Life Time Group Holdings Inc.

11/04/2025 | Press release | Distributed by Public on 11/04/2025 06:09

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain statements in this discussion and analysis are forward-looking statements within the meaning of federal securities regulations. Forward-looking statements in this discussion and analysis include, but are not limited to, our plans, strategies and prospects, both business and financial, including our financial outlook and cash flow, possible or assumed future actions, opportunities for growth and margin expansion, improvements to our balance sheet and leverage, capital expenditures, consumer demand, industry and economic trends, business strategies,events or results of operations. Generally, forward-looking statements are not based on historical facts but instead represent only our current beliefs and assumptions regarding future events. All forward-looking statements are, by nature, subject to risks, uncertainties and other factors. This discussion and analysis does not purport to identify factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements. You should understand that forward-looking statements are not guarantees of performance or results and are preliminary in nature. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Statements preceded by, followed by or that otherwise include the words "believes," "assumes," "expects," "anticipates," "intends," "continues," "projects," "predicts," "estimates," "plans," "potential," "may increase," "may result," "will result," "may fluctuate," and similar expressions or future or conditional verbs such as "will," "should," "would," "foreseeable," "may," and "could" as well as the negative version of these words or similar terms and phrasesare generally forward-looking in nature and not historical facts. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking.
The forward-looking statements contained in this discussion and analysis are based on management's current beliefs and assumptions and are not guarantees of future performance. The forward-looking statements are subject to various risks, uncertainties, assumptions or changes in circumstances that are difficult to predict or quantify. Actual results may differ materially from these expectations due to numerous factors, many of which are beyond our control, including risks relating to our business operations and competitive and economic environment, risks relating to our brand, risks relating to the growth of our business, risks relating to our technological operations, risks relating to our capital structure and lease obligations, risks relating to our human capital, risks relating to legal compliance and risk management and risks relating to ownership of our common stockand the other important factors discussed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the "SEC") and as such risk factors may be updated from time to time in our periodic filings with the SEC that are accessible on the SEC's website at www.sec.gov. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive. Consequently, we caution investors not to place undue reliance on any forward-looking statements, as no forward-looking statement can be guaranteed, and actual results may vary materially. Additionally, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. Forward-looking statements speak only as of the date of this report. We do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Overview
Business and Strategy
Life Time, the "Healthy Way of Life Company," is a premier lifestyle and leisure brand offering premium health, fitness and wellness experiences to a community of more than 1.6 million individual members, who together comprise more than 891,000 memberships, as of September 30, 2025. We are a leading innovator in the industry having successfully created a leisure model that incorporates the country club wellness lifestyle within a fitness and active living community. We have earned the trust ofour members for over 30 years to make their lives healthier and happier by offering them the best places, programs and performers. We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes 185 centers-distinctive, resort-like athletic country club destinations-across 31 states in the United States and one province in Canada. Our continuous commitment to members has resulted in strong brand loyalty and fueled our strong, long-term financial performance.
Our luxurious athletic country clubs total over 18 million of indoor square feet and over seven million of outdoor square feet in the aggregate. Our centers are located in affluent suburban and urban locations. Depending on the size and location of a center, we offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios and spaces, recovery spaces, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, indoor and outdoor pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces. Our premium service offerings are delivered by over 43,000 Life Time team members, including over 10,900 certified fitness professionals, ranging from personal trainers to studio performers.
Our members are highly engaged and draw inspiration from the experiences and community we have created. The value our members place on our community is reflected in the continued strength and growth of our average revenue per center membership, center usage and the visits to our athletic country clubs. Our average revenue per center membership increased to $2,638 for the nine months ended September 30, 2025 as compared to $2,361 for the nine months ended September 30, 2024. Total visits to our clubs were over 93 million for the nine months ended September 30, 2025 as compared to 87 million for the nine months ended September 30, 2024, and average visits per membership to our centers remained strong at 113 for the nine months ended September 30, 2025. Our membership mix is notably shifting with couples and family comprising an increasingly larger portions of total memberships. These memberships have historically been more engaged with higher retention and higher average monthly dues. With these membership dynamics and our premium, high-use model, our newer clubs are typically reaching their desired utilization and revenue with fewer memberships and in certain centers we are limiting qualified memberships, which have significantly lower average membership dues.
We believe that no other company in the United States delivers the same quality and breadth of health, fitness and wellness experiences that we deliver, which has enabled us to consistently grow our annual membership dues and in-center revenue.
