Life Time Group Holdings, Inc.

Greetings. Welcome to the Lifetime Group Holdings, Inc. Second Quarter 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 Connor Weinberg, Vice President of Capital Markets and Invest Relations. Thank you. You may begin.

Good morning, and thank you for joining us for the Second Quarter 2025 Lifetime Group Holdings Earnings Conference Call. With me today are Barama Crotty, 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 8K 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, and thank you all for joining us this morning. Let me begin with our second quarter results. Total revenue increased 14% to $761 million, driven by a 14% increase in membership dues and enrollment fees, and a .4% increase in incentive revenue. Comparable center revenue grew 11.2%. Given continued strong performance in both dues and incentive businesses, we are raising our full year comparable center revenue guidance to be between .5% and 10%. We ended the quarter with more than 849,000 center memberships, including on-hold memberships. Total memberships reached approximately 899,000. Average monthly dues grew .6% year over year to $219. Average revenue per center membership was $888, an increase of .8% from the prior year quarter. Net income for the quarter was $72.1 million, an increase of 36.5%, and includes approximately $9 million of tax-effective losses on sale leaseback. This compares to a $6 million tax-effective gain in the prior year quarter. More importantly, adjusted net income, which excludes the impact of gains and losses on sale leasebacks, was $84.1 million, up .5% year over year. Adjusted EBITDA was $211 million, an increase of 21.6%, and our adjusted EBITDA margin improved by 170 basis points to 27.7%. Net cash provided by operating activities rose approximately 15% to $196 million compared to the prior year quarter. Free cash flow was $112 million for the second quarter, marking our fifth consecutive quarter of delivering positive free cash flow. We remain committed to funding our growth through net cash from operations and sale leasebacks with a target of sustaining annual positive free cash flow. In Q2, we closed on the sale leaseback of three properties generating net proceeds of approximately $149 million. $139 million of these proceeds were reported in the investing section of our cash flow statement, and the remaining 10 million was reported in the financing section. With that, I will now turn the call over to Brahm. Brahm?

Thank you, Eric. We had a great quarter thanks to the efforts of our entire team, and as a result of that, we are once again in a position to raise our full year revenue and adjusted EBITDA guidance. Visits remain at all-time high, with visits per membership up .7% versus the same quarter last year. Retention continues to stay at record levels as well, with Q2 improving over the prior year quarter. We accomplished all of this while strengthening our balance sheet and achieving a double B credit rating, a critical milestone that provides us the opportunity to lower interest costs and increase earnings. As to liquidity, at the end of the Q2, we had no balance on our revolver and more than $175 million in cash on hand, following our most recent Sallie's Pack. The Sallie's Pack market remains open and attractive, and we expect to close another $100 million in transactions in the second half of the year. With the methodical and sequential progress we have made over the past four years, we're now perfectly positioned to shift our focus a bit. Growth is now our top priority. To that end, we're modestly accelerating the development of our new club openings from our robust pipeline and are now targeting 12 to 14 club openings in 2026. These new clubs will average nearly 100,000 square feet and will primarily be ground up developments compared to the 78,000 square feet average of clubs opened in 24 and 25. We're excited about our continued strong performance and the significant growth opportunities ahead, including several high potential accelerators. Lifetime Digital now has 2.3 million accounts up 216% year over year. We recently launched Lacy, our AI powered personal health companion to digital and center access members. Our LTH institutional supplement line continues to grow with revenues up 31% versus the prior year quarter. Our first two Miura locations continue to perform well with subscription and revenues growing month over month. Several additional locations are slated to open in the second half of the year. In short, we are pleased with our current momentum. We are laser focused on accelerating club growth and capitalizing on our asset light, high margin expansion opportunities to drive sustained revenue and adjusted EBITDA growth. With that, we will open the call for questions.

Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your headset before pressing the star keys. One moment while we pull for questions. Our first question is from Brian Nagel with Oppenheimer and Company, please proceed.

Hey guys, good morning. Good morning. Very nice quarter, congratulations. Thank you. The question I wanna ask, I know it's been a topic that a lot of, we've been discussing here for a bit now, but going back to the first quarter conference call, we discussed what may have been a softer initial trend when new members sign up since we headed into the summer pool season. We obviously got the numbers today. So I guess the question I'm asking is, how, from your perspective, did new membership signups track through the quarter? Did they perform in line with your expectations? Did you see some type of recovery as the quarter progressed?

