LifeTime Group Holdings, Inc. reported sales grew 42 percent in the second quarter ended June 30 with gym memberships up 10.2 percent year-over-year across its nearly 160 athletic country clubs across the US and Canada.
Bahram Akradi, founder, chairman and CEO, said: “We are happy to report that Life Time is growing back steadily. During the quarter, we made substantial progress on our strategic priorities. We delivered on our financial guidance while continuing to make strategic investments in broadening and elevating the programs and experiences we provide. We are seeing strong member engagement in our programming and will remain focused on driving these initiatives through the remainder of the year. Our new athletic country club pipeline remains strong with 12 planned openings this year and 11 or more in 2023. To further strengthen our balance sheet, we have entered into a definitive agreement for the sale-leaseback of approximately $200 million of owned real estate, which is expected to close in early October. We are also in discussions for additional sale-leaseback transactions of up to $300 million in gross proceeds by the end of the year. Finally, while we are seeing current macroeconomic headwinds that may slow our near-term recovery, we remain confident in the growth of our business as we accelerate the rollout of our initiatives.”
Second Quarter 2022 Results And Prior Year Comparisons
- Total revenue increased 42.7 percent to $461.3 million from $323.2 million;
- Comparable center sales increased 36.2 percent;
- Center memberships totaled 724,778 on June 30, 2022, an increase of 10.2 percent from 657,737 on June 30, 2021 and up by 50,795 from March 31, 2022;
- Net loss was $2.3 million and included a tax-effected one-time net benefit of $5.4 million, which included a $7.7 million gain on sale-leasebacks, partially offset by $2.2 million in non-cash share-based compensation expense; and
- Adjusted EBITDA increased to $63.1 million from $4.2 million.
Six-Month 2022 Results and Prior Year Comparisons
- Total revenue increased 49.1 percent to $853.5 million from $572.5 million;
- Comparable center sales increased 42.4 percent;
- Net loss was $40.3 million and included a tax-effected one-time net benefit of $18.4 million, which included a $42.4 million gain on sale-leasebacks, partially offset by $23.4 million in non-cash share-based compensation expense and $0.6 million in non -recurring charges consisting primarily of COVID-19-related expenses; and
- Adjusted EBITDA increased to $103.7 million from $(14.8) million.
New Center Openings
- The company operated 153 centers as of June 30, 2022.
- Year-to-date, the company has opened two centers, including one in Frisco, Texas and a second in Chicago.
- The company plans to open four new centers in the third quarter and six during the fourth quarter, for a total of 12 new centers in 2022.
- The company plans to open 11 or more new centers in 2023.
Cash Flow Highlights
- As of June 30, 2022, the company had total cash and cash equivalents of $61.3 million and $30.0 million in borrowings under its $475 million revolving credit facility.
- Net cash provided by operating activities for the three-month and six-month periods ended June 30, 2022, was $71.3 million and $80.3 million, respectively, compared to $25.1 million and $(13.0) million in the same prior-year periods, respectively .
- Free cash flow, before growth capital expenditures for the three-month and six-month periods ended June 30, 2022, was $32.4 million and $(1.9) million, respectively, compared to $(6.9) million and $(60.8) million in the same prior-year periods, respectively.
- During the second quarter, the company completed sale-leaseback transactions on two properties for gross proceeds of approximately $95 million, bringing the year-to-date sale-leaseback transaction total to $175 million.
- In August 2022, the company entered into a definitive agreement for the sale-leaseback of five properties for gross proceeds of approximately $200 million. The transaction is expected to close in early October.
- Additionally, the company is in discussions for sale-leaseback transactions of additional properties for gross proceeds of up to $300 million by the end of the year.
- Once closed, these transactions would bring the total gross proceeds for sale-leasebacks in 2022 to $675 million. The company expects to use the net proceeds both to pay down debt and maintain cash on the balance sheet to fund future growth.
- Assuming the successful closure of these sale-leaseback transactions on the timeline outlined above, full-year rent expense is expected to be $245 to $255 million.
For the third quarter ending September 30, 2022, the company is projecting revenue, net loss, and Adjusted EBITDA to be in the ranges of $490 to $510 million, $(24) to $(15) million, and $65 to $75 million, respectively. For the full year ending December 31, 2022, the company is projecting revenue, net loss, and Adjusted EBITDA to be in the ranges of $1.80 billion to $1.85 billion, $(73.6) million to $(55.6) million, and $250 million to $270 million, respectively.
Photo courtesy Life Time