Life Time (LTH) - 2025 Q2 - Quarterly Results

Executive Summary The company reported strong revenue and profitability growth in the first half of 2025, achieving positive free cash flow and raising its full-year outlook Second Quarter 2025 Highlights Life Time reported strong Q2 2025 results with significant revenue and profitability growth, achieving positive free cash flow for the fifth consecutive quarter and reducing net debt leverage - Total revenue of $761.5 million increased 14.0% over the prior year quarter[7] - Net income of $72.1 million increased 36.6% over the prior year quarter[7] - Adjusted EBITDA of $211.0 million increased 21.6% over the prior year quarter[7] - Achieved positive free cash flow for the fifth consecutive quarter[7] - Reduced net debt leverage ratio to 1.8 times[7] - Raised 2025 outlook[7] Six-Month 2025 Highlights For the first six months of 2025, Life Time demonstrated robust financial growth, with substantial increases in total revenue, net income, and adjusted profitability metrics, alongside strong cash flow generation - Total revenue increased 16.1% to $1,467.5 million[4] - Net income increased 90.7% to $148.2 million[4] - Adjusted net income increased 106.7% to $172.4 million[4] - Adjusted EBITDA increased 26.0% to $402.6 million[4] - Net cash provided by operating activities for the six months ended June 30, 2025, was $379.6 million, an increase of 45.5% compared to the prior year period[11] - Achieved positive free cash flow of $153.8 million for the six months ended June 30, 2025[11] CEO Commentary The CEO expressed satisfaction with Q2 results, highlighting record-high total visits, visits per membership, and retention, positioning the company for accelerated new club growth in 2026 - Life Time is pleased with its second quarter results and the momentum in the business[4] - Total visits, visits per membership, and retention reached all-time highs[4] - Strong business performance, balance sheet, and cash flow position the company for modestly accelerated new club growth in 2026[4] Financial Performance Overview The company's financial performance shows robust growth in revenue and profitability, driven by increased membership dues and in-center spending Consolidated Financial Summary This table provides a high-level overview of Life Time's key financial metrics for the three and six months ended June 30, 2025, compared to the prior year, showing significant growth across revenue and profitability Consolidated Financial Summary | Metric ($ in millions) | Q2 2025 | Q2 2024 | % Change | 6M 2025 | 6M 2024 | % Change | | :--------------------- | :------ | :------ | :------- | :------ | :------ | :------- | | Total revenue | $761.5 | $667.8 | 14.0% | $1,467.5 | $1,264.5 | 16.1% | | Center operations expenses | $403.9 | $355.5 | 13.6% | $774.9 | $677.4 | 14.4% | | Rent | $83.2 | $74.9 | 11.1% | $164.4 | $147.2 | 11.7% | | General, administrative and marketing expenses | $61.7 | $53.2 | 16.0% | $119.5 | $102.1 | 17.0% | | Net income | $72.1 | $52.8 | 36.6% | $148.2 | $77.7 | 90.7% | | Adjusted net income | $84.1 | $52.4 | 60.5% | $172.4 | $83.4 | 106.7% | | Adjusted EBITDA | $211.0 | $173.5 | 21.6% | $402.6 | $319.5 | 26.0% | | Comparable center revenue | 11.2% | 12.0% | | 12.0% | 11.6% | | | Center memberships, end of period | 849,643 | 832,636 | 2.0% | 849,643 | 832,636 | 2.0% | | Average center revenue per center membership | $888 | $794 | 11.8% | $1,733 | $1,541 | 12.5% | Second Quarter 2025 Detailed Results Life Time's Q2 2025 performance was marked by strong revenue growth driven by membership and in-center offerings, alongside increased operating expenses due to expansion and utilization, culminating in significant improvements in net income and adjusted profitability Revenue and Membership Growth Revenue growth was driven by higher membership dues and increased utilization of in-center offerings - Total revenue increased 14.0% to $761.5 million, driven by strong growth in membership dues and in-center revenue[8] - Revenue growth was fueled by increased average dues, membership growth in new and ramping centers, and higher member utilization of in-center offerings, particularly Dynamic Personal Training[8] - Center memberships reached 