Life Time Fitness, Chanhassen, MN, surpassed the $1 billion mark in revenue for the third consecutive year, according to financials released by the company today.
Life Time generated $1.206 billion in revenue for 2013, a 7 percent increase from the $1.127 billion it had in 2012. Net income for the full year was $121.7 million compared to net income of $111.5 million in 2012.
The company released fourth quarter 2013 results as well. Fourth quarter 2013 revenue grew 5.7 percent to $291 million from $275.3 million during fourth quarter 2012. Net income for the quarter was $26 million compared to net income of $23.4 million in fourth quarter 2012.
"Last year, we began setting the table for accelerated growth in 2014 and beyond," Bahram Akradi, founder, chairman, president and CEO of Life Time Fitness, said today in a call with analysts. "While 2013 was the last year of three centers per year expansion, we commenced construction on six new centers opening in 2014. We are very excited about the growth that we expect to come from these new destinations."
Those six new clubs are Harrison, NY (Westchester County); Laguna Niguel, CA (Orange County); Tampa, FL; Urbandale, IA (Des Moines); Bloomfield Hills, MI (Detroit); and Henderson, NV (Las Vegas). The Westchester County club opened on Feb. 6. The Tampa and Orange County clubs are expected to open in April, followed by the Iowa club's opening in May, the Michigan club's opening in June and the Nevada club's opening in the second half of this year.
In fourth quarter 2013, Life Time opened a new club in Montvale, NJ, in the New York City area, the third Life Time club in the state of New Jersey.
Total memberships for Life Time were 789,490 on Dec. 31, 2013, a 0.3 percent increase from 787,003 on Dec. 31, 2012.
Attrition and Expectations
Life Time's attrition rate in fourth quarter 2013 was 9.8 percent compared to 9.1 percent in fourth quarter 2012. Attrition for the trailing 12-month period ending Dec. 31, 2013, was 35.8 percent compared to trailing 12-month attrition of 33.5 percent on Dec. 31, 2012.
When asked about attrition and the growth of competition in the industry, Akradi said: "The industry, as it has over many, many decades, is going through a variety of transformations and fragmentation—an incredible number of small studios, small gyms, $10-a-month products, $20-a-month products. We basically have been focused on delivering a product that makes us not vulnerable to any of those types of, what I want to call, non-sophisticated threats, and that's what they are. Attrition is not radically different in terms of amounts or the reasons why [members are] leaving."
For 2014, Life Time expects its revenue to increase 8 percent to 9.5 percent to $1.3 billion to $1.32 billion. Net income is expected to increase 3 percent to 7 percent to $125 million to $130 million.
"2014 is off to a good start with our strategy around growing dues," Akradi said in today's call. "We're also seeing good performance from our new centers. We are absolutely and positively certain that the product we deliver is a coveted product in the markets we go to."
Akradi announced today that Life Time Executive Vice President Eric Buss will serve as interim chief financial officer beginning March 2 as current Life Time CFO Michael Robinson, who was on the call with Akradi and Buss today, will retire March 1.
"I have tremendous confidence in Eric's ability and integrity," Akradi said. "I will work closely with him and evaluate his effectiveness in this new role. At the same time, I am continuing to meet with other qualified candidates to ensure that we ultimately place the best candidates in this essential position. We expect to make that decision in the near future."
Robinson's retirement was announced last August. Life Time plans to retain Robinson as an employee or consultant for a period of time in the near future. Robinson received several well-wishes and congratulatory remarks from analysts in today's call.
Life Time's stock price was $46 in midday trading on the New York Stock Exchange, up $2 from its $44 open this morning.