Life Time Group Holdings, Inc. Q1 FY2025 earnings call

Key Points

• Total revenue growth driven by membership dues, enrollment fees, and incentive revenue. Comparable center revenue at 12.9% due to membership dues benefit, ramping clubs, and strong in-center businesses.
• Raised comparable center revenue guidance to 8.5-9.5% for the full year. Focus on member experience and higher revenue per membership, with retention at record levels.
• Deleveraged balance sheet to 2.0 times net debt leverage ratio. Signed letter of intent for sale leaseback of three properties worth ~$150 million, expected to complete in Q2.
• Monitored tariffs with no significant impact expected. Robust club growth pipeline, expecting 10-12 clubs per year, with progress in LT Digital, Miura, and LTH.

Total revenue increased 18.3% to $706 million. Membership dues and enrollment fees grew 17.9%, and incentive revenue rose 18.7%. Comparable center revenue was 12.9% (up from 11.1% in prior year). Center memberships increased 3% to 826,000, total memberships ended at ~880,000. Average monthly dues grew 11.8% to $208. Adjusted EBITDA was $191.6 million, up 31.2%, with a margin of 27.1%. Net cash provided by operating activities increased ~103% to $184 million, and free cash flow was ~$41 million. Net debt leverage ratio is 2.0 times.

Forward-Looking Statements

• Raised comparable center revenue guidance to 8.5-9.5% for the full year. Net income expected to benefit from reduced interest expense due to fixed interest rate swap.
• Deleveraged balance sheet to 2.0 times net debt leverage ratio. Expect to complete sale leaseback of three properties in Q2. Plan to open 10-12 clubs per year in 2025, with potential to increase in 2026 if economy improves.

Risks Identified

• Tariff policies evolving with no immediate significant impact but monitored. Macroeconomic uncertainty could affect membership sign-ups and business performance. Potential economic recession impact on housing and construction, but strategies in place to mitigate.

Q: How broad are the waitlists in clubs and can they go higher?

A: Clubs have waitlists to protect member experience. Most membership adds are full dues-paying customers. Waitlists are managed, and capacity can be adjusted based on club performance.

Q: Club pipeline capacity beyond 10-12 per year?

A: 10-12 clubs per year planned for 2025, with potential to do more in 2026 if the economy improves, while maintaining a strong balance sheet to navigate different economic scenarios.

Q: Legacy member pricing in Q1?

A: No significant legacy price increases in Q1. Monitored macro closely, with churn and new member joining at higher rates contributing to revenue.

Q: Impact of consumer confidence on membership sign-ups?

A: Slight softening in new member sign-ups, but de minimis to total business. Retention is high, and clubs are operating at capacity.

Q: Tariff impact on business?

A: Minimal impact currently. Strategies in place to mitigate, and ability to navigate through changes in construction and equipment costs.

Q: Balance sheet strategy and capital allocation?

A: Focus on maintaining a strong balance sheet for flexibility, aiming for double B credit rating, with the ability to adjust club development based on economic conditions.

Q: Growth in other in-center offerings besides dynamic personal training?

A: Spa and cafes are improving but have room for more improvement. Constant adaptation to member needs and fitness trends.

Q: LT Health performance and tariff exposure?

A: LTH is growing, with 40%+ month-over-month growth in March. Tariff exposure expected to be minimal in the short term, with strategies to navigate potential changes.