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What changed in Life Time Group Holdings, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Life Time Group Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+366 added−469 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-08)

Top changes in Life Time Group Holdings, Inc.'s 2023 10-K

366 paragraphs added · 469 removed · 292 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

71 edited+29 added−68 removed22 unchanged
Biggest changeSimilarly, our average revenue per center membership increased to $2,528 in 2022 compared to $2,098 and $1,317 in 2021 and 2020, respectively, and compared to $2,172 in 2019. 6 Table of Contents The table below displays the wide assortment of amenities, services, activities and events found at our centers: Amenities Services Activities and Events Indoor and Outdoor Pools Group Fitness Studios Cycle Studios Yoga & Pilates Studios Indoor and Outdoor Tennis Courts Pickleball Courts LifeCafe with Poolside Service Bar and Lounge with Wi-Fi Free Weight and Resistance Equipment Cardiovascular Equipment Steam Room and Sauna Racquetball and Squash Spaces Locker Rooms Child Center and Kids Academy Basketball/Volleyball Courts Dynamic Personal Training Small Group Training ARORA Weight Loss Coaching Nutrition Coaching LifeSpa and Medi-spa Physical Therapy and Chiropractic Assessments and Lab Testing Sport Specific Coaching Endurance Coaching Swim Lessons and Team Coaching Towel and Locker Service Athletic Leagues and Tournaments Kids’ Birthday Parties Summer and Vacation Camps for Kids Sports Training Camps Athletic Events Social Events Outdoor Group Runs Outdoor Group Cycle Rides Swim Meets Charity Events Our footprint of athletic country clubs as of December 31, 2022: We believe that no other company in the United States delivers the same quality and breadth of health, fitness and wellness experiences that we deliver, which enabled us to consistently grow our annual membership dues and in-center revenues for 20 consecutive years, prior to the impact of the COVID-19 pandemic.
Biggest changeThe table below displays this wide assortment: 6 Table of Contents Amenities Services Activities and Events Indoor and Outdoor Pools Group Fitness Studios Cycle Studios Yoga & Pilates Studios Indoor and Outdoor Tennis Courts Pickleball Courts LifeCafe with Poolside Service Bar and Lounge Free Weight and Resistance Equipment Cardiovascular Equipment Steam Room and Sauna Racquetball and Squash Spaces Locker Rooms Child Center and Kids Academy Basketball/Volleyball Courts Dynamic Personal Training Dynamic Stretch Small Group Training ARORA MIORA Weight Loss Coaching Nutrition Coaching LifeSpa and Medi-spa Physical Therapy and Chiropractic Assessments and Lab Testing Sport Specific Coaching Endurance Coaching Swim Lessons and Team Coaching Towel and Locker Service Athletic Leagues and Tournaments Kids’ Birthday Parties Summer and Vacation Camps for Kids Sports Training Camps Athletic Events Social Events Outdoor Group Runs Outdoor Group Cycle Rides Swim Meets Charity Events During 2023, we also organized approximately 27,800 events and served as a social and community hub for our members.
We offer Digital On-hold memberships for members who do not currently wish to access our centers, but still want to maintain certain member benefits, including our Life Time Digital membership, and the right to convert back to a Center membership without paying an enrollment fee. The majority of our Digital On-hold memberships cost $15 per month. Digital Memberships.
Digital On-hold Memberships . We offer Digital On-hold memberships for members who do not currently wish to access our centers, but still want to maintain certain member benefits, including our Life Time Digital membership and the right to convert back to a Center membership without paying an enrollment fee. The majority of our Digital On-hold memberships cost $15 per month.
Our signature multi-center access memberships provide the benefits of a standard membership along with certain products, services or spaces that would otherwise be accessible only upon payment of additional dues or fees, such as small group training and court time for certain racquet sports at certain centers.
Signature multi-center access memberships provide the benefits of a standard membership along with certain products, services or spaces that would otherwise be accessible only upon payment of additional dues or fees, such as small group training and court time for certain racquet sports at certain centers.
We call this collective approach and lens to physical, mental and social well-being “Healthy Way of Life” (“HWOL”). To build our HWOL brand, we aim to recruit, train, promote and empower team members through our culture of care and such initiatives as the Life Time Inclusion Council and Life Time University.
We call this collective approach and lens to physical, mental and social well-being “Healthy Way of Life” (“HWOL”). To build our HWOL brand, we aim to recruit, train, promote and empower team members through our culture of care and such initiatives as the Life Time Inclusion Council and Life Time University discussed below.
Diversity, Equity and Inclusion at Life Time At Life Time, we are committed to inspiring healthy, happy lives for everyone in our communities. We aspire to create healthy environments and workspaces that recognize, empower and celebrate the unique talents, backgrounds and perspectives of individuals so team members feel welcomed, respected, supported and valued.
Inclusion at Life Time At Life Time, we are committed to inspiring healthy, happy lives for everyone in our communities. We aspire to create healthy environments and workspaces that recognize, empower and celebrate the unique talents, backgrounds and perspectives of individuals so team members feel welcomed, respected, supported and valued.
