Life Time Group Holdings, Inc. slightly lifted its outlook for the year after reporting third-quarter results that topped its guidance. Sales were ahead 28.9 percent as fitness center memberships were up 9.0 percent year-over-year.

Bahram Akradi, founder, chairman and CEO, said: “We are pleased with our continued progress this quarter. While the macroeconomic background remains a headwind, our strategy of playing offense to enhance the member experience and drive our revenue recovery and growth is working, and we are swiftly turning our focus to margin expansion. We see significant opportunities to continue improving our margins by capturing operating leverage as we continue to grow revenue, optimizing the execution of our key strategic initiatives, continuing our price optimization and driving efficiencies across our club and corporate structure. Additionally, our recently opened athletic resorts are performing well and we are excited to conclude 2022 with a total of 12 new openings with 11 more to come in 2023.”

Third Quarter 2022 Results and Prior Year Comparisons

  • Total revenue increased 28.9 percent to $496.4 million from $385.0 million;
  • Comparable center sales increased 25.6 percent;
  • Center memberships totaled 728,729 on September 30, 2022, an increase of 9.0 percent from 668,310 on September 30, 2021, and up approximately 4,000 from June 30, 2022;
  • Net income was $24.7 million and included a tax-effected gain of $42.7 million from sale-leasebacks and $5.1 million in tax-effected non-cash share-based compensation expense; and
  • Adjusted EBITDA increased 50.9 percent to $71.0 million from $47.0 million.

Life Time’s guidance had called for revenue, net loss and Adjusted EBITDA to be in the ranges of $490 to $510 million, $(24) to $(15) million, and $65 to $75 million, respectively.

Nine-Month 2022 Results and Prior Year Comparisons

  • Total revenue increased 41.0 percent to $1.350 billion from $957.5 million;
  • Comparable center sales increased by 35.7 percent;
  • Net loss was $15.5 million and included a tax-effected gain of $80.3 million from sale-leasebacks and $27.2 million in tax-effected non-cash share-based compensation expense; and
  • Adjusted EBITDA increased 441.2 percent to $174.7 million from $32.3 million.

New Center Openings
The company opened three new centers in the third quarter of 2022 and operated 156 centers as of September 30, 2022. The company has opened five new centers in the nine month period ending September 30, 2022, and plans to open seven new centers in the fourth quarter, for 12 new centers in 2022. The company plans to open 11 new centers in 2023.

Cash Flow Highlights

  • As of September 30, 2022, the company had total cash and cash equivalents of $107.1 million and no outstanding borrowings under its $475 million revolving credit facility;
  • Net cash provided by (used in) operating activities for the three-month and nine-month periods ended September 30, 2022, was $45.0 million and $125.3 million, respectively, compared to $(2.3) million and $(15.3) million in the same prior-year periods, respectively; and
  • Free cash flow before growth capital expenditures for the three-month and nine-month periods ended September 30, 2022, was $7.4 million and $5.5 million, respectively, compared to $(38.6) million and $(99.5) million in the same prior-year periods, respectively.

Sale-Leasebacks
During the third quarter 2022, the company completed sale-leaseback transactions on five properties for gross proceeds of $200 million. For the nine-month period ending September 30, 2022, aggregate proceeds from sale-leaseback transactions were approximately $375 million. The company is exploring alternative sale-leaseback structures to optimize our financing cost and preserve the utilization of our net operating losses to offset our growing future taxable income.

Outlook
For the fourth quarter ending December 31, 2022, the company is projecting revenue, net loss, and Adjusted EBITDA to be in the ranges of $460 to $490 million, $(10) to $(2) million, and $80 to $90 million, respectively.

For the full year ending December 31, 2022, the company is projecting revenue, net loss, and Adjusted EBITDA to be in the ranges of $1.81 to $1.84 billion, $(26) to $(17) million, and $255 to $265 million, respectively. Previously, guidance for the year called for revenue, net loss, and Adjusted EBITDA to be in the ranges of $1.80 to $1.85 billion, $(73.6) to $(55.6) million, and $250 to $270 million, respectively.