849,643, a 2.0% increase YoY and 2.8% QoQ, with sequential growth partly due to seasonality[8] Operating Expenses Operating expenses rose due to new center costs and higher club utilization - Center operations expenses increased 13.6% to $403.9 million, primarily due to operating costs for new/ramping centers and increased club utilization[11] - General, administrative and marketing expenses rose 16.0% to $61.7 million, mainly due to share-based compensation, center support overhead, IT costs, and secondary offering expenses[11] Profitability (Net Income, Adjusted Net Income, Adjusted EBITDA) Profitability metrics improved significantly, reflecting strong business performance and structural enhancements - Net income increased 36.6% to $72.1 million, driven by improved business performance and $9.3 million from employee retention credits, partially offset by a $9.0 million loss on a sale-leaseback transaction[11] - Adjusted net income increased 60.5% to $84.1 million and Adjusted EBITDA increased 21.6% to $211.0 million[11] - Profitability improvements reflect greater revenue flow-through and structural business enhancements that improved margins[11] Six-Month 2025 Detailed Results For the first half of 2025, Life Time achieved significant revenue growth, driven by membership and in-center offerings, but overall profitability saw substantial improvements, supported by tax benefits and structural enhancements Revenue and Membership Growth Revenue growth was driven by higher membership dues and increased utilization of in-center offerings - Revenue increased 16.1% to $1,467.5 million, due to strong growth in membership dues and in-center revenue[11] - Growth was driven by an increase in average dues, membership growth in new and ramping centers, and higher member utilization of in-center offerings, particularly Dynamic Personal Training[11] Operating Expenses Operating expenses rose due to new center costs and higher club utilization - Center operations expenses increased 14.4% to $774.9 million, primarily due to operating costs for new/ramping centers and increased club utilization[11] - General, administrative and marketing expenses increased 17.0% to $119.5 million, mainly due to share-based compensation, center support overhead, IT costs, and secondary offerings in February and June 2025[11] Profitability (Net Income, Adjusted Net Income, Adjusted EBITDA) Profitability metrics improved significantly, reflecting strong business performance and structural enhancements - Net income increased 90.7% to $148.2 million, primarily due to improved business performance, a $15.0 million tax benefit from stock option exercises, and $10.5 million from employee retention credits, partially offset by a $10.2 million loss on a sale-leaseback transaction[11] - Adjusted net income increased 106.7% to $172.4 million and Adjusted EBITDA increased 26.0% to $402.6 million[11] - Both Adjusted net income and Adjusted EBITDA benefited from greater revenue flow-through and structural business improvements[11] Operational Highlights The company's operational performance shows growth in memberships and an expanding physical footprint through new center openings Membership and Center Data Life Time reported an increase in center memberships and total subscriptions, alongside an expansion in its physical footprint with new center openings and increased total center square footage Membership and Center Data (as of June 30, 2025) | Metric | Q2 2025 | Q2 2024 | % Change | | :-------------------------- | :------ | :------ | :------- | | Center memberships | 849,643 | 832,636 | 2.0% | | On-hold memberships | 49,207 | 46,131 | 6.7% | | Total memberships | 898,850 | 878,767 | 2.3% | | Total centers (end of period) | 184 | 175 | 5.1% | | Total center square footage (end of period) | 18,000,000 | 17,200,000 | 4.7% | New Center Openings Life Time opened four new centers during Q2 2025, contributing to a total of 184 centers operated as of June 30, 2025, and five net new center openings for the six months ended June 30, 2025 - Four new centers were opened during the second quarter of 2025[11] - As of June 30, 2025, the company operated a total of 184 centers[11] - Net new center openings for the six months