Expanded Memberships and Omni-Channel Membership Offerings We believe the importance of health, fitness and wellness coupled with the structural shift of consumer preferences toward experiential and proactive health and wellness spending creates new opportunities for us to leverage our “Healthy Way of Life” lifestyle brand.
Expanded Omni-Channel Offerings We believe the importance of health, fitness and wellness coupled with the structural shift of consumer preferences toward experiential and proactive health and wellness spending creates new opportunities for us to leverage our “Healthy Way of Life” lifestyle brand.
We seek to leverage this halo effect of our brand, as well as long-term relationships with landlords and property developers, to achieve favorable lease or development agreements and increased construction reimbursements to support our capital light expansion.
We seek to leverage this halo effect of our brand, as well as long-term relationships with landlords and property developers, to achieve favorable lease or development agreements and increased construction reimbursements to support our asset-light expansion.
Team members also receive ongoing mentoring and continuing education, and we require an annual re-certification before any team member is permitted to work or to advance to other positions within our Company. Our personal trainers, registered dietitians, massage therapists and cosmetologists are required to maintain a professional license or one of their industry’s top certifications.
Team members also receive ongoing 10 Table of Contents mentoring and continuing education, and we require an annual re-certification before any team member is permitted to work or to advance to other positions within our Company. Our personal trainers, registered dietitians, massage therapists and cosmetologists are required to maintain a professional license or one of their industry’s top certifications.
Our culture of care encourages our team members to live out HWOL in their personal and professional lives. We believe in supporting our team members throughout their journey from casting, onboarding, training, certification, career-path planning and employee resource or affinity groups. We also offer numerous supportive programs, including education, training and surveys.
Our culture of care encourages our team members to exemplify HWOL in their personal and professional lives. We believe in supporting our team members throughout their journey from casting, onboarding, training, certification, career-path planning and employee resource or affinity groups. We also offer numerous supportive programs, including education, training and surveys.
Available Information We file annual, quarterly and special reports and other information with the SEC. Our filings with the SEC are available to the public on the SEC’s website at http://www.sec.gov. Those filings are also available to the public on, or accessible through, our investor relations website at www.ir.lifetime.life under the “Filings” tab.
Available Information We file annual, quarterly and special reports and other information with the SEC. Our filings with the SEC are available to the public on the SEC’s website at http://www.sec.gov. Those filings are also available to the public free of charge on, or accessible through, our investor relations website at www.ir.lifetime.life under the “Filings” tab.
The power of our lifestyle brand, attractive member demographics, breadth of amenities and services and high utilization of our centers allow us to build deeply meaningful connections with our members, which are difficult for others in our industry to replicate fully.
Revenue ($ in millions) Our Engaged Members The power of our lifestyle brand, attractive member demographics, breadth of amenities and services and high utilization of our centers allow us to build deeply meaningful connections with our members, which are difficult for others in our industry to replicate fully.
Competition We consider the following groups to be the primary participants in the health, fitness and wellness industry: • health center operators, including, but not limited to, Equinox Holdings, Inc., The Bay Club Company, ClubCorp, LA Fitness International, LLC and 24 Hour Fitness Worldwide, Inc.; • the YMCA and similar non-profit organizations or community centers; • physical fitness and recreational facilities established by local governments, hospitals and businesses; • local salons, cafes and businesses offering similar ancillary services; 15 Table of Contents • small fitness clubs and studios and other boutique fitness offerings, including Anytime Fitness, Snap Fitness, Planet Fitness, Orange Theory, Barre3, Crunch Fitness and others; • racquet, tennis, pickleball and other athletic centers; • rental unit and condominium amenity centers; • country clubs; • digital fitness and health services, including online personal training and fitness coaching; • the home-use fitness equipment industry; • athletic event operators and related suppliers; and • providers of wellness and other health and wellness-orientated products and services.
Competition We consider the following groups to be the primary participants in the health, fitness and wellness industry: • health center operators, including, but not limited to, Equinox Holdings, Inc., The Bay Club Company, Invited (formerly ClubCorp), LA Fitness International, LLC and 24 Hour Fitness Worldwide, Inc.; • the YMCA and similar non-profit organizations or community centers; • physical fitness and recreational facilities established by local governments, hospitals and businesses; • local salons, cafes and businesses offering similar ancillary services; • small fitness clubs and studios and other boutique fitness offerings, including Anytime Fitness, Snap Fitness, Planet Fitness, Orange Theory, Barre3, StretchLab and others; • racquet, tennis, pickleball and other athletic centers; • rental unit and condominium amenity centers; • country clubs; • digital fitness and health services, including online or other technology-based personal training and fitness and nutrition coaching; • the home-use fitness equipment industry; 11 Table of Contents • athletic event operators and related suppliers; and • providers of wellness and other health and wellness-orientated products and services.
We have something for every generation, from young children attending our swim lessons and Kids Academy classes, teenagers engaged in our sports and agility training, adults engaged in our Dynamic Personal Training and small group training or more senior adults engaged in our ARORA community to members of all ages participating in pickleball, our iconic athletic events and a variety of our other in-center activities.
