Life Time Group Holdings, Inc. raised its earnings guidance for the year after reporting a profit against a loss in the second quarter ended June 30 as adjusted operating earnings grew 115 percent. Revenue gained 21.8 percent.

Report highlights include:

  • Second-quarter revenue increased 21.8 percent to $561.7 million from $461.3 million in the second quarter of 2022. Revenues came in at the low end of guidance in the range of $560 million to $570 million;
  • Net income increased to $17.0 million from a net loss of $2.3 million in the second quarter of 2022. Guidance called for net income in the range of $19 million and $20 million;
  • Adjusted EBITDA increased 115.5 percent to $136.0 million from $63.1 million in the second quarter of 2022. Guidance called for adjusted EBITDA in the range of $124 million to $126 million;
  • Full-year fiscal 2023 net income guidance ranged from $75 million to $83 million and increases full-year fiscal 2023 adjusted EBITDA guidance range to $510 million to $520 million; and
  • On July 24, Fitch Ratings assigned Life Time an issuer credit rating of B+ (stable). The company is rated B by S&P and B- by Moody’s.

Bahram Akradi, founder, chairman and CEO, said, “Our strong quarter further validates that all of our strategies are working and contributing to our success. We added 26,000 memberships, grew revenue nearly 22 percent, and, once again, raised our expectations for net income and Adjusted EBITDA for the full year. With a continued focus on our balance sheet, we further lowered our leverage ratio and are actively pursuing an increasing number of asset-light growth opportunities. We entered the third quarter with great momentum as we are delivering extraordinary member experiences. Our Company is on a solid footing and well positioned for long-term success.”

Second Quarter 2023

  • Revenue increased 21.8 percent to $561.7 million due to continued membership dues and in-center revenue growth;
  • Center memberships increased by approximately 26,000 from the first quarter to 790,238;
  • Total subscriptions, which include digital on-hold memberships, increased to 832,639;
  • Center operations expenses increased 8.2 percent to $302.6 million, primarily due to operating costs related to our new and ramping centers;
  • General, administrative and marketing expenses increased 1.5 percent to $52.8 million due to higher share-based compensation expenses, partially offset by reduced center support overhead, advertising and marketing, public company and cash incentive compensation expenses;
  • Net income included tax-effected expenses of $21.0 million, including $13.7 million related to non-cash share-based compensation expenses and a $6.2 million loss on a sale-leaseback transaction. Net loss in the prior year period included a tax-effected net benefit of $5.4 million, including a $7.7 million gain on sale-leaseback transactions, partially offset by $2.2 million in non-cash share-based compensation expense. Excluding these expenses and net benefits, net income improved by $45.7 million; and
  • Net income and Adjusted EBITDA improved as Life Time experienced greater flow-through of its increased revenue and benefited from the structural improvements to its business that improved margins.

Six-Month 2023 

  • Revenue increased 25.7 percent to $1072.6 million due to continued membership dues and in-center revenue growth;
  • Center memberships increased by approximately 65,000 versus in 2022;
  • Center operations expenses increased 11.1 percent to $576.7 million due primarily to operating costs related to its new centers and utility cost inflation;
  • General, administrative and marketing expenses declined 19.6 percent to $95.3 million due to lower share-based compensation expense, lower cash incentive compensation expense, reduced center support overhead, advertising and marketing, and public company expenses;
  • Net income included tax-effected expenses of $15.4 million, including $17.3 million related to non-cash share-based compensation expenses and a $0.6 million net loss on sale-leaseback transactions. Net loss in the prior year period included a tax-effected net benefit of $18.4 million, including a $42.4 million gain on sale-leaseback transactions, partially offset by $23.4 million in non-cash share-based compensation expense and $0.8 million in expenses consisting primarily of COVID-19-related costs. Excluding these expenses and net benefits, net income improved by $118.5 million; and
  • Net income and Adjusted EBITDA improved for the same reasons identified for the quarter.

New Center Openings

  • Life Time opened one new center in the second quarter of 2023 and four new centers through the first half of 2023;
  • As of June 30, 2023, the company operated 164 centers;
  • Life Time plans to open 12 centers in 2023, eight of which will be in the second half; and
  • The company continues to target capital expenditures of $260 million to $280 million for the year, net of the planned $300 million of gross sale-leaseback proceeds.

Liquidity and Capital Resources

  • As of June 30, 2023, Life Time had total cash and cash equivalents of $30.9 million and $20.0 million in outstanding borrowings under its $475 million revolving credit facility;
  • On May 9, 2023, Life Time completed refinancing its $274 million Term Loan B facility with a $310 million Term Loan B facility that matures January 15, 2026;
  • Life Time completed a sale-leaseback transaction for one property for gross proceeds of approximately $45.5 million in the second quarter, bringing the total gross proceeds for the year-to-date 2023 period to $78.5 million; 
  • The final property from Life Time’s previously announced letters of intent is expected to be completed by September 30, 2023, for gross proceeds of approximately $45 million; and
  • Life Time forecasts it will complete the $300 million sale-leaseback transactions in 2023.

2023 Outlook
Third Quarter 2023 Guidance

  • Revenues are expected in the range of $585 million to $595 million against $496.4 million a year ago, representing a gain at the midpoint of 18.9 percent; and
  • Adjusted EBITDA is expected in the range of $136 million to $138 million against $71.0 million a year ago, representing a gain at the midpoint of 93.0 percent.

Full-Year 2023 Guidance

  • Revenue is expected in the range of $2,235 million to $2,265 million versus $1,823 million a year ago, representing a gain at the midpoint of 23.4 percent. Previous guidance called for revenue between $2,200 million and $2,300 million; and
  • Adjusted EBITDA is expected in the range of $510 million to $520 million against $282 million the prior year, representing a gain at the midpoint of 82.6 percent. Previous guidance called for adjusted EBITDA between $470 million and $490 million.

Photo courtesy Life Time