Life Time Group Holdings Inc (LTH) (Q1 2024) Earnings Call Transcript Highlights: Navigating ...
Total Revenue: Increased 16.8% to $596.7 million.
Net Income: $24.9 million, down 9.5% from Q1 2023.
Adjusted Net Income: $30.5 million, up $7.3 million from Q1 2023.
Adjusted Diluted EPS: $0.15, up from $0.11 in Q1 2023.
Adjusted EBITDA: Increased 21.6% to $146 million.
Adjusted EBITDA Margin: 24.5%, up 100 basis points from Q1 2023.
Net Cash from Operating Activities: Increased 21.7% to $90.4 million.
Net Debt to Adjusted EBITDA Leverage: Reduced to 3.6 times from 5.2 times in Q1 2023.
Membership Numbers: Access memberships at 802,000, total memberships at 853,000.
Average Monthly Dues: $186, up 12.7% from Q1 2023.
Revenue per Access Membership: Increased to $745 from $667.
Full Year Revenue Guidance: Raised to $2.5 billion to $2.53 billion.
Full Year Adjusted EBITDA Guidance: Raised to $603 million to $618 million.
Free Cash Flow: On track to be positive in Q2 and expected to remain positive.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Total revenue for Q1 increased by 16.8% to $596.7 million compared to the previous year, driven by a 19% increase in membership dues and enrollment fees.
Net income for Q1 was $24.9 million, with adjusted net income at $30.5 million, showing a $7.3 million increase from Q1 2023.
Adjusted EBITDA increased by 21.6% to $146 million, with an adjusted EBITDA margin improvement of 100 basis points to 24.5%.
Net cash provided by operating activities rose by 21.7% to $90.4 million compared to Q1 2023, and net debt to adjusted EBITDA leverage was reduced to 3.6 times.
Access memberships increased by 5% to over 802,000, and total memberships ended the quarter at approximately 853,000.
Negative Points
Net income for Q1 2024 decreased by 9.5% compared to Q1 2023, primarily due to the absence of one-time net benefits experienced in the previous year.
Despite strong financial performance, the company faces ongoing challenges with high construction, development costs, and increased wages.
The company's strategy involves significant upfront investments, which could impact short-term liquidity despite long-term gains.
While membership dues are increasing, there is a potential risk of member dissatisfaction or loss due to rising costs.
The company is cautious about the potential for economic downturns or shifts in consumer behavior that could negatively impact membership retention and growth.
Q & A Highlights
Q: Can you discuss the engagement rates and how dynamic personal training is impacting wallet share with in-center revenue? A: (Bahram Akradi - Chairman & CEO) Dynamic personal training has been a significant initiative, doubling the number of personal trainers and showing strong momentum. Engagement in personal training has improved, contributing positively to in-center revenue. Additionally, other programs like kids programming and summer camps are performing well, and there are opportunities for growth in spa and cafe services.
Q: How do you view the pipeline for large format equivalent clubs and their potential impact over the next few years? A: (Bahram Akradi - Chairman & CEO) The target is to open 8-12 new clubs annually, averaging about 10 per year. These clubs are expected to contribute to achieving a 10% revenue and EBITDA growth from 2025 onwards, with about 45% of this growth coming from existing stores and the rest from new club expansions and other initiatives.
Q: Could you provide more details on the updated guidance and factors driving the improved outlook? A: (Bahram Akradi - Chairman & CEO) The updated guidance is driven by better-than-expected retention rates, which are about 10% better than any previous period, significantly impacting forecasted dues and financial projections. The guidance is based on current trends and factual data.
Q: What are the trends in EBITDA margins, and is there potential for these margins to exceed current projections? A: (Bahram Akradi - Chairman & CEO) The company is satisfied with the EBITDA margin range of 23.5% to 24.5%. While there is potential for higher margins, the current focus is on delivering exceptional member experiences and maintaining a sustainable business model, which includes managing higher operational costs.
Q: How is the company addressing the potential economic concerns affecting consumer behavior, especially in membership trends? A: (Bahram Akradi - Chairman & CEO) Despite potential economic concerns, the company continues to see record engagement and retention levels. Some clubs have implemented waitlists to manage new memberships effectively and maintain high service levels, indicating strong demand and customer satisfaction.
Q: Can you discuss the strategy behind the pricing and membership models, particularly in relation to seasonal trends and waitlist management? A: (Bahram Akradi - Chairman & CEO) The strategy includes managing seasonal membership fluctuations by introducing fees during peak times to discourage short-term memberships. This approach helps in smoothing out seasonal variations and improving the predictability of membership trends.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