We have something for every generation, from young children attending our swim lessons, parent-child dances, pool parties and Kids Academy classes, teenagers engaged in our sports and agility training, adults engaged in our Dynamic Personal Training and small group training and more senior adults engaged in our ARORA community, to members of all ages participating in pickleball, our iconic athletic events and a variety of our other in-center activities.
We continue to evolve our premium lifestyle brand in ways that elevate and broaden our member experiences and allow our members to integrate health, fitness and wellness into their lives with greater ease and frequency.
Expand and Elevate In-Center Service Offerings We continue to evolve our premium lifestyle brand in ways that elevate and broaden our member experiences and allow our members to integrate health, fitness and wellness into their lives with greater ease and frequency.
We believe that our brand, our comprehensive product offering and focus on services, amenities and value provide us with a distinct competitive advantage, positioning us well to compete in the health, fitness and wellness industry. Intellectual Property Our business depends on the quality and reputation of our brand.
We believe that our brand, our comprehensive product offering and focus on premium services and amenities and our value provide us with a distinct competitive advantage that positions us well in the health, fitness and wellness industry. Intellectual Property Our business depends on the quality and reputation of our brand.
Currently, our digital membership is included with both our Center and Digital On-hold memberships at no additional charge or it can be purchased separately as a digital-only membership. We currently report our Digital memberships within our Digital On-hold membership totals.
Currently, our digital membership is included with both our Center and Digital On-hold memberships at no additional charge or it can be purchased separately as a digital-only membership.
We are also expanding our “Healthy Way of Life” ecosystem in response to the desire of our members to holistically integrate health and wellness into every aspect of their daily lives.
We also continue to expand our “Healthy Way of Life” ecosystem in response to the desire of our members to holistically integrate health and wellness into every aspect of their daily lives.
The health, fitness and wellness industry is highly competitive. While competition in the industry varies from market to market, it may be impacted by various factors, including the breadth and price of membership offerings and other products and services, the flexibility of membership options, the overall quality of the offering, name or brand recognition and economies of scale.
While competition in the industry varies from market to market, it may be impacted by various factors, including the breadth and price of membership offerings and other products and services, the flexibility of membership options, the overall quality of the offering, name or brand recognition and economies of scale.
Governmental Laws and Regulations Our operations and business practices are subject to laws and regulations at federal, state, provincial and local levels, including consumer protection laws related to our advertising, marketing and sales efforts, health and safety regulations and licensing requirements related to our training, cafe, spa, aquatics, child care and ancillary health and fitness-related products and services, environmental laws and regulations, including those related to the handling, use, remediation and storage of hazardous materials, the emission, release and discharge of hazardous materials into the environment, and the health and safety of our employees, fair housing laws, accessibility laws, regulations related to the collection, use and security of personal information about our members, guests and purchasers, and wage and hour and other labor and employment laws.
Governmental Laws and Regulations Our operations and business practices are subject to laws and regulations at federal, state, provincial and local levels, including consumer protection laws, health and safety regulations, licensing requirements related to our training, cafe and bistro, spa, aquatics, child care and ancillary health and fitness-related products and services, environmental laws and regulations, including those related to the handling, use, investigation, remediation and storage of hazardous materials, the emission, release and discharge of hazardous materials into the environment, the health and safety of our employees and the disclosure of our environmental initiatives, fair housing laws, accessibility laws, regulations and laws related to the collection, use and security of personal information about our members, guests and other third parties, and wage and hour and other labor and employment laws.
As of December 31, 2022, our members had a median household income of $143,000, 80% owned a home and approximately 60% of our members are part of a couples or family membership, and these members typically engage more fully within our centers. Approximately 58% of our members had at least a college education.
As of December 31, 2023, our members had a median household income of $145,000, 80% owned a home and approximately 58% of our members are part of a couples or family membership, and these members typically engage more fully within our centers. Approximately 59% of our members had at least a college education.
We offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.
Depending on the size and location of a center, we offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.
We take a disciplined approach to sourcing, acquiring and integrating high quality assets and/or locations and complementary businesses that can help us continue to expand into new geographic areas, acquire key talent and offer new services and experiences.
Our acquisitions can be single assets or portfolios of assets. We take a disciplined approach to sourcing, acquiring and integrating high quality assets and/or locations and complementary businesses that can help us continue to expand into new geographic areas, acquire key talent and offer new services and experiences.
Life Time Work members also generally receive access to all of our resort-like athletic country club destinations across the United States and Canada. Additionally, we have opened our first two Life Time Living locations, which offer luxury wellness-oriented residences in close proximity to one of our athletic country clubs.
Life Time Work members also have the ability to receive access to all of our resort-like athletic country club destinations across the United States and Canada. Additionally, our Life Time Living locations offer luxury wellness-oriented residences, also in close proximity to one of our athletic country clubs.
Who We Are Life Time, the “Healthy Way of Life Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a community of nearly 1.4 million individual members, who together comprise more than 776,000 memberships, as of December 31, 2022.
