Revenue increased 57.3 percent to $392.3 million in first quarter 2022 for Life Time Group Holdings Inc., Chanhassen, Minnesota, the public company announced on May 11.
Life Time did not share how first quarter 2022 revenue compared to first quarter 2019 and Life Time was not a public company at that time, but Life Time Founder, Chairman and CEO Bahram Akradi said in a call with analysts that he anticipates the majority of his clubs will exceed 2019 dues revenue by the end of the year.
First quarter 2022 total center revenue increased 56 percent to $382 million while comparable center sales increased 50.3 percent. The total center revenue increase was driven by a 55 percent increase in membership dues, and a 57 percent increase in in-center revenue, according to Life Time President and CFO Tom Bergmann. Average center revenue per center membership increased to $580 from $459 in the prior year period, reflecting increased member spending with Life Time’s in-center businesses that continued execution of its pricing strategy and the opening of new athletic country clubs in more fluid markets.
Life Time has 160 open clubs, some of which include Life Time Work locations. Two of its clubs opened in the first quarter. It plans to open 10 more by the end of the year and 11 or more in 2023 (including a location at the Brooklyn Towers in New York). It also has nine Life Time Work-only locations.
“Our long-term strategy has been and remains to build and uphold the most premium, most loved and respected brand in the healthy way of life, live, work, play ecosystem,” Akradi said in the earnings call. “As a result of executing this strategy, Life Time was at an inflection point for very accelerated growth pre-COVID. Despite the impact of government mandated shutdowns and masks, vaccines and other restrictions, we've continued to build and strengthen our brand reputation, systems and programs. And we are seeing great results and rewards from the way we treated our team members, members, landlords, vendors and communities. This has put us in a great position not only to recover but to exceed our past performance.”
The company has experienced a “strong” growth in visits, revenue and membership recovery in the first quarter, partially due to some of its initiatives, including a nationwide rollout of pickleball, active aging programs and small group training.
Memberships increased 23.8 percent to 673,983 (equating to about 1.3 million members) compared to 544,216 at the end of first quarter 2021.
The company’s month-over-month dues revenue grew four percent in the clubs at which it has implemented the initiatives during the last 18 months, he said.
The company is looking to capture additional membership at higher average dues, he added. Average membership dues were $145 in the first quarter, a sequential increase of $10 from the $135 reported in fourth quarter 2021. Akradi anticipates dues will grow to $150 to $160 range by end of the year. The new join dues rate for memberships sold during first quarter 2022 averaged $166 compared to $135 in first quarter 2021 and $115 during first quarter 2019.
Life Time is evaluating opportunities to make it more asset light and strengthen its balance sheet, Akradi said. Life Time owns approximately 60 of its athletic country clubs. In the quarter, the company closed on two sale-leaseback transaction with proceeds of $80 million and expects to close another two transactions on or about May 13 with proceeds of $95 million bringing the year-to-date total to $175 million.
The company is evaluating sale-leaseback and other opportunities to monetize up to an additional $500 million of owned real estate by the end of third quarter 2022.
Life Time also is looking for additional assets-light real estate locations for its clubs, along with potential health and well-being growth opportunities that are a natural extension to the brand, Akradi said.
More First Quarter Results
In the first quarter, Life Time reported net loss of $38 million that included a tax-effected one-time net benefit of $6.1 million, including a $26.4 million gain on sale leasebacks offset by $19.9 million in non-cash share-based compensation expense and $0.4 million in IPO- and COVID-19-related expenses.
Adjusted EBITDA increased to $40.6 million from $(18.9) million in first quarter 2021.
During the first quarter, Life Time opened two new centers, leaving it with a total of 153 centers at the end of the quarter.
At the end of the first quarter, Life Time had total cash and cash equivalents of $41.1 million and had $30 million in borrowings under its $475 million revolving credit facility.
Net cash provided by operating activities totaled $9.1 million for the quarter, compared to net cash used of $38.2 million in the prior year period.
Free cash flow before growth capital expenditures totaled $(35.3) million for the quarter compared to $(53.9) million in the prior year period.
For the second quarter, Life Time is projecting revenue, net loss, and adjusted EBITDA to be in the ranges of $450 million to $470 million, $(25) million to $(20) million, and $63 million to $68 million, respectively. The company did not share full 2022 outlook.