden member services and higher marketing, information technology and public company-related expenses.

A full-year net loss of $1.8 million included a $66.9 million tax-effected gain on sale-leaseback transactions associated with nine properties, partially offset by $25.5 million of tax-effected non-cash share-based compensation expense. The $480.5 million net loss in the prior year included $269.1 million of tax-effected non-cash share-based compensation expense and $68.6 million of one-time tax-effected additional interest expense incurred in connection with the conversion of a related-party secured note into preferred stock, debt refinancing, and the partial pay down of a term loan. Excluding these items of income and expense, net loss improved by $195.2 million.

Net loss and Adjusted EBITDA improved significantly as LTH experienced greater flow-through of increased revenue.

The company opened five new centers in the fourth quarter of 2022 and 10 new centers in fiscal 2022. As of December 31, 2022, Life Time operated a total of 161 centers.

LTH plans to open 10 new centers in 2023, including three in the first quarter.

The company completed sale-leaseback transactions associated with nine properties for gross proceeds of approximately $375 million in fiscal 2022.

The company continues to explore alternative sale-leaseback structures to optimize financing costs in a tax-efficient manner.

Bahram Akradi, Founder, chairman and CEO, said, “We had a strong 2022 and believe we are entering 2023 with great momentum in our business. Our strategies are working. The strategic investments we have made are driving increased club usage and memberships. We are also optimizing our pricing to continue to enhance our member experience, increase center revenue per center membership and deliver margin expansion. In 2023, our top priority is to improve our balance sheet, including by growing our revenue and increasing our operating margin to reduce our leverage. Our entire organization is united in delivering incredible experiences to our members and continued strong financial performance.”