Who We Are Life Time, the “Healthy Way of Life Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a community of nearly 1.5 million individual members, who together comprise nearly 815,000 memberships, as of December 31, 2023.
State statutes often require that we: • include certain terms in our membership contracts, including the right to cancel a membership, in most cases, within three to 10 days after joining, and receive a refund of enrollment fees paid; • escrow funds received from pre-opening sales or post a bond or proof of financial responsibility; and • adhere to price or financing limitations. 16 Table of Contents Seasonality of Business Seasonal trends have an effect on our overall business.
State statutes often require that we: • include certain terms in our membership contracts, including the right to cancel a membership, in most cases, within three to 10 days after joining, and receive a refund of enrollment fees paid; • escrow funds received from pre-opening sales or post a bond or proof of financial responsibility; and • adhere to price or financing limitations.
Human Capital As of December 31, 2022, we employed over 34,000 Life Time team members, including 26,000 part-time employees and over 8,800 certified fitness professionals, ranging from personal trainers to studio performers. On average, our centers are generally staffed with approximately 180 to 240 full-time and part-time employees depending on center activity levels.
As of December 31, 2023, we employed over 37,000 Life Time team members, including over 28,000 part-time employees and over 9,800 certified fitness professionals, ranging from personal trainers to studio performers. On average, our centers are generally staffed with approximately 200 to 240 full-time and part-time employees depending on center activity levels.
We offer base memberships that provide one or more individuals 14 years of age or older general access (with some amenities excluded) to a selected home center and all centers with the same or lower base monthly dues rate.
We offer base memberships that provide general access (with some amenities excluded) to a selected home center and all centers with the same or lower base monthly dues rate.
Our focus on a flexible real estate strategy has enabled us to develop a business model that targets a new center return on invested capital, after sale-leaseback proceeds or construction reimbursements, of over 40%, which is more than double historical trends before implementing this strategy.
Our focus on an asset-light real estate strategy has enabled us to develop a business model that targets a new center return on invested capital, after sale-leaseback proceeds or construction reimbursements, in the mid-to-upper 30% range, which is more than double historical trends before implementing this strategy.
We are also expanding the number of our centers in an asset-light model that targets higher income members, higher average annual revenue per center membership and higher returns on invested capital. With the strong recovery of our membership dues revenue, we have also been able to focus on margin expansion.
We are also expanding the number of our centers in an asset-light model that targets higher income members, higher average annual revenue per center membership and higher returns on invested capital.
This internal expertise has also helped us control the cost and pace of capital expenditures, including in determining when to begin construction on a new location after we have purchased the land as we balance the timing of our growth with any inflationary, labor or supply pressures, and has also ensured a consistent feel across our centers.
This internal expertise has also helped us control the cost and pace of capital expenditures, including in determining when to begin construction on a new location after we have purchased the land as we balance the timing of our growth with any inflationary, labor or supply pressures. 8 Table of Contents We have acquired, and expect to continue to acquire, centers as well as events and services that complement our offerings.
We consider our brand to be one of our most important assets and certain of our trademarks and service marks to be of material importance to our business and actively defend and enforce such trademarks and service marks. Examples include LIFE TIME®, EXPERIENCE LIFE®, LIFECAFE®, LIFESPA®, LIFE TIME HEALTHY WAY OF LIFE®, LIFE TIME WORK® and LIFE TIME LIVING®.
We consider our brand to be one of our most important assets and certain of our trademarks and service marks to be of material importance to our business and actively defend and enforce such trademarks and service marks.
We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 160 centers—distinctive, resort-like athletic country club destinations—across 29 states in the United States and one province in Canada.
We have built this reputation and robust brand equity through our continuous focus on delivering high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 170 centers—distinctive, resort-like athletic country club destinations—across 31 states in the United States and one province in Canada.
In 2018, we launched Life Time Work, an asset-light branded co-working model, which offers premium work spaces in close proximity to our athletic country clubs and integrates ergonomic furnishings and promotes a healthy working environment. As of December 31, 2022, we had 11 Life Time Work locations in operation, with plans to open more in the coming years.
In 2018, we launched Life Time Work, an asset-light branded co-working model that offers premium work spaces in close proximity to our athletic country clubs and integrates ergonomic furnishings and promotes a healthy working environment.
Recurring Revenue Model with Consistent Growth Membership dues from our network of members create a recurring and relatively predictable revenue stream that has proven to be resilient for over 30 years and across economic cycles.
Our Recurring Revenue Model Membership dues create a recurring and relatively predictable revenue stream that has proven to be resilient for over 30 years and across economic cycles. Membership dues and enrollment fees provide our largest source of revenue, representing over 70% of our total Center revenue.
Since our founding over 30 years ago, we have sought to continuously innovate ways for our members to lead healthy and happy lives by offering them the best places, programs and performers.
Since our founding over 30 years ago, we have sought to continuously innovate ways for our members to lead healthy and happy lives by offering them the best places, programs and performers. We believe that consumers equate our brand with the uncompromising quality, luxury and “Healthy Way of Life” experiences that Life Time offers.