Yeah, Brian, good to hear from you, this is Bram. As I mentioned during the last call, a single month is really no indication of anything. And I just had to emphasize that I covered that with you guys. The back half of the quarter, basically, it was just timing. The members that planned it to come, maybe slightly slower, the first half of the quarter to come in, but they came back in. And so we were able to finish the month, the quarter super strong, and make up for the little slow that membership signups in the first 40 days of the quarter, and just all made it up naturally. We didn't have to do anything in particular to do that.

That's very helpful, Bram, thank you. And then my follow-up question, again, we're seeing the numbers today, but just any further commentary on your efforts or your abilities to further monetize that membership? And we talked quarter and quarter out about your selectively lifting dues versus rat rates and such. Are you seeing anything change in that dynamic whatsoever?

Bram, what are your thoughts on that? I think the business, as we both have mentioned, is very, very solid. Memberships are strong. The customers are using the club a lot. They are engaging in all in-centers. We're just, at this point, we were cautious the first half of the year, as I mentioned to you guys, because of the macro picture, not because of tariffs or anything like that. We just wanted to know that there isn't gonna be a sort of a meltdown. We also were focused on getting our double B rating and getting a strong balance sheet. So the company can really, bulldozer through any condition. If it's great, we'll go faster. If it's tough conditions, we're gonna do great in that condition as well. That's been the strategy. Now we have the strength in the balance sheet. We have the double B. Leverage is low. And we can see continued opportunity to grow the business faster and faster while we maintain the leverage or even have it go lower. So I really don't have anything to look at and be concerned about just -to-day operation and take advantage of all the growth opportunities I

had. And just to kind of maybe put a quantitative point on that, Brian, I mean, if you look at our revenue per membership for Q2, it's up nearly 12%. So I think our ability to monetize that has been very effective.

Great, guys. Very helpful. Thanks for all the color. Congrats again.

Thank

you.

Our next question is from Alex Perry with Bank of America. Please proceed.

Hi, thanks for taking my questions here and congrats on a strong quarter. I just wanted to talk a little bit more about the unit guide commentary. I think you sort of narrowed the unit guide from 10 to 12 units this year to 10. Was there a timing shift sort of into next year that sort of leads you to accelerate the growth next year? Did the timeline of openings sort of get elongated based on build schedules, just trying to sort of square up the unit guide this year versus next year? Thanks.

Yeah. So I think, as we mentioned, the 24 or 25 was more of a collection of some of the clubs that they're going into existing spaces, great locations, opportunistic, but sometimes in markets like New York, Florida, they're a little smaller than 100,000 square feet because they're more urban, and then some conversion clubs. We were also focused on really watching the spend and the balance sheet to make sure we sort of get to that exact level that we wanted to make sure the company sits financially. So all of those were sort of the resulted in the number of clubs that they're coming up being closer to that 10 number, and sometimes they just shift a little bit, construction takes longer. Now, we also have spent quite a bit of time over this past four or five months on construction to make sure we get better bids, better construction numbers, which we have been getting them now. It's super important. And then with all of those things set, we are aiming to deliver, like I said, 12 to 14, and obviously we're hoping to get the 14 clubs open for the next year. So I think that's really the key, and we have a huge pipeline. There's more deals coming in, so we should be able to continue to grow. As I mentioned earlier, the balance sheet also points out to the fact that we can do this growth and continue keeping this low leverage point that we have achieved now.

That's really helpful. And then just my follow-up is on memberships. What is sort of the expectation for the back half in terms of membership? Should it sort of follow the normal seasonality curve that we see? Have you seen the really strong, what it sounds like good strong exit rate out of the quarter in terms of gross adds sort of continue here as we move through July, thanks?

Yeah, we're gonna continue. Obviously, in Q3, we've got our typical seasonality. If you look back at last year, memberships went down 6,000. But I will say, if you look at last year, there was a little bit of some of our new builds kind of masking maybe a little bit of that seasonality. So in 2023, we had seven clubs, 600,000 square feet. So they would have been in year two of their ramp last year. And last year, we opened up four clubs with about 300,000 square feet. Last year was maybe a little bit light because we had more clubs in their second year of ramp. So the expectation is that yes, Q3 will come down. We won't have the benefit of having as many clubs in Q3 this year, maybe 50% less square feet. So you need to take that into account.