Our total Center revenue increased to $2,182.4 million for the nine months ended September 30, 2025 as compared to $1,900.3 million for the nine months ended September 30, 2024. We believe it will continue to grow as we open new centers in desirable locations across the country, new members join at higher membership dues rates, our new centers ramp to expected performance and we continue to execute on our strategic initiatives discussed below. Our new centers on average have taken three to four years to ramp to expected performance. As of September 30, 2025, we had 30 centers open for less than three years and 17 new centers under construction. We are expanding the number of our centers using an asset-light model that targets affluent markets with higher income members, higher average revenue per center membership and higher returns on invested capital. As we open these new centers in more affluent markets, our average revenue per center membership should naturally increase.
We believe we have significant opportunities to continue expanding our portfolio of premium centers in an asset-light manner. We are now targeting 12 to 14 new locations on average per year starting in 2026 and we are planning to deliver at the high end of that range in 2026 and 2027. We also expect a larger percentage of our new centers will be large format ground up construction builds as compared to 2024 and 2025.
We also continue to execute several strategic initiatives that are driving revenue, engagement, membership optimization and expansion as we elevate and broaden our member experiences and allow members and non-members to integrate health, fitness and wellness into their lives with greater ease and frequency. These strategic initiatives include pickleball, Dynamic Personal Training, Dynamic Stretch, small group training such as Alpha, GTX, Ultra Fit and MB360, our ARORA community focused on members aged 55 years and older, where we have experienced a significant increase in our unique participants or total sessions, and most recently LT Games, a unique hybrid-athletic competition. Our MIORA performance and longevity health offering is performing to our expectations in our first two locations, and we plan to expand these offerings to additional locations in 2025 and beyond.
We have also been executing on enhanced offerings to accelerate growth beyond our centers. We are selling our LTH nutritional products more broadly on e-commerce platforms. Additionally, our digital platform is delivering a true omni-channel experience through our integrated digital app that is available to members and non-members at no cost, including live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content. We are continuing to invest in our digital capabilities, including artificial intelligence such as L•AI•C, our first generative, artificial intelligence driven healthy way of life personal companion with personalized content and recommendations, to strengthen our relationships with our members, reach more people looking for a Healthy Way of Life and more comprehensively address their health, fitness and wellness needs so that they can engage and connect with Life Time at any time or place.
We also continue to expand our "Healthy Way of Life" ecosystem in response to the desire of our members to holistically integrate health and wellness into every aspect of their daily lives. In 2018, we launched Life Time Work, an asset-light branded
co-working model that offers premium work spaces in close proximity to our athletic country clubs and integrates ergonomic furnishings and promotes a healthy working environment. Life Time Work members also have the ability to receive access to all of our resort-like athletic country club destinations across the United States and Canada. We have also begun to dedicate space within many of our athletic country clubs for work lounges that have a design aesthetic similar to our Life Time Work locations. Additionally, our Life Time Living locations, which are also an asset-light model, offer luxury wellness-oriented residences in close proximity to our athletic country clubs. As of September 30, 2025, we had 15 Life Time Work and four Life Time Living locations open and operating. Our Life Time Living concept is generating interest from new property developers and presenting opportunities for new center development and deal terms that were not previously available to us. Our omni-channel platform continues to grow as we expand our footprint with new centers and nearby work and living spaces, as well as strengthen our digital capabilities.
Macroeconomy and Policy Environment
We continue to monitor the macroeconomic and policy environment and its impact on our business, including with respect to tariffs, inflation, interest rates, taxes and labor, as well as a potential economic recession and general economic and political conditions. There continues to be macroeconomic uncertainty in many markets around the world, including as a result of international unrest and trade policy, and new or elevated tariffs, which have increased certain of our expenses and capital expenditures, but have not had a material impact on our business. We continue to analyze the potential impact of these events and any resulting downstream impacts, including higher inflation. Despite these headwinds, we have experienced growth in our revenue and expanded our operating margins. We will continue to monitor the macroeconomic and policy environment and while any future uncertainty or volatility, a decline in the U.S. or global economy, or the public perception that any of these events may occur, could adversely affect our business and results of operations, we believe that our business is resilient and has performed well historically during different economic cycles including during a recession.
Non-GAAP Financial Measures
This discussion and analysis includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"), including Adjusted net income, Adjusted net income per common share, Adjusted EBITDA, free cash flow and ratios related thereto. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of the Company's non-GAAP financial measures to the corresponding GAAP measures should be carefully evaluated.