ended June 30, 2025, were five[33] Cash Flow and Capital Structure The company strengthened its financial position through positive free cash flow, increased liquidity, and a reduction in its net debt leverage ratio Cash Flow Highlights Life Time achieved positive free cash flow for both Q2 and the first six months of 2025, significantly increasing net cash provided by operating activities, partly aided by proceeds from a sale-leaseback transaction - Net cash provided by operating activities for the six months ended June 30, 2025, was $379.6 million, an increase of 45.5% YoY[11] - Achieved positive free cash flow of $112.5 million for Q2 2025, including $138.8 million net proceeds from a sale-leaseback transaction[11] - Achieved positive free cash flow of $153.8 million for the six months ended June 30, 2025[11] Capital Expenditures Capital expenditures increased significantly in Q2 and the first six months of 2025, driven by growth capital for new centers and major remodels, as well as increased maintenance and modernization/technology investments Capital Expenditures ($ in millions) | Type | Q2 2025 | Q2 2024 | % Change | 6M 2025 | 6M 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | :------ | :------ | :------- | | Growth capital expenditures | $167.0 | $108.6 | 53.8% | $260.5 | $213.5 | 22.0% | | Maintenance capital expenditures | $35.9 | $27.3 | 31.5% | $65.4 | $48.4 | 35.1% | | Modernization and technology capital expenditures | $19.1 | $8.4 | 127.4% | $38.7 | $39.2 | (1.3)% | | Total capital expenditures | $222.0 | $144.3 | 53.8% | $364.6 | $301.1 | 21.1% | Liquidity and Capital Resources Life Time significantly improved its liquidity position, with total available liquidity reaching $794.0 million, including substantial revolving credit facility availability and increased cash and cash equivalents - Total available liquidity was $794.0 million as of June 30, 2025[14] - This included $618.5 million of availability on the $650.0 million revolving credit facility and $175.5 million of cash and cash equivalents[14] - Cash and cash equivalents are higher than historical levels due to a sale-leaseback transaction, with plans to fund growth initiatives[14] Debt and Leverage Life Time successfully reduced its net debt leverage ratio to 1.8 times, improved its credit rating, and converted its variable interest rate term loan to a fixed rate, enhancing financial stability - Net debt leverage ratio improved to 1.8 times as of June 30, 2025, from 3.0 times as of June 30, 2024[14] - Entered into interest rate swap agreements for the entire $997.5 million term loan facility, converting the variable rate to a fixed rate of 3.409% plus applicable margin[14] - S&P Global Ratings upgraded the Company's issuer credit rating to 'BB-' from 'B+' on June 18, 2025, improving term loan and revolving credit facility margins by 25 basis points[14] 2025 Financial Outlook The company raised its full-year 2025 guidance, reflecting increased confidence in its business performance and growth trajectory Full-Year 2025 Guidance Update Life Time raised its full-year 2025 guidance for revenue, net income, and Adjusted EBITDA, reflecting increased confidence in its business performance and growth trajectory Full-Year 2025 Guidance Update ($ in millions) | Metric | New Guidance (Dec 31, 2025) | Previous Guidance (May 8, 2025) | Year Ended Dec 31, 2024 (Actual) | % Change (Midpoints vs 2024) | | :---------------- | :-------------------------- | :-------------------------- | :----------------------------- | :--------------------------- | | Revenue | $2,955 – $2,985 | $2,940 – $2,980 | $2,621.0 | 13.3% | | Net Income | $290 – $293 | $286 – $293 | $156.2 | 86.6% | | Adjusted EBITDA | $805 – $815 | $792 – $808 | $676.8 | 19.7% | | Rent | $337 – $343 | $337 – $347 | $304.9 | 11.5% | Key Operational and Financial Guidance Life Time provided updated operational and financial guidance for 2025, including plans for new center openings, comparable center revenue growth, debt management, and revised estimates for key expenses - Plan to open 10 new centers[15] - Manage net debt leverage ratio to remain at or below 2.00 times[15] - Comparable center revenue growth of 9.5% to 10.0%, increased from previous