Yeah, to respond clearly is that we're not seeing anything that shows any sign of weakness. All we see is the seasonality of execution. It's just a normal seasonal ups and downs. In fact, things are going extremely well. And you asked about this quarter. I wanna make it clear that we do not wanna make a practice of commenting on mid-quarter things going forward, like I did last quarter. I'm gonna make a comment now, but I hope that in the future, nobody asks mid-quarter questions. But the first part of this quarter is following the same trends of the last half of the quarter before. So things are very, very good, but I wanna make sure we are very clear. We don't wanna get into Q&A about the mid-quarter stuff, if it's okay with you guys.

Perfect. No, that's incredibly helpful and makes a lot of sense. So thanks for that. Best of luck going forward. Thank you, Alex.

Our next question is from John Heimbacher with Guggenheim Securities. Please proceed.

Aver, I wanted to start off with how you think about managing the pipeline, right? I think that would be helpful for everybody, right? When you look out 26 or even maybe thinking about 27, how many projects are kind of in the pipeline? You think about doing 12 to 14. There's sort of 15 to 20 or 20 plus candidates, or maybe more than that, kind of floating around in case some slip. And then when you think about the timing of that, what you can do with, let's say, takeovers, moles, right? Stuff that has a shorter time horizon. How quickly can you move on that if you wanted to move up a couple of projects?

I love this, John. I think this is the constant challenge that you have in a public world is getting chasing your tail. We have always done the right thing for the company. The right thing for this company is use a strong cashflow that we're generating and put it to work. We have at all times the real estate team is working to have between 85 to 100 deals in the pipeline. Then that's the number that we are managing. We can step on the gas, try to expedite startups and constructions when all things make sense. Just like right now, the business is strong, in-center is strong, dues is strong, ramp is strong in the new clubs, and then the balance sheet is strong. So now is the time you basically say, okay, now can we expedite some of these deals in the pipeline? But at no time, John, we're going to risk just trying to push a number out just because then you end up doing things that are not long-term benefit of the company. But I do not see a reason why we can continue to deliver the growth year numbers that we have guided you guys to that light double-digit pipeline revenue is what our target is, and we see a clear path to delivering that.

Maybe as a follow-up, when you think about the maturation, and I know every club is different, but the maturation process here, I think the idea wasn't it, you want to start out with 2,200, 2,300 members right, so the staff is new, the members are new, they got to kind of feel it out. And then you grow from there pretty rapidly over a couple of year period. Is that still the idea? Because the brand awareness is larger, the wait lists are bigger. You could certainly open up stronger than that, but are you sort of still significantly restraining your membership acquisition for the sake of experience?

Well, you have to, because it's, when you open a brand new club with 50% memberships, and that first call at three to six months, as the natural capacity of the club, just with 50% more membership, the club feels as busy as a couple years down the road when you have twice as many members. Now, why is that? Because the members are all new, they are using the club not as efficiently for themselves. I mean, as time goes on, the members dissipate themselves accordingly. Some like to go into busy times at the club, they like that busy, they like the social aspects of the club being busy, they come at that time and they're okay with the club being busy. Some don't like it, they start finding shoulder times where the club is less busy. So it's just a natural process that will take place in a club with, the worst thing you can do is just get greedy and try to open a club with too many members and make that initial experience be awkward and strange. And we don't wanna do that, we don't need to. We're delivering the numbers that we're telling you we're gonna guide you to by just managing the experience at all times. Okay, thank you.

Our next question is from Chris Oronca with Deutsche Bank. Please proceed.

Hey guys, Lauren, thanks for taking the question. Boram, maybe you can add a little bit of color here. This is somewhat of a follow on to the last question. I mean, I think one of the things that sometimes folks get confused about or lose sight of is the effect that the wait list have on your member growth. So maybe you can add a little bit of color on, or if you wanna give us a number, what you would look at on a, I guess, member growth outside of clubs with wait lists or how that impacts things. But I think that would be super helpful to put things in perspective, thanks.

Yeah, I mean, I can take that and Boram can add to it. But again, we look at wait lists similar to how we look at enrollment fees. Wait list is, just to be clear, is not intended to be really a KPI. It is one of the tools that we use to manage the member experience. And we do that, we look at traffic, we look at hours of the day for a particular club. So a club may come on a wait list, it may come off a wait list. Again, it's a means for us to be able to manage that member experience. And so again, look at it more that way as opposed, and again, similar to IF and even in some ways, similar to price, just one of the tools that we leverage, if that's helpful.

