Life Time Group Holdings, Inc.

Greetings and welcome to the Lifetime Group Holdings, Inc., first quarter of 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Conor Weinberg, Vice President of Capital Markets and Investor Relations. Please go ahead.

Good morning, and thank you for joining us for the first quarter 2025 Lifetime Group Holdings Earnings Conference Call. With me today are Burhan Makrati, founder, chairman, and CEO, and Eric Weaver, executive vice president and CFO. During the call, we will make forward-looking statements which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today. There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will also discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA, or what we refer to as net debt leverage ratio, and free cash flow. This information, along with the reconciliations to the most directly comparable GAAP measures are included, when applicable, in the company's earnings release issued this morning, our 8-K filed with the SEC, and on the investor relations section of our website. With that, I will turn the call over to Eric.

Thank you, Connor. We appreciate you joining us this morning. Starting with our first quarter results, total revenue increased 18.3% to $706 million, driven by a 17.9% increase in our membership dues and enrollment fees and an 18.7% increase in our in-center revenue. We continue to see strong revenue growth in our clubs open within the last 12 months, which are outpacing their anticipated revenue plans. In addition, we are seeing strong comparable center performance. Comparable center revenue was 12.9%, which increased from 11.1% in the prior year period. We continue to see robust comparable center revenue due to, first, an increase in our membership dues revenue, which is primarily a result of a full quarter benefit of legacy member price increases taken in the previous year. We took virtually no legacy price increase in the first quarter, and on average, legacy members continue to pay approximately $30 per month below our RAC rate. And we also realized a benefit from new members joining at higher dues rates, replacing members who were paying a lower rate. For example, if we lose an existing member paying monthly dues of $178 and gain a new member at a current dues rate of $208, we realize a net revenue benefit. Second, our ramping clubs continue to perform to our expectations. And third, we continue to see strong performance in our in-center businesses, particularly in our dynamic personal training. With our strong first quarter, we raised our guidance for our comparable center revenue to be between 8.5 and 9.5% for the full year as we normalized towards our long-term revenue growth targets in the following quarters. Center memberships increased 3.0% compared to Q1 last year to end the quarter at more than $826,000. When combined with our on-hold memberships, total memberships ended the quarter at approximately $880,000. These membership totals are in line with our strategy. As noted in our earnings release this morning, we are focused on our member experience and adding memberships with higher revenue and visits per membership. In addition, retention continues to pace at record levels and our in-center businesses are performing exceptionally well. Average monthly dues grew 11.8% year over year to $208. We continue to open locations in premium markets with strong demand and higher dues rates. Average revenue per center membership was $844, an increase of 13.3% from the prior year quarter. Net income was $76.1 million, an increase of 206%, and adjusted net income was $88.1 million, an increase of 189% from the prior year quarter. We received an income tax benefit of $14.6 million related to the one-time exercise of stock options by our CEO, which is now factored into our updated guidance. For the remaining quarters of fiscal year 2025, we expect net income to benefit from reduced interest expense as a result of entering into the fixed interest rate swap of under 6% on our term loan fee. Adjusted EBITDA was $191.6 million, an increase of 31.2%, and our adjusted EBITDA margin of 27.1% increased 260 basis points versus the first quarter, 2024. Net cash provided by operating activities increased approximately 103% to $184 million as compared to the first quarter 2024. This increase was largely a result in income from operations as well as timing of cash interest in the first quarter 2025. For the fourth consecutive quarter, we achieved positive free cash flow. Free cash flow was approximately $41 million and we had no sale leaseback proceeds in the first quarter. We have signed a letter of intent for the sale-leaseback of three properties for approximately $150 million, which we expect to complete in the second quarter. Before I conclude my remarks, I will give a brief comment on how we look at our exposure to tariffs. We have completed a review of key areas of our company that could be subject to tariffs, including construction, equipment, and retail, and we currently do not expect there to be a significant impact. As tariff policies are still evolving, we are diligently monitoring the situation to assess and respond as needed. After a strong first quarter, we have deleveraged our balance sheet to a net debt leverage ratio of 2.0 times. We have clear visibility into our cash interest expense for the next three years, having fixed the interest rate on our entire term loan to below 6%. And with over 30 years of operating experience, we believe we are well positioned to navigate any macroeconomic conditions. With that, I will now pass the call over to Brahm. Brahm.