expectations of 8.5% to 9.5%[15] - Rent to include non-cash rent expense of $34 million to $37 million, decreased from previous expectations of $35 million to $38 million[15] - Cash income tax expense of $25 million to $27 million, decreased from previous $39 million to $41 million, reflecting tax benefits of the One Big Beautiful Bill Act[15] - Complete $100 million in additional sale-leaseback transactions in the second half of the year, resulting in total gross proceeds of approximately $250 million for the year[15] Company Information & Disclosures This section provides corporate information, investor relations details, and required legal disclosures About Life Time Life Time operates over 180 athletic country clubs across the US and Canada, offering a comprehensive healthy living ecosystem and recognized as a Great Place to Work - Life Time operates over 180 athletic country clubs across the United States and Canada[17] - Empowers people to live healthy, happy lives through its clubs, complimentary app, and nearly 30 iconic athletic events[17] - Serves people 90 days to 90+ years old through healthy living, aging, and entertainment communities and ecosystem, along with programs and nutritional products[17] - Recently certified as a Great Place to Work, reinforcing its commitment to fostering an exceptional workplace culture[17] Conference Call Details Life Time scheduled a conference call for August 5, 2025, at 10:00 a.m. ET to discuss its second quarter financial results, with dial-in and webcast options available - A conference call to discuss Q2 financial results was scheduled for Tuesday, August 5, 2025, at 10:00 a.m. ET[15] - Dial-in numbers provided for U.S. (1-877-451-6152) and International (1-201-389-0879) participants[15] - A live audio webcast was available at https://ir.lifetime.life, with a recorded replay accessible within approximately three hours of the call's conclusion[15][16] Forward-Looking Statements The press release contains forward-looking statements regarding the company's future plans and financial outlook, which are subject to inherent risks and uncertainties detailed in SEC filings - The press release includes forward-looking statements concerning the Company's plans, strategies, financial outlook for fiscal year 2025, growth, business initiatives, and capital structure[23] - These statements are based on management's beliefs and assumptions and are inherently subject to risks, uncertainties, and assumptions[23] - Factors that could cause actual results to differ materially are discussed under 'Risk Factors' in the Company's Annual Report on Form 10-K and other SEC filings[24] Contacts Contact information for investor relations and corporate communications is provided for inquiries - Investor Relations contacts: Ken Cooper and Connor Wienberg[25] - Media contact: Jason Thunstrom[25] Condensed Consolidated Financial Statements This section presents the company's unaudited statements of operations, balance sheets, and cash flows for the reported periods Statements of Operations The condensed consolidated statements of operations show Life Time's revenue, operating expenses, and net income for the three and six months ended June 30, 2025, compared to the prior year, indicating strong growth in profitability Condensed Consolidated Statements of Operations (In thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :-------- | :-------- | | Total revenue | $761,469 | $667,761 | $1,467,510 | $1,264,478 | | Total operating expenses | $653,020 | $563,005 | $1,251,391 | $1,087,665 | | Income from operations | $108,449 | $104,756 | $216,119 | $176,813 | | Net income | $72,102 | $52,805 | $148,244 | $77,722 | | Basic EPS | $0.33 | $0.27 | $0.69 | $0.39 | | Diluted EPS | $0.32 | $0.26 | $0.66 | $0.38 | Balance Sheets The condensed consolidated balance sheets present Life Time's financial position as of June 30, 2025, compared to December 31, 2024, showing an increase in total assets and stockholders' equity Condensed Consolidated Balance Sheets (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $368,023 | $170,975 | | Cash and cash equivalents | $175,509 | $10,879 | | Total assets | $7,600,207 | $7,152,537 | | Total current liabilities | $568,658 | $520,103 | | Long-term debt, net of current portion | $1,493,038 | $1,513,157 | | Total liabilities | $4,730,964 | $4,542,187 | | Total stockholders' equity | $2,869,243 | $2,610,350 | Statements of Cash Flows The condensed consolidated statements of cash flows for the six months ended June 30, 2025, show a significant increase in net cash provided by operating activities Condensed Consolidated Statements of Cash Flows (In thousands) | Metric | 6M 2025 | 6M 2024 | | :-------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | $379,554 | $260,830 | | Net cash used in investing activities | $(230,651) | $(154,281) | | Net cash provided by (used in) financing activities | $19,291 | $(87,102) | | Increase in cash and cash equivalents and restricted cash | $168,371 | $19,392 | | Cash and cash equivalents and restricted cash—end of period | $196,249 | $49,358 | Non-GAAP Financial Measures and Reconciliations This section defines the non-GAAP measures used by the company and provides detailed reconciliations of these measures to their most directly comparable GAAP counterparts Use and Definitions of Non-GAAP Measures Life Time uses non-GAAP financial measures like Adjusted net income, Adjusted EBITDA, free cash flow, and net debt to provide investors with supplemental information for comparing operating performance and evaluating liquidity - Non-GAAP financial measures include Adjusted net income, Adjusted EBITDA, free cash flow, and net debt[18] - Adjusted net income is defined as net income excluding specific non-recurring items and their tax effects[19] - Adjusted EBITDA is defined as net income before interest, taxes, depreciation, and amortization, excluding specific non-recurring items[19] - Free cash flow is defined as net cash provided by operating activities less capital expenditures, plus net proceeds from sale-leaseback and land sales[19] - These measures are presented to assist investors in comparing operating performance and evaluating liquidity, but are not substitutes for GAAP measures[20] Key Performance Indicators This section presents key operational and financial performance indicators, including membership data, revenue breakdown, center statistics, and GAAP/Non-GAAP financial measures Key Performance Indicators (Unaudited, $ in thousands, except for Average Center revenue per center membership data) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :-------- | :-------- | | Center memberships | 849,643 | 832,636 | 849,643 | 832,636 | | Total memberships | 898,850 | 878,767 | 898,850 | 878,767 | | Membership dues & enrollment fees (% of total center revenue) | 71.7% | 71.7% | 72.4% | 72.5% | | In-center revenue (% of total center revenue) | 28.3% | 28.3% | 27.6% | 27.5% | | Average Center revenue per center membership | $888 | $794 | $1,733 | $1,541 | | Comparable center revenue | 11.2% | 12.0% | 12.0% | 11.6% | | Net new center openings | 4 | 3 | 5 | 4 | | Total centers (end of period) | 184 | 175 | 184 | 175 | | Net income margin | 9.5% | 7.9% | 10.1% | 6.1% | | Adjusted net income margin | 11.1% | 7.9% | 11.7% | 6.6% | | Adjusted EBITDA margin | 27.7% | 26.0% | 27.4% | 25.3% | Reconciliation of Net Income to Adjusted Net Income This reconciliation details the adjustments made to GAAP net income to arrive at Adjusted net income, primarily accounting for share-based compensation, sale-leaseback impacts, and employee retention credits Reconciliation of Net Income to Adjusted Net Income (Unaudited, $ in thousands) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :-------- | :-------- | | Net income | $72,102 | $52,805 | $148,244 | $77,722 | | Share-based compensation expense | 16,380 | 11,071 | 28,288 | 18,698 | | Loss (gain) on sale-leaseback transactions | 12,496 | (7,558) | 12,496 | (7,522) | | Capital transaction costs | 611 | — | 1,531 | — | | Employee retention credits | (12,873) | — | (12,873) | — | | Other | 17 | (3,974) | 203 | (3,796) | | Taxes | (4,589) | 96 | (5,515) | (1,726) | | Adjusted net income | $84,144 | $52,440 | $172,374 | $83,376 | | Diluted EPS | $0.32 | $0.26 | $0.66 | $0.38 | | Adjusted diluted EPS | $0.37 | $0.25 | $0.77 | $0.41 | Reconciliation of Net Income to Adjusted EBITDA This reconciliation shows the adjustments from GAAP