Adjusted Net Income
We define Adjusted net income as net income excluding the impact of share-based compensation expense as well as (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, less the tax effect of these adjustments.
Adjusted EBITDA
We define Adjusted EBITDA as net income before interest expense, net, provision for income taxes and depreciation and amortization, excluding the impact of share-based compensation expense as well as (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations.
Management uses Adjusted net income and Adjusted EBITDA to evaluate the Company's performance. We believe that Adjusted net income and Adjusted EBITDA are important metrics for management, investors and analysts as they remove the impact of items that we do not believe are indicative of our core operating performance and allows for consistent comparison of our operating results over time and relative to our peers. We use Adjusted net income and Adjusted EBITDA to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and to establish annual budgets and forecasts. We also use Adjusted EBITDA or variations thereof to establish incentive compensation for management.
Free Cash Flow
We define free cash flow as net cash provided by operating activities less capital expenditures, net of construction reimbursements, plus net proceeds from sale-leaseback transactions and land sales. We believe free cash flow assists investors and analysts in evaluating our liquidity and cash flows, including our ability to make principal payments on our indebtedness
and to fund our capital expenditures and working capital requirements. Our management considers free cash flow to be a key indicator of our liquidity and we present this metric to our board of directors. Additionally, we believe free cash flow is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry.
Adjusted net income, Adjusted EBITDA and free cash flow should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP. These are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities as a measure of our liquidity and may not be comparable to other similarly titled measures of other businesses. Adjusted net income, Adjusted EBITDA and free cash flow have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Furthermore, we compensate for the limitations described above by relying primarily on our GAAP results and using Adjusted net income, Adjusted EBITDA and free cash flow only for supplemental purposes. See our condensed consolidated financial statements included elsewhere in this report for our GAAP results.
Non-GAAP Measurements and Key Performance Indicators
We prepare and analyze various non-GAAP performance metrics and key performance indicators to assess the performance of our business and allocate resources. For more information regarding our non-GAAP performance metrics, see "-Non-GAAP Financial Measures" above. These are not measurements of our financial performance under GAAP and should not be considered as alternatives to any other performance measures derived in accordance with GAAP.
Set forth below are certain GAAP and non-GAAP measurements and key performance indicators for the three and nine months ended September 30, 2025 and 2024. The following information has been presented consistently for all periods presented.
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
($ in thousands, except for Average Center revenue per center membership data)
Membership Data
Center memberships 840,622 826,502 840,622 826,502
On-hold memberships 50,603 50,007 50,603 50,007
Total memberships 891,225 876,509 891,225 876,509
Revenue Data
Membership dues and enrollment fees 71.9 % 72.3 % 72.2 % 72.4 %
In-center revenue 28.1 % 27.7 % 27.8 % 27.6 %
Total Center revenue 100.0 % 100.0 % 100.0 % 100.0 %
Membership dues and enrollment fees $ 547,306 $ 488,105 $ 1,576,268 $ 1,376,212
In-center revenue 213,591 186,670 606,148 524,055
Total Center revenue $ 760,897 $ 674,775 $ 2,182,416 $ 1,900,267
Average Center revenue per center membership (1)
$ 907 $ 815 $ 2,638 $ 2,361
Comparable center revenue (2)
10.6% 12.1% 11.5 % 11.8 %
Center Data
Net new center openings (3)
1 2 6 6
Total centers (end of period) (3)
185 177 185 177
Total center square footage (end of period) (4)
18,100,000 17,400,000 18,100,000 17,400,000
GAAP and Non-GAAP Financial Measures
Net income $ 102,427 $ 41,355 $ 250,671 $ 119,077
Net income margin (5)
13.1 % 6.0 % 11.1 % 6.1 %
Adjusted net income (6)
$ 92,992 $ 56,278 $ 263,778 $ 140,158
Adjusted net income margin (6)
11.9 % 8.1 % 11.7 % 7.2 %
Adjusted EBITDA (7)
$ 220,046 $ 180,293 $ 622,611 $ 499,816
Adjusted EBITDA margin (7)
28.1 % 26.0 % 27.7 % 25.5 %
Center operations expense $ 414,328 $ 371,134 $ 1,189,240 $ 1,048,544
Pre-opening expenses (8)
$ 1,050 $ 1,164 $ 3,489 $ 4,819
Rent $ 87,511 $ 78,575 $ 251,866 $ 225,804
Non-cash rent expense (open properties) (9)
$ 10,216 $ 9,684 $ 18,275 $ 20,734
Non-cash rent expense (properties under development) (9)
$ 5,597 $ 1,847 $ 10,601 $ 4,447
Net cash provided by operating activities $ 251,112 $ 151,146 $ 630,666 $ 411,976
Free cash flow (10)
$ 62,530 $ 138,332 $ 216,369 $ 247,054
(1) We define Average Center revenue per center membership as Center revenue less On-hold revenue, divided by the average number of Center memberships for the period, where the average number of Center memberships for the period is an average derived from dividing the sum of the total Center memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.