Yeah, we don't want that to become a KPI for you guys. I think it's a mistake to chase that. I have been probably redundant. And maybe I don't wanna sound disrespectful in any shape or form, but I do wanna be clear. The reason we have built such a strong brand over 30 some years is because we have focused on the customer experience at all times, right? So our focus is to create a brand that is cool, a brand that is the place people wanna go to, a brand that the experience is coveted. And that is our key focus on execution. And sometimes we need to implement a wait list to make sure that it doesn't get out of control. Sometimes we need to pull it off the wait list, not because of the demand is different, but we may have execution issues on responding to the people and the experience actually gets worse because the particular club isn't executing on addressing the people on the wait list correctly. So we are managing a lot of things. And if you, the analyst, buy side or sell side, is trying to take cues out of that, it honestly can just mislead the group. And so we are focused on being cautious right now with you guys is not giving you responses that creates unwanted KPIs. This

is not, it should not be a KPI. Yeah, and what I would point you back to is two things. We said visits per membership 12.7, that's the highest it's been. And if you look at just total swipes across the system, they're up .9% versus prior quarter. So the clubs are busy.

And really feel right. That's the most important thing.

Yeah, understood that. Super helpful, thanks guys.

Our next question is from Eric Delorius with Craig Hallam Capital Group, please proceed.

Great, thank you for taking my questions and congrats on a very strong quarter here. First one for me, just on the average revenue per membership, obviously continues to demonstrate very robust growth, approaching $900 a quarter. Just curious how much room you see for this figure to continue increasing without materially impacting retention. You guys seeing any signs of fatigue among any demographics or geographies? And just overall, how do you assess whether you're kind of approaching a wall of share limit with members?

No, I mean based on the results that we just posted, both in swipes, as Eric just mentioned, dues revenue and in-center execution, we are not seeing any weakness in any part of our business and anything with the customer at this point.

All right, that's great. And I guess just kind of as a follow-up there, so you called out in-center, personal training obviously cited as one of the drivers of that growth. Just curious if this is sort of typical seasonality where personal training kind of picks up heading into summer or is there something structurally, something structural that you see kind of causing increased utilization of personal training or perhaps other in-center offerings?

It's the fundamental of the programming and the creation of dynamic personal training and the execution of our team. There is constant methodical planning of programs and it is not a seasonal thing. In fact, summer months typically aren't necessarily the big months for people coming inside. Our swipes are strong, which is really indication of the clubs working the way we want it to work. And then the personal training is strong and that's due to the programs that our team are executing. It's not seasonal. It's all great to hear.

That's great. Thank you for taking my question. Congrats again.

Our next question is from Owen Rickert with Northland Securities. Please proceed.

Hey, Brom. Hey, Erica. Thanks for taking my question. Can you guys, kind of building off the last question, but can you comment on some of the in-center revenue trends and initiatives that are going on? I know DPP and some other membership engagement events like the pool parties are crushing it, but what else is working well? And then are there some areas you can see some improvement with going forward? Look, the couple areas

that we have been working on is LTH. Clearly we are focused on building the absolute best nutritional lines, a line of products for everything from AMPM, men, women, multivitamins, performance vitamins, to everything that has to do with hydration or sleep or proteins, different kind of protein isolates, et cetera. We're working on that. We have always been focused on building the best product. As you guys know, we don't cut corners. We don't deliver second best. We are making sure the product is sound from a science standpoint. It is exactly what the people need. There isn't have anything that they shouldn't have in it. And it tastes good and performs well. And all of our indication right now is that this LTH line can continue to grow and it has been growing in the clubs substantially, as I mentioned in my remarks, year on year. Miura is one that we have taken two locations. We have been seeing month over month sequential growth. We see that business model maturing to exactly what we hoped it to be. And therefore right now we are hustling to get at least four to six additional Miura locations launched this year and then gradually grow that business. So that's going well. The SPA and FNB both have quite a bit of additional opportunities and we're working on execution on both of those to make sure that we continue to get the extra growth that we can get out of those businesses and deliver the right experiences for our customers. So when they come to clubs, they get what they want. We are working on Lacey. Lacey is really a big vision. It's the vision of bringing to the customer a whole picture of their health rather than just workout or just nutrition or just sleep. The vision of Lacey is to bring in just like a lifetime club is the whole ecosystem of health and wellbeing rather than just a club, like a studio of some sort. The Lacey is the AI companion for you. The vision for it is to help you, assist you with all aspects of your health and wellbeing. Where are we at with it? We just launched Lacey. The first what I would call version is gonna do maybe two or three of the 30 things extremely well. And over the next couple of years, we continue to expand on what Lacey can do for you exceptionally well. But then ultimately it will deliver a whole picture of health viewpoint for you based if it's personalized. For you based on your past, based on all the reservoir of information that Lifetime has put together over the last 32, 33 years. And so it's something really special. It takes a lot of work. It's a big vision, takes a long time for it to get there. But we're making solid progress with that literally every 30 to 90 days. And then that will actually will help LTH, will help Miura, will help the clubs. It literally will help the whole ecosystem. Vision for that is millions and millions, not two million, but tens of millions of people using Lifetime digital and Lacey, whether if they're members or just simply subscribers. And so those are all the extra things we're working on in addition to adding, ramping up the club opening and score footage growth. And so lots of work and it's all working pretty well at