In 2003, we formed the Life Time Foundation with a focus on inspiring healthier families. In 2010, we further focused on helping children reach their full potential by collaborating with school food leaders to help them serve wholesome, nourishing, minimally processed food in schools across the United States.
In 2010, we further focused on helping children reach their full potential by collaborating with school food leaders to help them serve wholesome, nourishing, minimally processed food in schools across the United States. In 2022, we complemented these efforts with a focus on improving exercise and healthy movement in our nation’s youth.
We also have Digital memberships that we began to offer in December 2020 for direct-to-consumer memberships that do not provide access to our centers. Center Memberships. We offer a variety of convenient month-to-month memberships with no long-term contracts. Each Center membership is defined as one or more adults, plus any juniors under the age of 14. • Base Memberships.
We offer a variety of convenient month-to-month Center memberships with no long-term contracts. Each Center membership is defined as one or more adults, plus any children under the age of 14. • Base Memberships.
Asset-light, Flexible Real Estate Strategy Approximately 65% of our centers are now leased, including approximately 90% of our new centers opened within the last five years, versus a predominantly owned real estate strategy prior to 2015.
Approximately 66% of our centers are now leased, including approximately 88% of our new centers opened since 2015, versus a predominantly owned real estate strategy prior to 2015.
Generally, we have experienced greater membership growth at the beginning of the year. We also typically experience increased levels of membership in certain centers during the summer pool season. During the summer months, we also experience a slight increase in our in-center business activity with summer programming and operating expenses due to our outdoor aquatics operations and kids programming.
During the summer months, we also experience a slight increase in our in-center business activity with summer programming and operating expenses due to our outdoor aquatics operations and kids programming. We typically experience an increased level of membership attrition during the third and fourth quarters as the summer pool season ends and we enter the holiday season.
Our Life Time Living offering is generating interest from new property developers and presenting opportunities for new center development that we have not previously had .
As of December 31, 2023, we had 14 Life Time Work and four Life Time Living locations open and operating. Our Life Time Living offering is generating interest from new property developers and presenting opportunities for new center development that were not previously available to us .
We are now executing on several offensive strategies to grow our business and drive our memberships and revenue per center membership. We are elevating our member experiences through new and improved in-center service offerings, types of memberships, concierge-type member services and omni-channel offerings.
We continue to build on that foundation by executing several strategies and initiatives to grow our business, further engage our members, optimize our memberships and increase revenue per center membership. We are elevating our member experiences through new and improved in-center service offerings and omni-channel offerings.
We offer several other recurring memberships and access-related products at select centers, including a Tennis Membership that bundles a base membership with tennis and a Pool Pass that provides access to the outdoor pool area at select centers. Digital On-hold Memberships .
We offer several other recurring memberships and access-related products at select centers, including a pool pass that provides access to the outdoor pool area at select centers. We also offer base memberships that can be purchase d at a reduced rate in partnership with certain medical insurance providers.
For more information on the IPO, including with respect to our use of proceeds, see Note 1, Nature of Business and Basis of Presentation—Initial Public Offering, to our consolidated financial statements included in Part II, Item 8 of this Annual Report.
Life Time Group Holdings, Inc. completed its initial public offering (“IPO”) in October 2021 and its common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “LTH.” For more information on the IPO, see Note 1, Nature of Business and Basis of Presentation—Initial Public Offering, to our consolidated financial statements included in Part II, Item 8 of this Annual Report.
Over the last five-plus years, we have expanded our footprint on the East and West coasts, and increased our presence in premium, urban and coastal areas such as Boston, Chicago, New York City, Florida and California.
The strength of our brand paired with this flexibility has allowed us to expand our footprint on the East and West coasts, and increased our presence in premium urban and coastal areas such as Boston, Chicago, New York City, Florida and California.
Our Membership Offering We define a membership for our centers in two ways: Center memberships and Digital On-hold memberships. As of December 31, 2022, we had a total of 776,676 total memberships, comprised of 725,206 Center memberships and 51,470 Digital On-hold memberships.
Our Membership Offering We define a membership in two ways: Center memberships and Digital On-hold memberships. As of December 31, 2023, we had 814,936 total memberships, comprised of 763,216 Center memberships and 51,720 Digital On-hold memberships. Center Memberships. A center membership provides general access to one or more of our centers.
Our optimized pricing for a Center membership is determined center-by-center based on a variety of factors, including geography, market presence, demographic nature, population density, competition, initial investment in the center and available services and amenities.
Our optimized pricing for a Center membership is determined center-by-center based on a variety of factors, including geography, market presence, demographic nature, population density, competition, initial investment in the center and available services and amenities. ◦ Our standard multi-center access memberships include general access to our centers, including the locker rooms (with locker and towel service), fitness floor, child center and other benefits such as the Life Time app. ◦ In 2021, we launched our signature membership.
We typically experience an increased level of membership attrition during the third and fourth quarters as the summer pool season ends and we enter the holiday season. This can lead to a sequential decline in memberships during those quarters. Life Time Foundation We believe in giving back to our communities in ways that empower people to live happy, healthy lives.
