Life Time Group Holdings, Inc.

Greetings and welcome to Lifetime Group Holdings Inc. Q4 and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Conor Weinberg, SVP of Treasury and IR. Thank you, Conor. You may begin.

Good morning. Thank you for joining us for the fourth quarter and full year 2025 Lifetime Group Holdings Earnings Conference Call. With me today are Bharat McCrotty, 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'll turn the call over to Eric.

Thank you, Connor, and good morning, everyone. As always, we appreciate you joining us for our business and financial update, starting with our fourth quarter results. Total revenue increased 12.3% to $745 million, driven by continued execution in our centers, including higher average dues and utilization of our in-center businesses. Average monthly dues were $223, up approximately 10.8% from the fourth quarter of last year, and average revenue per center membership was $882, up 10.8% from the prior year quarter. Comparable center revenue grew 9.9% and was in line with our expectations, reflecting strength in our membership dues and in-center business performance. We ended the year with over 822,000 center memberships. Including on-hold memberships, total memberships reached approximately 873,000. Net income for the quarter was $123 million, an increase of 231%. Fourth quarter net income benefited from approximately $45.6 million of net tax-affected items that are excluded from adjusted net income, as they are not reflective of our ongoing operations. These adjustments primarily included proceeds we received in partial satisfaction of legal claims and employee retention credits, as well as adjustments for net gains on sale leaseback transactions and share-based compensation. Adjusted net income, which excludes the tax-affected impact of these items, was $77 million, up 28.4% year-over-year. Adjusted EBITDA was $203 million, an increase of 14.5% over the prior year quarter, and our adjusted EBITDA margin improved by 50 basis points to 27.2%. Net cash provided by operating activities increased to $240 million, approximately 47% higher compared to the prior year quarter. This included $59 million of non-recurring proceeds from partial satisfaction of legal claims and employee retention credits. For the full year of 2025, total revenue increased 14.3% to $2.995 billion, driven by a 13.9% increase in membership dues and enrollment fees, and a 15.1% increase in in-center revenue. Comparable center revenue grew 11.1%. Relative to our initial guidance in 2025, the outperformance was driven primarily by our mature clubs, which in aggregate reached and exceeded our expected levels of performance faster than we had anticipated. We believe this outperformance from our mature clubs is largely complete coming into 2026. In 2026, we expect full-year comparable center revenue growth of approximately 6.3% to 7.3%. We expect a continuation of the quarterly trends we saw throughout 2025, starting the year at a higher comparable center growth rate and gliding downward as the year progresses. Average revenue per center membership was $3,531, up 11.7% from the prior year. Net income increased 139% to $374 million, and adjusted net income increased 62.3% to $326 million. Adjusted diluted earnings per share increased 51.6% to $1.44 compared to 95 cents per share from the prior year. Adjusted EBITDA increased 21.9% to $825 million, and our adjusted EBITDA margin increased 170 basis points to 27.5%. Net cash provided by operating activities increased to $871 million, approximately 51% higher compared to the prior year. This included $94 million of non-recurring proceeds from partial satisfaction of legal claims and employee retention credits. Total capital expenditures, net of construction reimbursements were $892 million for 2025. This included $657 million for growth capital expenditures. Looking forward to 2026, we expect to invest between $875 million to $915 million of growth capital. It is critical to underscore that over half of our growth capex in 2026 is will be for clubs opening in 2027 and beyond as we have been accelerating the number of new clubs versus prior years. This increased investment in growth CapEx is driven by both the greater number of club openings this year and the next few years compared to 2025 and 2024, as well as the increased size of our clubs. We are nearly doubling the amount of square footage we are opening in 2026 as compared to 2025 and 2024. Of our 2026 clubs, we have opened one and the remaining 13 are under construction. As these owned clubs open and begin to ramp, we expect to recycle the invested capital through sale leasebacks over time. In addition to growth CapEx, we anticipate $140 to $150 million of maintenance capital expenditures and $130 to $140 million for modernization of existing clubs, technology, and corporate investments. We anticipate funding our CapEx through cash from operations, sale-leaseback proceeds, and cash on hand. For 2026, we expect to do a minimum of $300 million of sale-leasebacks. One final note. With our increased growth capital spending, a larger portion of our interest expense will be capitalized this year as compared to 2025. For 2026, we expect to capitalize between $33 and $35 million of interest expense. With that, I will pass the call to Brahm.