(2) We measure the results of our centers based on how long each center has been open as of the most recent measurement period. We include a center, for comparable center revenue purposes, beginning on the first day of the 13thfull calendar month of the center's operation, in order to assess the center's growth rate after one year of operation.
(3) Net new center openings is calculated as the number of centers that opened for the first time to members during the period, less any centers that closed during the period. Total centers (end of period) is the number of centers operational as of the last day of the period. During the three months ended September 30, 2025, we opened one center.
(4) Total center square footage (end of period) reflects the aggregate square footage excluding areas used for tennis courts, outdoor swimming pools, outdoor play areas and stand-alone Work, Sport and Swim locations. We use this metric for evaluating the efficiencies of a center as of the end of the period. These figures are approximations.
(5) Net income margin is calculated as net income divided by total revenue.
(6) We present Adjusted net income as a supplemental measure of our performance. We define Adjusted net income as net income excluding the impact of share-based compensation expense as well as (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, less the tax effect of these adjustments.
Adjusted net income margin is calculated as Adjusted net income divided by total revenue.
The following table provides a reconciliation of net income and income per common share, the most directly comparable GAAP measures, to Adjusted net income and Adjusted net income per common share:
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 2025 2024 2025 2024
Net income $ 102,427 $ 41,355 $ 250,671 $ 119,077
Share-based compensation expense (a)
16,891 11,752 45,179 30,450
(Gain) loss on sale-leaseback transactions (b)
(7,732) 4,902 4,764 (2,620)
Capital transaction costs (c)
- - 1,531 -
Legal settlements (d)
- 1,250 - 1,250
Employee retention credits (e)
(21,994) - (34,867) -
Other (f)
(1) 2,869 202 (927)
Taxes (g)
3,401 (5,850) (3,702) (7,072)
Adjusted net income $ 92,992 $ 56,278 $ 263,778 $ 140,158
Income per common share:
Basic $ 0.47 $ 0.20 $ 1.15 $ 0.60
Diluted $ 0.45 $ 0.19 $ 1.11 $ 0.57
Adjusted income per common share:
Basic $ 0.42 $ 0.28 $ 1.21 $ 0.70
Diluted $ 0.41 $ 0.26 $ 1.17 $ 0.67
Weighted-average common shares outstanding:
Basic 220,063 202,945 217,132 199,793
Diluted 226,007 214,633 225,075 207,841
(a) Share-based compensation expense recognized during the three and nine months ended September 30, 2025 was associated with stock options, restricted stock units, performance stock units, our employee stock purchase plan ("ESPP") and liability-classified awards related to our 2025short-term incentive plan. Share-based compensation expense recognized during the three and nine months ended September 30, 2024 was associated with stock options, restricted stockunits, performance stock units, our ESPP and liability-classified awards related to our 2024 short-term incentive plan.
(b) We adjust for the impact of gains and losses on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations. For details on the (gain) loss on the sale-leaseback transactions that we recognized during the three and nine months ended September 30, 2025, see Note 9, Leases, to our condensed consolidated financial statements in this report.
(c) Represents one-time costs related to capital transactions, including debt and equity offerings that are non-recurring in nature.
(d) We adjust for the impact of unusual legal settlements as these costs are non-recurring in nature and do not reflect costs associated with our normal ongoing operations.
(e) Represents refundable payroll tax credits for employee retention under the CARES Act.
(f) Includes (i) legal-related expenses in pursuit of our claim against Zurich of $0.1 million and $0.6 million for the nine months ended September 30, 2025 and 2024, respectively, (ii) a $3.5 million write-off of the unamortized debt discounts and issuance costs associated with the extinguishment of our former term loan facility and construction loan for the three and ninemonths ended September 30, 2024, (iii) gain on sales of land of $0.6 million and $5.0 million for the three and ninemonths ended September 30, 2024, respectively, and (iv) other immaterial transactions that are unusual or non-recurring in nature of $0.1 million for the ninemonths ended September 30, 2025.
(g) Represents the estimated tax effect of the total adjustments made to arrive at Adjusted net income using the effective income tax rates for the respective periods.