this point. Awesome, that was beyond helpful. Thanks for on and congrats on another excellent quarter. Thank you so much.

Our next question is from Logan Reich with RBC Capital Markets, please proceed.

Hey, morning guys. Thanks for taking the questions. Congrats on the strong results. I want to ask one on pricing. I mean, your retention is at all time highs, swipes continues to improve. And I know you sort of all take that all into account when you're looking at pricing, but can you just give any sort of color on what pricing you took on legacy members in Q2 and then what's sort of your outlook for the rest of the year? I think the implied same source sales for the second half of the year is around a 350 bit deceleration. So I'm just wondering if there's anything specific we should be looking at in terms of the deceleration or is there just some conservatism baked into the guidance? Thanks.

Yeah, I mean, as you know, we always have some level of conservatism baked into the guidance, but we did raise the comp sales from nine and a half to 10. It certainly wouldn't be unrealistic for us to hit or go north of that. But as it relates to pricing, we typically do take legacy pricing, Q2, Q4, so consistent with our strategy around pricing, we did do that in Q2. I would still point you to the fact that we still have quite a bit of embedded pricing in our legacy, we've talked about that before. So nothing really, I guess what I would call different or unusual that wasn't really aligned with how we were thinking about our pricing strategy. And then again, related to comps, we feel great about the raise and our ability to hit that.

Great, super helpful. And then just to follow up, it's sort of been asked a couple different ways, maybe I'll take a different approach at it. So the unit growth pipeline beyond 26, I appreciate the color on the 12th to 14th for next year. And I recognize you guys are very careful around making sure the new centers open successfully. I guess, what are the sort of things you guys need to do to continue accelerating the pipeline, maybe beyond the 12th to 14th range and 27 and the years beyond?

Yeah, look, as the company gets bigger, to maintain that 10% plus top line growth, we also need to continue to deliver more growth, more new club growth. There are many ways that that can manifest itself. We have a pipeline so solid right now and real estate team is just adding to it, not losing any sort of esteem on that. So it's hard to just come and give you guys a number for 27, but you gotta expect that it's at least 10 to 12 clubs a year as we've said before. And when we can deliver more, we deliver more than that. Great, thanks

guys.

Our next question is from Molly Baum with Morgan Stanley, please proceed.

Hi, yeah, thanks for taking my question. This is Molly, I'm for Steven. And I just want, I know you talked a little bit about the maturation process of new stores, but I just wanted to ask a follow up to that one. Can you talk a little bit more about how the same store sales compare in your most mature markets versus those that have maybe been open for less than three years? And do you expect that new club waterfall to change at all given the opening of larger stores or just any detail about your expectations going forward? Thank you.

Look, once again, we are seeing growth across the board with our programming and with our dues growth. It's not isolated to any group, it's across the board. The overperformance is across the board in the system. So that's pretty much the level of color that I like to provide. We don't wanna get into additional metrics. Yeah, but I can tell you it's across the board is how the clubs are performing. It's in the older clubs, they're doing extremely well. New clubs

are doing well and ramping clubs are doing well. Yeah, and just to add that, you guys kinda know our ramping profile and some of those markets and some of those clubs, they do kind of ramp quicker than some of our historical builds. And to Brom's point, there's nothing really regional. As I look at the same store sales in our various businesses, I mean, PT, aquatic, spa, kids, they're all up versus the prior quarter. So it's nothing really regional, it's just everything across the system that's driving that growth.

Got it, thanks so much.

There are no further questions at this time. I would like to turn the conference back over to Connor for closing remarks.

Yeah, thank you, operator, and thank everyone for joining us this morning. We look forward to the next call with you.

Thank you, this will conclude today's conference. You may disconnect at this time and thank you for your participation.