net income to Adjusted EBITDA, primarily adding back interest, taxes, depreciation, amortization, and non-recurring items Reconciliation of Net Income to Adjusted EBITDA (Unaudited, $ in thousands) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :-------- | :-------- | | Net income | $72,102 | $52,805 | $148,244 | $77,722 | | Interest expense, net | 21,784 | 37,669 | 46,891 | 75,072 | | Provision for income taxes | 27,473 | 13,818 | 33,878 | 23,732 | | Depreciation and amortization | 72,988 | 69,714 | 143,907 | 135,617 | | Share-based compensation expense | 16,380 | 11,071 | 28,288 | 18,698 | | Loss (gain) on sale-leaseback transactions | 12,496 | (7,558) | 12,496 | (7,522) | | Capital transaction costs | 611 | — | 1,531 | — | | Employee retention credits | (12,873) | — | (12,873) | — | | Other | 17 | (3,974) | 203 | (3,796) | | Adjusted EBITDA | $210,978 | $173,545 | $402,565 | $319,523 | Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow This reconciliation outlines the calculation of free cash flow from net cash provided by operating activities by adjusting for capital expenditures and proceeds from asset sales Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited, $ in thousands) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :-------------------------------- | :------ | :------ | :-------- | :-------- | | Net cash provided by operating activities | $195,698 | $170,423 | $379,554 | $260,830 | | Capital expenditures, net of construction reimbursements | (222,004) | (144,306) | (364,486) | (301,107) | | Proceeds from sale-leaseback transactions | 138,771 | 142,671 | 138,771 | 142,671 | | Proceeds from land sales | — | 6,328 | — | 6,328 | | Free cash flow | $112,465 | $175,116 | $153,839 | $108,722 | Reconciliation of Net Income to Adjusted EBITDA Trailing Twelve Months This reconciliation provides the calculation of Adjusted EBITDA for the trailing twelve months ended June 30, 2025 and 2024, starting from net income Reconciliation of Net Income to Adjusted EBITDA Trailing Twelve Months (Unaudited, $ in thousands) | Metric | TTM June 30, 2025 | TTM June 30, 2024 | | :-------------------------------- | :---------------- | :---------------- | | Net income | $226,762 | $109,321 | | Interest expense, net | 119,914 | 142,695 | | Provision for income taxes | 62,674 | 30,074 | | Depreciation and amortization | 282,971 | 263,565 | | Share-based compensation expense | 60,625 | 46,670 | | Loss on sale-leaseback transactions | 17,400 | 5,307 | | Capital transaction costs | 1,531 | — | | Asset impairments | — | 5,340 | | Employee retention credits | (12,873) | — | | Other | 819 | (2,761) | | Adjusted EBITDA | $759,823 | $600,211 | Reconciliation of Net Debt and Leverage Calculation This reconciliation details the calculation of net debt and the net debt leverage ratio as of June 30, 2025 and 2024, showing a significant improvement in the leverage ratio Reconciliation of Net Debt and Leverage Calculation (Unaudited, $ in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Current maturities of debt | $22,873 | $12,755 | | Long-term debt, net of current portion | $1,493,038 | $1,830,241 | | Total Debt | $1,515,911 | $1,842,996 | | Less: Fair value adjustment | 207 | 362 | | Less: Unamortized debt discounts and issuance costs | (18,445) | (11,661) | | Less: Cash and cash equivalents | 175,509 | 34,527 | | Net Debt | $1,358,640 | $1,819,768 | | Trailing twelve-month Adjusted EBITDA | 759,823 | 600,211 | | Net Debt Leverage Ratio | 1.8x | 3.0x | Reconciliation of Net Income to Adjusted EBITDA Guidance This table provides a reconciliation of the full-year 2025 guidance for net income to Adjusted EBITDA, outlining the expected adjustments Reconciliation of Net Income to Adjusted EBITDA Guidance for the Year Ending 2025 (Unaudited, $ in millions) | Metric | Year Ending December 31, 2025 | | :-------------------------------- | :---------------------------- | | Net income | $290 – $293 | | Interest expense, net of interest income | 84 – 80 | | Provision for income taxes | 92 – 93 | | Depreciation and amortization | 288 – 294 | | Share-based compensation expense | 51 – 55 | | Loss on sale-leaseback transactions | 13 – 13 | | Other | (13) – (13) | | Adjusted EBITDA | $805 – $815 |