(7) We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net income before interest expense, net, provision for income taxes and depreciation and amortization, excluding the impact of share-based compensation expense as well as (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations.
Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total revenue.
The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA:
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 2025 2024 2025 2024
Net income $ 102,427 $ 41,355 $ 250,671 $ 119,077
Interest expense, net of interest income 18,440 36,011 65,331 111,083
Provision for income taxes 36,921 16,213 70,799 39,945
Depreciation and amortization 75,094 69,451 219,001 205,068
Share-based compensation expense (a)
16,891 11,752 45,179 30,450
(Gain) loss on sale-leaseback transactions (b)
(7,732) 4,902 4,764 (2,620)
Capital transaction costs (c)
- - 1,531 -
Legal settlements (d)
- 1,250 - 1,250
Employee retention credits (e)
(21,994) - (34,867) -
Other (f)
(1) (641) 202 (4,437)
Adjusted EBITDA $ 220,046 $ 180,293 $ 622,611 $ 499,816
(a) - (e) See the corresponding footnotes to the table in footnote 6 immediately above.
(f) Includes (i) legal-related expenses in pursuit of our claim against Zurich of $0.1 million and $0.6 million for the nine months ended September 30, 2025 and 2024, respectively, (ii) gain on sales of land of $0.6 million and $5.0 million for the three and ninemonths ended September 30, 2024, respectively, and (iii) other immaterial transactions that are unusual or non-recurring in nature of $0.1 million for the ninemonths ended September 30, 2025.
(8) Represents non-capital expenditures associated with opening new centers that are incurred prior to the commencement of a new center opening. The number of centers under construction or development, the types of centers and our costs associated with any particular center opening can vary significantly from period to period.
(9) Reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments. Non-cash rent expense for our open properties represents non-cash expense associated with properties that were operating at the end of each period presented. Non-cash rent expense for our properties under development represents non-cash expense associated with properties that are still under development at the end of each period presented.
(10) Free cash flow, a non-GAAP financial measure, is calculated as net cash provided by operating activities less capital expenditures, net of construction reimbursements, plus net proceeds from sale-leaseback transactions and land sales.
The following table provides a reconciliation from net cash provided by operating activities to free cash flow:
Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 2025 2024 2025 2024
Net cash provided by operating activities $ 251,112 $ 151,146 $ 630,666 $ 411,976
Capital expenditures, net of construction reimbursements (222,494) (87,106) (586,980) (388,213)
Proceeds from sale-leaseback transactions 33,912 65,043 172,683 207,714
Proceeds from land sales - 9,249 - 15,577
Free cash flow $ 62,530 $ 138,332 $ 216,369 $ 247,054
Factors Affecting the Comparability of our Results of Operations
Impact of Our Asset-light, Flexible Real Estate Strategy on Rent Expense
Our asset-light, flexible real estate strategy has allowed us to expand our business by leveraging operating leases and sale-leaseback transactions, among other asset-light opportunities. Approximately 69% of our centers are now leased, including approximately 84% of our new centers opened since 2015, versus a predominantly owned real estate strategy prior to 2015. Rent expense, which includes both cash and non-cash rent expense, will continue to increase as we lease more centers and will therefore impact the comparability of our results of operations. The impact of these increases is dependent upon the timing of our centers under development and the center openings, the timing of sale-leaseback transactions and terms of the leases for the new centers or sale-leaseback transactions.
Macroeconomic and Policy Trends
We have been monitoring the macroeconomic and policy environment and its impact on our business, including with respect to tariffs, inflation, interest rates, taxes and labor, as well as a potential economic recession and general economic and political conditions. See "-Overview-Macroeconomy and Policy Environment" for additional information.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates. In recording transactions and balances resulting from business operations, we use estimates based on the best information available. We revise the recorded estimates when better information is available, facts change or we can determine actual amounts. These revisions can affect operating results.
Management has evaluated the development and selection of our critical accounting policies and estimates used in the preparation of the Company's unaudited condensed consolidated financial statements and related notes and believes these policies to be reasonable and appropriate. Certain of these policies involve a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position, and are, therefore, discussed as critical. Our most significant estimates and assumptions that materially affect the Company's unaudited condensed consolidated financial statements involve difficult, subjective or complex judgments, which management used while performing goodwill, indefinite-lived intangible and long-lived asset impairment analyses and sale-leaseback arrangements.
More information on all of our significant accounting policies can be found in Note 2, "Summary of Significant Accounting Policies" to our audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC.There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in such Annual Report on Form 10-K.