This can lead to a sequential decline in memberships during those quarters. Life Time Foundation We believe in giving back to our communities in ways that empower people to live happy, healthy lives. In 2003, we formed the Life Time Foundation with a focus on inspiring healthier families.
Flexible Real Estate Strategy with Nationwide Footprint We have a diversified portfolio of over 160 resort-like athletic country club destinations that are primarily located in affluent markets across 29 states and one Canadian province.
Expand National Footprint in Affluent Metropolitan Statistical Areas Our diversified portfolio of over 170 resort-like athletic country club destinations are primarily located in affluent markets across 31 states and one Canadian province.
We believe the strength of our brand and the effective execution of our operating strategy have driven our long-term track record of growth. Prior to the impact of COVID-19 in 2020, we grew our revenue each year from 2000 through 2019. Our revenue declined in 2020 due to the closure of our centers by governmental authorities during the COVID-19 pandemic.
We believe this recurring revenue stream, the strength of our brand and the effective execution of our operating strategy have driven our long-term track record of growth. Except in 2020 due to the impact of COVID-19, we have grown our revenue each year since 2000 and we had our highest ever amount of revenue in 2023, as shown below.
As we expand our footprint with new centers and nearby work and living spaces, as well as strengthen our digital capabilities, we expect to continue to grow our omni-channel platform to support the “Healthy Way of Life” journey of our members wherever they are in the United States and Canada. 9 Table of Contents Our Competitive Strengths We believe that the following strengths power our brand and business model: Authentic, Premium “Healthy Way of Life” Brand We have built Life Time into a premier health, fitness and wellness lifestyle brand, earning the trust of our members for over 30 years to make their lives healthier and happier.
As we expand our footprint with new centers and nearby work and living spaces, as well as strengthen our digital capabilities, we expect to continue to grow our omni-channel platform to support the “Healthy Way of Life” journey of our members wherever they are in the United States and Canada.
We launched Life Time Digital direct-to-consumer in December 2020 to bring our “Healthy Way of Life” programs, services and content to consumers virtually. Life Time Digital features include live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support, curated award-winning health and fitness and wellness content.
We also have Life Time Digital memberships for direct-to-consumer memberships that do not provide access to our centers and do not convert back to a Center membership. Life Time Digital features include live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support, and curated award-winning health, fitness and wellness content.
Through this casting, we select team members whom we believe are the best fitness professionals in the industry to empower, educate and entertain our members.
Development and Training Our recruiting and talent acquisition teams seek diverse and highly skilled team members who promote a friendly and inviting environment and uphold consistency in performance and excellence in hospitality. Through this casting, we select team members whom we believe are the best fitness professionals in the industry to empower, educate and entertain our members.
For example, we had 124 average visits per membership to our centers in 2022, 113 average visits per membership to our centers in 2021 and 69 average visits per membership to our centers in 2020 despite the COVID-19 pandemic. We had 108 average visits per membership to our centers in 2019.
We had 135 average visits per membership to our centers in 2023 compared to 124 and 113 in 2022 and 2021, respectively.
In addition, to enhance our member experiences and drive consistency in our hospitality and services, we have a strong focus on team member culture, training and certification. • Passionate Culture: Our focus on engagement among team members attracts and fosters our multi-generational member base.
We therefore recruit, hire and certify those whom we believe are the best professionals in the industry to empower, educate and entertain our members. In addition, to enhance our member experiences and drive consistency in our hospitality and services, we have a strong focus on team member culture, training and certification.
Certain of our centers are accessible only with a signature membership. • Junior Memberships.
As a result, some revenue that was historically reported as in-center revenue is now reported as membership dues revenue. Certain of our centers are accessible only with a signature membership. • Junior Memberships.
In addition, from time to time we have been required to investigate and remediate contamination at some of our sites under such environmental laws and regulations. In particular, within the health, fitness and wellness industry, state statutes regulate the sale and terms of our membership contracts.
In particular, within the health, fitness and wellness industry, state statutes regulate the sale and terms of our membership contracts.
We have developed a disciplined and sophisticated process to evaluate markets and specific sites in those markets where we may want to build new centers. This dynamic process is based upon demographic, psychographic and competitive criteria generated from profiles of our most successful centers, and we continue to refine these criteria based upon the performance of our centers.
This dynamic process is based upon demographic, psychographic and competitive criteria generated from profiles of our most successful centers, and we continue to refine these criteria based upon the performance of our centers. We believe that the presence of a Life Time center benefits landlords and property developers and the value of the underlying property and surrounding neighborhoods.
Our new center expansion initiatives are focused on strategic locations that will generate higher average dues, higher in-center revenue per membership and higher revenue per square foot.
Our new center expansion initiatives are focused on strategic locations in increasingly affluent markets with higher income members that will generate higher average dues, higher in-center revenue per membership and higher revenue per square foot. We believe we have significant whitespace opportunity for our premium athletic country clubs across the United States and Canada, as well as internationally.
