An increased focus on member retention seems to be paying off for Life Time Fitness Inc., Chanhassen, MN, as the company reported attrition decreases and revenue growth for fourth quarter 2014 and full-year 2014.
The company, which held a financial call with analysts today, reported that fourth quarter 2014 revenue grew 8.3 percent to $315.3 million compared to $291 million during the same period last year. Revenue for the full year grew 7 percent to $1.291 billion compared to $1.206 billion in 2013.
Net income for the quarter was $22.4 million compared to net income of $25.9 million for fourth quarter 2013. Adjusted net income for the quarter was $27 million compared to adjusted net income of $26 million for fourth quarter 2013. Net income for the full year was $114.4 million compared to net income of $121 million for 2013. Adjusted net income for the full year was $117.8 million compared to adjusted net income of $121.7 million for 2013. The adjustments to net income and diluted earnings per share are reflected in the reconciliations of net income to adjusted net income and diluted earnings per share to adjusted diluted earnings per share, provided below.
Attrition in fourth quarter 2014 was 9.4 percent compared to 9.8 percent in the prior-year period. Attrition for the 12-month period ended Dec. 31, 2014, was 35.2 percent compared to attrition of 35.8 percent during the 12-month period ended Dec. 31, 2013.
"Our core focus in 2014 was on reducing membership attrition rates, and I am pleased with the progress we achieved via our connectivity and engagement initiatives," Bahram Akradi, chairman, president and chief executive officer, said in a release from the company. "For the quarter and full year, we also saw steady growth in our revenue, including dues and in-center revenue."
The company had a second straight quarter of sequential improvement in its same-center sales metrics, which Akradi said he expects to be positive in 2015, along with growth in membership levels.
Total memberships grew 2.5 percent to 809,445 at end of 2014, compared to 789,490 at the end of 2013. Access memberships totaled 683,530 at end of 2014, compared to 678,619 at end of 2013. Non-Access memberships were 125,915 at the end of 2014, compared to 110,871 at the end of 2013.
"We are off to a good start this year and look forward to continuing our improvement across these metrics," Akradi said. "As always, we remain focused on delivering an unparalleled Healthy Way of Life experience to our members, while driving shareholder value."
As previously announced, the company's board of directors continues to review strategic alternatives, including the exploration of a conversion of real estate assets into a Real Estate Investment Trust (REIT), which the board says could provide substantial benefits to the company and its shareholders. The company is unable to comment further at this time but expects to provide shareholders with additional information, as appropriate. Akradi declined to provide more details on the REIT possibility during the call.
During the fourth quarter, the company opened its sixth planned center for the year, located in Henderson, NV, marking the company's second center in the Las Vegas market.
In 2015, Life Time plans to open six centers in existing and new markets, including a March opening in Raleigh, NC, which will be the company's seventh North Carolina location. The remaining planned openings will be in the markets of Sacramento, CA; Toronto, Ontario; Boston, MA; Mt. Laurel, NJ (greater Philadelphia market); and, Long Island, NY.
Partially due to the retention efforts and the new club openings in 2015, Life Time notes that it expects 2015 revenue to be $1.390 billion to $1.415 billion with net income of $120 million to $128 million.
Two days before the financial call, Life Time Fitness hit a 52-week high on the New York Stock Exchange where it trades. It closed that day at $59.13, but had been trading during the day for as high as $59.27, but it closed at $58.60.
Equities.com, which reported on the 52-week high, noted:
"Hitting a new 52-week high is a notable milestone for any company, and it can mean a trading opportunity on either the long or short side, depending on one's perspective. Some view a company hitting its highest price in a year as a sign of momentum and think it means it's time to buy in. Others, though, tend to interpret a new 52-week high as likely signaling the end of a strong run, with the stock peaking out before a period of decline."