Results of Operations
Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024
The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the three months ended September 30, 2025 and 2024:
Three Months Ended September 30,
As a Percentage of Total Revenue
2025 2024 2025 2024
Revenue:
Center revenue $ 760,897 $ 674,775 97.2 % 97.3 %
Other revenue 21,752 18,459 2.8 % 2.7 %
Total revenue 782,649 693,234 100.0 % 100.0 %
Operating expenses:
Center operations 414,328 371,134 52.9 % 53.5 %
Rent 87,511 78,575 11.2 % 11.3 %
General, administrative and marketing 59,840 57,737 7.6 % 8.3 %
Depreciation and amortization 75,094 69,451 9.6 % 10.0 %
Other operating expense 10,231 22,642 1.3 % 3.3 %
Total operating expenses 647,004 599,539 82.6 % 86.4 %
Income from operations 135,645 93,695 17.4 % 13.6 %
Other income (expense):
Interest expense, net of interest income (18,440) (36,011) (2.4) % (5.2) %
Equity in earnings (loss) of affiliates 149 (116) - % - %
Other income 21,994 - 2.8 % - %
Total other income (expense) 3,703 (36,127) 0.4 % (5.2) %
Income before income taxes 139,348 57,568 17.8 % 8.4 %
Provision for income taxes 36,921 16,213 4.7 % 2.3 %
Net income $ 102,427 $ 41,355 13.1 % 6.1 %
Total revenue. The $89.4 million increase in Total revenue for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was due to continued strong growth in membership dues and in-center revenue, including higher average dues, membership growth in our new and ramping centers and higher member utilization of our in-center offerings, particularly in Dynamic Personal Training.
With respect to the $86.1 million increase in Center revenue for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024:
•68.7% was from membership dues and enrollment fees, which increased $59.2 millionfor the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. This increase reflects the growth in our new and ramping centers, as well as higher average monthly dues per Center membership during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024; and
•31.3% was from in-center revenue, which increased $26.9 million for the three months ended September 30, 2025as compared to the three months ended September 30, 2024. This increase was recognized across all of our primary in-center businesses and reflects the higher utilization of our offerings by our members, particularly Dynamic Personal Training, during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.
The $3.3 million increase in Other revenue for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024was primarily driven by the improved performance of our media and events business and Life Time Work locations.
Center operations expenses. The $43.2 millionincrease in Center operations expenses for the three months ended September 30, 2025as compared to the three months ended September 30, 2024was primarily due to operating costs related to our new and ramping centers, additional center operating expenses related to increased club utilization in our mature centers, as well as costs to support in-center business revenue growth.
Rent expense. The $8.9 million increase in Rent expense for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily driven by sale-leaseback transactions, taking possession of other leased properties, as well as the recognition of a higher level of contingent rent expense, which is generally determined based on a percentage of center-specific revenue and/or other center-specific financial metrics over contractually specified levels.
General, administrative and marketing expenses.The $2.1 million increase in General, administrative and marketing expenses for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily due to increases in center support overhead to enhance and broaden our member services and experiences and general corporate overhead.
Depreciation and amortization expenses. The $5.6 million increase in Depreciation and amortization expenses for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily due to new center openings and capitalized software development costs.
Other operating expense. The $12.4 million decrease in Other operating expense for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily due to a $7.7 millionnet gain on a sale-leaseback transaction during the three months ended September 30, 2025 as compared to a $4.9 million net loss on sale-leaseback transactions, partially offset by a $0.6 million gain on the sale of land, during the three months ended September 30, 2024.
Interest expense, net of interest income. The $17.6 million decrease in Interest expense, net of interest income for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily driven by lower average levels of outstanding borrowings and a lower interest rate largely as a result of the interest rate swaps entered into in April 2025.
Other income. The $22.0 million increase in Other income for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was related to net cash proceeds received in connection with employee retention credits under the CARES Act to provide certain relief as a result of the COVID-19 pandemic.
Provision for income taxes. The $20.7 million increase in provision for income taxes for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was primarily driven by an increase in earnings before taxes and a change in the valuation allowance in the prior year associated with certain of our deferred tax assets, partially offset by the excess tax deduction associated with share-based compensation. The effective tax rate was 26.5% and 28.2% for those same periods, respectively. The effective tax rate applied to our pre-tax income for the three months ended September 30, 2025 is higher than our statutory rate of 21% and is primarily due to the state income tax provisions and deductibility limitations associated with executive compensation, partially offset by the excess tax deduction associated with share-based compensation.