Over the last five years, we have transitioned to an asset-light strategy through sale-leaseback transactions and have adopted more strategic and flexible center formats that can be modified to 10 Table of Contents accommodate various settings, including traditional suburban, vertical residential, urban and mall/retail locations.
Since 2015, we have introduced more strategic and flexible center formats that can be modified to accommodate various settings, including ground-up suburban builds, mall or retail locations, vertical residential and urban locations.
Zwiefel has been with Life Time for over 20 years and has more than 35 years of experience in the health, fitness and wellness industry. 11 Table of Contents Our team has an entrepreneurial spirit that we believe makes us highly adaptable, reflects an ownership mentality and allows us to navigate shifts in the health, fitness and wellness landscape, including as a result of the COVID-19 pandemic.
Our team members are at the heart of our Company. We have an entrepreneurial spirit that we believe makes us highly adaptable, reflects an ownership mentality and allows us to navigate shifts in the health, fitness and wellness landscape.
As our business model evolves and our membership base grows, we expect to leverage our brand reputation and deep understanding of the member experience to add a growing portfolio of products and services to our omni-channel platform.
We expect to leverage our brand reputation and deep understanding of the member experience to add a growing portfolio of products and services to our omni-channel platform. We continue to invest in our technology, including in the Life Time app and artificial intelligence, which we believe will enable our members to further utilize our “Healthy Way of Life” ecosystem.
As we have emerged from the pandemic and implemented our strategic initiatives to further enhance our member experiences and drive significant increases in center usage and higher center memberships, we have grown our average revenue per center membership to $2,098 in 2021 and $2,528 in 2022. • Strong Profitability.
We have grown our average revenue per center membership to $2,810 in 2023, up from $2,098 in 2021 and $2,528 in 2022.
Our premium service offerings are delivered by over 34,000 Life Time team members, including over 8,800 certified fitness professionals, ranging from personal trainers to studio performers. Our members are highly engaged and draw inspiration from the experiences and community we have created.
Our premium service offerings are delivered by over 37,000 Life Time team members, including over 9,800 certified fitness professionals, ranging from personal trainers to studio performers. Our footprint of athletic country clubs as of December 31, 2023: 4 Table of Contents Coming out of the COVID-19 pandemic, we believe that we have built an even healthier and stronger business.
Our inclusion council works through committees to identify and incubate areas for growth within our organization with respect to DEI.
Our inclusion council works through committees to identify and incubate areas for enhancing DEI within our organization. Among other initiatives, Life Time has supported mentoring, coaching, engagement forums and inclusive leadership feedback and learning.
While our operations are predominantly in the United States today, we also believe that we can leverage our brand reputation to expand internationally. Our enhanced digital platform is delivering a true omni-channel experience for our members, including live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content.
Our omni-channel experience currently includes live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content. In addition, we are improving our e-commerce platform that includes the purchase of a wide variety of equipment, wearables, apparel, beauty products and nutritional supplements.
Impact of COVID-19 on Our Financial Performance On March 16, 2020, we closed all of our centers based on orders and advisories from federal, state and local governmental authorities responding to the spread or threat of the spread of COVID-19. While our centers were closed, we did not collect monthly access membership dues or recurring product charges from our members.
Impact of COVID-19 on Our Financial Performance In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, the United States declared a National Public Health Emergency and we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding COVID-19.
Passionate, Visionary, Founder-Led Management Team with Deep Industry Experience Our unwavering commitment to excellence and a “Healthy Way of Life” culture is driven by our passionate management team, under the leadership of Bahram Akradi, our founder, Chairman and Chief Executive Officer. Life Time was founded by Mr.
The performance of our centers has improved significantly as our centers have ramped back from the adverse impacts of COVID-19. 9 Table of Contents Human Capital Our unwavering commitment to excellence and a “Healthy Way of Life” culture is driven by our passionate team members and strong leadership team that includes Bahram Akradi, our founder, Chairman and Chief Executive Officer.
Our team members are at the heart of our Company. Since our founding in 1992, we have believed that creating and sustaining a trusted community requires a high level of passion and commitment from our team.
Life Time was founded by Mr. Akradi in 1992 to help people achieve their health, fitness and wellness goals by delivering entertaining, educational and innovative experiences with uncompromising quality and unparalleled service. Since our founding, we have believed that creating and sustaining a trusted community requires a high level of passion and commitment from our team.
We re-opened our first center on May 8, 2020 and continued to re-open our centers in accordance with evolving state and local governmental guidance.
We re-opened our first center on May 8, 2020, and continued to re-open our centers as state and local governmental authorities permitted, subject to operating processes and protocols that we developed in consultation with an epidemiologist (MD/PhD) to provide a healthy and clean environment for our members and team members and to meet various governmental requirements and restrictions.
This strategy has also allowed us to grow the number of centers in a more cost-effective manner and enter attractive urban and coastal markets with premium centers where the price of real estate had historically been a deterrent to entry. We also benefit from our in-house architecture, design and construction expertise that allows us to create operationally efficient centers.
We also benefit from our in-house architecture, design and construction expertise that allows us to create operationally efficient centers and a consistent feel across our centers.
