10-K: Life Time Group Holdings Reports Record Revenue for 2024, Focuses on Asset-Light Growth

Life Time Group Holdings achieved its highest revenue in history in 2024, driven by membership growth and strategic initiatives, while focusing on an asset-light expansion model.

Summary

• Life Time Group Holdings, Inc. reported its financial results for the year ended December 31, 2024.
• The company achieved its highest revenue in history in 2024, driven by a subscription-based membership model.
• As of December 31, 2024, Life Time had over 1.5 million individual members, comprising more than 866,000 memberships.
• The company operates over 175 centers across 31 states in the United States and one province in Canada.
• Membership dues and enrollment fees represent over 72% of total Center revenue for the year ended December 31, 2024.
• Average revenue per center membership increased to $3,160 in 2024, compared to $2,810 in 2023 and $2,528 in 2022.
• Total visits to Life Time clubs were over 114 million in 2024, compared to 103 million in 2023 and 86 million in 2022.
• Life Time is focused on expanding its national footprint in affluent metropolitan areas using an asset-light real estate model.
• The company is targeting opening 10 to 12 new locations on average per year going forward.
• Life Time expects net invested capital of $25-$30 million per new location on average, with a targeted average return on net invested capital in excess of 30% after a threeto four-year ramp-up period.
• The company is expanding its omni-channel offerings, including digital fitness and wellness content, co-working spaces (Life Time Work), and luxury wellness-oriented residences (Life Time Living).
• Life Time was free cash flow positive starting in the second quarter of 2024 and expects to remain free cash flow positive on an annual basis.
• The company is committed to environmental, social, and governance (ESG) initiatives, including the Life Time Foundation's focus on healthier families and a healthy planet.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with record revenue and strategic growth initiatives, but also acknowledges risks and challenges related to debt, competition, and macroeconomic factors.

Positives

• Strong membership growth and engagement.
• Increased average revenue per center membership.
• Successful execution of asset-light growth strategy.
• Expansion of omni-channel offerings.
• Focus on strategic initiatives like pickleball, personal training, and ARORA.
• Positive free cash flow generation.
• Commitment to ESG initiatives.
• Median household income of members is $158,000, 1.4 times the median income in the respective trade areas.

Negatives

• Indebtedness and lease obligations could affect financial condition.
• Variable interest rates on debt could increase debt service obligations.
• Inability to generate sufficient cash to service indebtedness and lease obligations.
• Competition in the health, fitness and wellness industry.
• Dependence on third-party suppliers for equipment and certain products and services.
• Potential for claims related to the development, construction or operation of facilities.
• Inability to maintain the required type or level of insurance coverage on acceptable terms or at an acceptable cost.

Risks

• Inability to attract and retain members.
• Adverse impacts from macroeconomic environment, including inflation and interest rates.
• Competition in the health, fitness, and wellness industry.
• Dependence on third-party suppliers.
• Deterioration in brand quality or reputation.
• Inadequate protection of intellectual property rights.
• Failure to successfully execute asset-light growth strategy.
• Delays in new center openings.
• Strains on management, employees, information systems, and internal controls due to growth.
• Inability to successfully acquire or invest in suitable businesses.
• Reliance on technology and inability to adapt to technological change.
• Failure to maintain the operation, integrity and security of systems and data.
• Risks related to acceptance of ACH, credit card, debit card and digital payments.
• Inability to generate sufficient cash to service indebtedness and lease obligations.
• Limitations on ability to raise capital in the future.
• Inability to retain key employees and hire additional qualified employees.
• Exposure to extensive governmental laws and regulations.
• Potential for claims related to health, fitness, and wellness-related offerings.
• Inability to maintain the required type or level of insurance coverage on acceptable terms or at an acceptable cost.
• Adverse developments in applicable tax laws or tariffs.
• Share price volatility.
• Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.
• Control by certain stockholders whose interests may not be aligned with yours.
• Anti-takeover effects of charter documents and Delaware law.
• Limitations on ability to use net operating loss carryforwards and certain other tax attributes.
• Non-U.S. holders who own more than 5% of our common stock may be subject to U.S. federal income tax on gain realized on the sale or other taxable disposition of such stock.

Future Outlook

Life Time is targeting opening 10 to 12 new locations on average per year going forward and expects to continue to grow its omni-channel platform to support the Healthy Way of Life journey of its members.

Management Comments

• Life Time is focused on improving the ratio of its net debt to Adjusted EBITDA, or its leverage ratio.
• Life Time believes that it can reach and maintain a leverage ratio of 2.25 times or below.

Industry Context

Life Time competes with various participants in the health, fitness, and wellness industry, including health center operators, non-profit organizations, physical fitness facilities, boutique fitness offerings, and digital fitness services.

Comparison to Industry Standards

• Equinox Holdings, Inc., The Bay Club Company, Invited (formerly ClubCorp), LA Fitness International, LLC and 24 Hour Fitness Worldwide, Inc. are listed as key competitors.
• Anytime Fitness, Snap Fitness, Planet Fitness, Orange Theory, Barre3, StretchLab and others are listed as smaller fitness clubs and studios and other boutique fitness offerings.
• The document does not provide specific comparisons of Life Time's financial results to those of its competitors.
• The document does not provide specific comparisons of Life Time's financial results to global benchmarks.

Legal Proceedings

• Life Time Parties have appealed the Court's decision to the Minnesota Court of Appeals.

Related Party Transactions

• The document discloses related party transactions, including sale-leaseback arrangements and property leases involving the CEO and other related parties.

Stakeholder Impact

• Shareholders: Potential for increased value through revenue growth and strategic initiatives, but also risk of share price volatility and control by certain stockholders.
• Employees: Continued employment opportunities and benefits, but also potential for changes in labor laws and unionization.
• Customers: Enhanced member experiences and expanded offerings, but also potential for claims related to health, fitness, and wellness-related offerings.
• Suppliers: Continued business relationships, but also potential for disruptions in the supply chain.
• Creditors: Repayment of debt obligations, but also potential for increased debt service obligations due to variable interest rates.

Next Steps

• Expand the number of centers in an asset-light manner.
• Continue to elevate and broaden member experiences.
• Optimize membership levels and membership dues in centers.
• Expand national footprint in affluent metropolitan statistical areas.
• Continue to expand omni-channel offerings.
• Continue to invest in digital capabilities, including in the Life Time integrated digital app and artificial intelligence.

Key Dates