Net income. As a result of the factors described above, net income was $102.4 million for the three months ended September 30, 2025 as compared to $41.4 million for the three months ended September 30, 2024.
Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024
The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the nine months ended September 30, 2025 and 2024:
Nine Months Ended September 30,
As a Percentage of Total Revenue
2025 2024 2025 2024
Revenue:
Center revenue $ 2,182,416 $ 1,900,267 97.0 % 97.1 %
Other revenue 67,743 57,445 3.0 % 2.9 %
Total revenue 2,250,159 1,957,712 100.0 % 100.0 %
Operating expenses:
Center operations 1,189,240 1,048,544 52.9 % 53.6 %
Rent 251,866 225,804 11.2 % 11.5 %
General, administrative and marketing 179,361 159,836 8.0 % 8.2 %
Depreciation and amortization 219,001 205,068 9.7 % 10.5 %
Other operating expense 58,927 47,952 2.6 % 2.4 %
Total operating expenses 1,898,395 1,687,204 84.4 % 86.2 %
Income from operations 351,764 270,508 15.6 % 13.8 %
Other (expense) income:
Interest expense, net of interest income (65,331) (111,083) (2.9) % (5.8) %
Equity in earnings (loss) of affiliates 170 (403) - % - %
Other income 34,867 - 1.5 % - %
Total other expense (30,294) (111,486) (1.4) % (5.8) %
Income before income taxes 321,470 159,022 14.2 % 8.0 %
Provision for income taxes 70,799 39,945 3.1 % 2.0 %
Net income $ 250,671 $ 119,077 11.1 % 6.0 %
Total revenue. The $292.4 million increase in Total revenue for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was due to continued strong growth in membership dues and in-center revenue, including higher average dues, membership growth in our new and ramping centers and higher member utilization of our in-center offerings, particularly in Dynamic Personal Training.
With respect to the $282.1 million increase in Center revenue for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024:
•70.9% was from membership dues and enrollment fees, which increased $200.0 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase reflects the growth in our new and ramping centers, as well as higher average monthly dues per Center membership during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024; and
•29.1% was from in-center revenue, which increased $82.1 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. This increase was recognized across all of our primary in-center businesses and reflects the higher utilization of our offerings by our members, particularly Dynamic Personal Training, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
The $10.3 million increase in Other revenue for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily driven by the improved performance of our media and events business and Life Time Work locations.
Center operations expenses. The $140.7 million increase in Center operations expenses for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily due to operating costs related to our new and ramping centers, additional center operating expenses related to increased club utilization in our mature centers, as well as costs to support in-center business revenue growth.
Rent expense. The $26.1 million increase in Rent expense for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily driven by sale-leaseback transactions, taking possession of other leased properties, as well as the recognition of a higher level of contingent rent expense, which is generally determined based on a percentage of center-specific revenue and/or other center-specific financial metrics over contractually specified levels, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
General, administrative and marketing expenses.General, administrative and marketing expenses increased $19.5 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to the timing of share-based compensation and benefit-related expenses, increases in center support overhead to enhance and broaden our member services and experiences, general corporate overhead, information technology costs and costs attributable to the secondary offerings of our common stock completed in February and June 2025.
Depreciation and amortization. Depreciation and amortization increased $13.9 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to new center openings and capitalized software development costs.
Other operating expense. Other operating expense increased $11.0 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to a $4.8 million net loss on sale-leaseback transactions during the nine months ended September 30, 2025 as compared to a $2.6 million net gain on sale-leaseback transactions and a $5.0 million gain on the sale of land during the nine months ended September 30, 2024.
Interest expense, net of interest income. The $45.8 million decrease in Interest expense, net of interest income for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was driven by lower average levels of outstanding borrowings and a lower interest rate largely as a result of the interest rate swaps entered into in April 2025.
Other income. The $34.9 million increase in Other income for the ninemonths ended September 30, 2025 as compared to the ninemonths ended September 30, 2024 was related to net cash proceeds received in connection with employee retention credits under the CARES Act to provide certain relief as a result of the COVID-19 pandemic.
Provision for income taxes. The $30.9 million increase in provision for income taxes for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily driven by an increase in earnings before taxes and a change in the valuation allowance in the prior year associated with certain of our deferred tax assets, partially offset by the excess tax deduction associated with share-based compensation. The effective tax rate was 22.0% and 25.1% for those same periods, respectively. The effective tax rate applied to our pre-tax income for the nine months ended September 30, 2025 is higher than our statutory rate of 21% and is primarily due to the state income tax provisions and deductibility limitations associated with executive compensation, partially offset by the excess tax deduction associated with share-based compensation.
