Life Time Group Holdings Inc., Chanhassen, Minnesota, has filed an Form S-1 with the U.S. Securities and Exchange Commission for a proposed initial public offering (IPO), the company announced on Sept. 13.
The number of shares to be offered, the date of the IPO, how much money it plans to raise and other details were not included in the filing, but the form noted that the company would be a “controlled company,” which means that its existing shareholders will own more than 50 percent of the outstanding shares.
The company intends to apply to list its common stock on The New York Stock Exchange (NYSE) under the symbol LTH, but the offering is subject to market and other conditions, and the company made no assurance about whether or when the offering may be completed.
Life Time is just the latest health club brand to seek a public option. F45 Training and Xponential Fitness went public in July, and vendor Beachbody Company went public in June while vendor iFIT Health & Fitness filed for an IPO on Aug. 31. Planet Fitness has been a public company for several years.
Life Time isn’t a novice to being a public company. It previously traded on the NYSE as LTM from June 30, 2004, until an investor group, which included Life Time founder and CEO Bahram Akradi, bought the company in June 2015 in a deal that Life Time valued at $4 billion. It opened in 2004 at $20.75 per share and its shares traded at $72.07 on its last day in 2015.
In this iteration as a public company, Life Time plans to use the net proceeds from the stock offering to repay an unspecified amount on its aggregate principal amount of borrowings under its term loan facility (which matures in December 2024), to pay offering fees and expense, and for working capital and general corporate purposes.
Life Time does not anticipate paying any cash dividends on its common stock for the foreseeable future, the filing noting, instead using the earnings to support its operations and to finance growth and development of the business.
Performance Details
As part of the S-1 form, Life Time shared details about its performance in 2020 and prior years as well as its performance for the first six months of 2021.
In 2019, Life Time generated $1.9 billion in revenue with $30 million in net income and $438 million in adjusted EBITDA, according to the filing. In 2020, revenue dropped to $948 million with $360 million in net loss and $(63) million in adjusted EBITDA. In the six months that ended June 30, 2021, the company had generated $600 million in revenue with $229 million in net loss and $(15) million in adjusted EBITDA.
The decrease in 2020 revenue was due to the temporary health club closures mandated by many cities and states to curb the spread of COVID-19, the filing states.
The company’s center revenue decreased by $921.4 million in 2020 compared to 2019. Sixty percent of the decrease was due to decreases in membership dues and enrollment fees, which fell by $557.3 million for the year due to temporary club closures. Forty percent was from in-center revenue, which decreased $364.1 million in 2020 due to a decline in its in-center businesses caused by the COVID-related club closures.
Life Time also reported $30.6 million less in other revenue in 2020 compared to 2019, primarily due to athletic event cancellations caused by COVID-19. Life Time owns and operates more than 30 athletic events in addition to its health clubs.
To curb the impact of COVID-19 on the company in 2020, Life Time reduced its operating costs and preserved liquidity by furloughing more than 95 percent of its employees, doing two corporate restructurings to right size overhead, suspending almost all construction capital spending, negotiating rent reductions and deferrals with many of its landlords, evaluating the CARES Act and securing employee retention credit, and completing sale-leaseback transactions on six properties, according to the filing.
The company’s general, administrative and marketing expenses decreased by $77.8 million due to a reduction in advertising and marketing expenses of approximately $22.7 million. It also included savings from the staff furlough, accounting for a savings of $26.9 million.
Memberships for Life Time dropped from 944,047 at the end of 2019 to 749,589 at the end of 2020. Its digital on-hold memberships increased from 90,299 at the end of 2019 to 248,641 at the end of 2020. The digital on-hold memberships include members who put their memberships on hold but pay about $15 per month to maintain certain member benefits and the right to convert back to a center membership without paying an enrollment fee. It also includes those who have a digital-only memberships, a virtual membership that the company started in December 2020 allowing access to live streaming fitness classes, remote personal training, nutrition and weight loss support plus access to Apple Fitness+.
Growth Moving Forward
When the company went private in 2015, it incurred a lot of debt, the filing states. Its debt now stands at about $2.4 billion, but the filing notes that the company’s revenue has steadily increased since 2015 ($1.35 billion in 2015, $1.48 billion in 2016, $1.59 billion in 2017, $1.75 billion in 2018 and $1.9 billion in 2019) except for 2020 ($948 million) with the impacts of COVID-19.
Since going private in 2015, Life Time has expanded its national footprint with a focus on locations in affluent areas, such as Boston, Chicago, New York City and California, according to the filing. Even though COVID-19 slowed construction of new locations, the company opened nine facilities between Dec. 31, 2019, and Aug. 31, 2021, with a plan to open six more locations by the end of the year and 20 or more locations in 2022 and 2023. Life Time currently has 155 centers in 29 states and one Canadian province.
The company also adopted an asset-light, flexible real estate strategy, which was opposite to its owned real estate strategy prior to 2015. Of its 155 facilities, 64 are owned (including ground leases) by Life Time and 91 are leased, equating to 58 percent of its locations being leased, including about 84 percent of the locations it has opened since 2014.
In addition, Life Time has expanded its membership to an omnichannel membership with its digital app, its relationship with Apple Fitness+ and its Life Time Work and Life Time Living locations.
In speaking to the strength of the brand, the S-1 form stated: “As of December 31, 2019, December 31, 2020 and June 30, 2021, our recurring membership dues represented 63%, 69% and 68%, respectively, of our total revenue, while our in-center revenue, consisting of Life Time Training, LifeCafe, LifeSpa, Life Time Swim and Life Time Kids, among other services, represented 34%, 29% and 30%, respectively, of our total revenue. Between 2015 and 2019, we grew our average revenue per membership from $1,883 to $2,172, a testament to the significant value that our members place on engaging with Life Time. Our Net Promoter Score increased from 34 as of December 31, 2017 to 53 as of June 30, 2021, demonstrating our ability to continuously enhance our member experience. While average revenue per membership fell to $1,317 in 2020, we have seen a strong rebound already in 2021, with $984 in average revenue per membership during the six months ended June 30, 2021.”