Net income. As a result of the factors described above, net income was $250.7 million and $119.1 million for the nine months ended September 30, 2025 and 2024, respectively.
Liquidity and Capital Resources
Liquidity
Our principal liquidity needs include the acquisition and development of new centers, lease requirements and debt service, investments in our business and technology and expenditures necessary to maintain and update or enhance our centers and associated equipment and member experiences. We have primarily satisfied our historical liquidity needs with cash flow from operations, drawing on the Revolving Credit Facility, construction reimbursements and through sale-leaseback transactions. Additionally, we benefit from our in-house architecture and design expertise that allows us to design operationally efficient centers.
As the opportunity arises or as our business needs require, we may seek to raise capital through additional debt or equity financing. There can be no assurance that any such financing would be available on commercially acceptable terms, or at all.
Volatility in these markets may increase costs associated with issuing debt instruments or affect our ability to access those markets, which could have an adverse impact on our ability to raise additional capital, to refinance existing debt and/or to react to changing economic and business conditions. In addition, it is possible that our ability to access the credit and capital markets could be limited at a time when we would like or need to do so.
As of September 30, 2025, there were no outstanding borrowings under our Revolving Credit Facility and there were $31.8 million of outstanding letters of credit, resulting in total availability under our $650.0 million Revolving Credit Facility of $618.2 million. Total cash and cash equivalents at September 30, 2025 was $218.9 million, resulting in total cash and availability under our Revolving Credit Facility of $837.1 million.
The following table sets forth our condensed consolidated statements of cash flows data (amounts in thousands):
Nine Months Ended
September 30,
2025 2024
Net cash provided by operating activities $ 630,666 $ 411,976
Net cash used in investing activities (436,083) (162,103)
Net cash provided by (used in) financing activities 18,926 (142,748)
Effect of exchange rates on cash and cash equivalents and restricted cash and cash equivalents 51 (38)
Increase in cash and cash equivalents and restricted cash and cash equivalents $ 213,560 $ 107,087
Operating Activities
The$218.7 million increase innet cash provided by operating activities for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily the result of increased business performance and profitability and timing of cash interest payments.
Investing Activities
Investing activities consist primarily of the acquisition and development of new centers, expenditures necessary to maintain and update or enhance our centers and associated equipment and investments in our business and technology. We fund the purchase of our property, centers and equipment through operating cash flows, proceeds from sale-leaseback transactions, construction reimbursements and draws on our Revolving Credit Facility.
The $274.0 million increase in net cash used in investing activities for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily driven by a $198.8 million increase in capital expenditures and $50.6 million lower proceeds from sale-leaseback transactions and land sales.
The following table reflects capital expenditures by type of expenditure (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Growth capital expenditures (1)
$ 155,967 $ 46,416 $ 416,427 $ 259,885
Maintenance capital expenditures (2)
27,834 21,566 93,186 70,002
Modernization and technology capital expenditures (3)
38,693 19,124 77,367 58,326
Total capital expenditures $ 222,494 $ 87,106 $ 586,980 $ 388,213
(1) Consist of new center land and construction, initial major remodels of acquired centers, major remodels of existing centers that expand existing square footage, asset acquisitions including the purchase of previously leased centers and other growth initiatives.
(2) Consist of general maintenance of existing centers.
(3) Consist of modernization of existing centers and technology.
The increase in total capital expenditures for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily driven by an increase in new center construction as we expand our new center openings to
12 to 14 centers per year, most of which will be large format ground up builds in 2026 and 2027, the acquisition of existing health club and racquet facilities, higher maintenance expenditures for member experiences and operational efficiencies, and higher modernization and technology expenditures for center remodels, fitness floor reconfigurations and digital and artificial intelligence initiatives.
Financing Activities
The $161.7 million increase in net cash provided by financing activities for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was primarily driven by lower repayments of debts, partially offset by higher net repayments under our Revolving Credit Facility and receiving no proceeds from the issuance of our common stock.
We believe we will generate adequate amounts of cash to meet our requirements and plans for cash in the short-term and long-term and expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, sale-leaseback transactions, the borrowing capacity available under our Revolving Credit Facility and additional debt and equity financing as needed.
Life Time Group Holdings Inc. published this content on November 04, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 04, 2025 at 12:09 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]