Additionally, our gender mix is balanced and approximately 44% of our members are under 35 years of age and approximately 82% are under 55 years of age.
Additionally, our gender mix is balanced and approximately 46% of our members are under 35 years of age and approximately 79% are under 55 years of age. Our Growth Strategies and Member Experience Initiatives We have built a strong foundation with an engaged membership base in pursuit of a healthy way of living.
Removed
Life Time Group Holdings, Inc. common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “LTH.” Initial Public Offering On October 12, 2021, Life Time Group Holdings, Inc. consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock at a public offering price of $18.00 per share, resulting in total gross proceeds of $702.0 million before deducting the underwriting discounts and other offering expenses.
Added
Our brand loyalty and track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance. Our luxurious athletic country clubs total approximately 17 million square feet in the aggregate. Our centers are located in affluent suburban and urban locations and include ground-up suburban builds, mall or retail locations, vertical residential and urban locations.
Removed
The shares of its common stock began trading on the NYSE under the symbol “LTH” on October 7, 2021. A registration statement on Form S-1 relating to the offering of these securities was declared effective by the SEC on October 6, 2021.
Added
Our initial focus on center recovery produced strong results in member engagement and increasing memberships, visits and Center revenue. We were then able to focus on expanding margins by optimizing our average revenue per center membership and significantly improving the efficiency of our club operations and corporate office.
Removed
Additionally, on November 1, 2021, Life Time Group Holdings, Inc. consummated the sale of nearly 1.6 million additional shares of its common stock at the IPO price of $18.00 per share pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $28.4 million before deducting the underwriting discounts and commissions.
Added
We have also benefited from the greater flow through of our increased revenue and from new members joining at higher membership dues rates. In 2023, we achieved a 3.4% net income margin and a 24.2% Adjusted EBITDA margin, both of which exceeded the 1.6% net income margin and 23.0% Adjusted EBITDA margin in 2019 before the pandemic.
Removed
Our track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance and has driven our growth as we have emerged from the COVID-19 pandemic. In 2022, we generated $1,823 million of revenue, a net loss of $2 million and $282 million in Adjusted EBITDA.
Added
We refer to these memberships as qualified memberships and recognize the memb ership dues and related revenue if the member visits a center within a given month. Beginning in 2024, qualified memberships associated with a Medicare insurance plan have access to centers during limited hou rs, which helps to optimize center usage by shifting their visits to non-peak hours.
Removed
In 2021, a year in which we experienced an initial recovery from the impacts of COVID-19, we generated $1,318 million of revenue, a net loss of $579 million and $80 million in Adjusted EBITDA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

97 edited+8 added−37 removed114 unchanged
Biggest changeSpecifically, our high level of indebtedness and lease obligations, and the restrictions imposed thereby, could have material consequences, including: • making it more difficult for us to satisfy our obligations with respect to our indebtedness, and if we fail to comply with these requirements, an event of default could result; • limiting our ability to obtain or guarantee additional indebtedness or make certain investments, which could impact our ability or flexibility to fund or execute on future working capital, capital expenditures, our growth strategy including the development and construction of new centers, investments or acquisitions or other general corporate requirements or business opportunities; • requiring a substantial portion of our cash flows to be dedicated to debt service and lease obligations instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, our growth strategy, investments or acquisitions and other general corporate purposes or business opportunities, and restricting our ability to pay dividends or make distributions on our capital stock; • limiting our ability to incur liens, to sell assets, including capital stock of restricted subsidiaries, to agree to payment restrictions affecting our restricted subsidiaries, to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets or to enter into transactions with our affiliates; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete and to changing business and economic conditions; • placing us at a disadvantage compared to other, less leveraged competitors and affecting our ability to compete; and • increasing our cost of borrowing or limiting our ability to refinance indebtedness. 24 Table of Contents Additionally, a breach of any of the restrictive covenants could result in an event of default under the applicable indebtedness.
Biggest changeOur ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions, pandemics or epidemics and changes in regulations, and there is no assurance that we will be able to comply with such covenants. 19 Table of Contents Specifically, our level of indebtedness and lease obligations, and the restrictions imposed thereby, could have material consequences, including: • making it more difficult for us to satisfy our obligations with respect to our indebtedness and lease obligations, and if we fail to comply with these requirements, an event of default could result; • limiting our ability to obtain or guarantee additional indebtedness or make certain investments, which could impact our ability to fund or execute on future working capital, capital expenditures, our growth strategy or other general corporate requirements or business opportunities; • requiring a substantial portion of our cash flows to be dedicated to debt service and lease obligations, thereby reducing the amount of cash flows available for working capital, capital expenditures, our growth strategy and other general corporate purposes or business opportunities, and restricting our ability to pay dividends or make distributions on our capital stock; • limiting our ability to incur liens, to sell assets, to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets or to enter into transactions with our affiliates; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for and reacting to changes in the industry in which we compete and to changing business and economic conditions; • placing us at a disadvantage compared to other, less leveraged competitors; and • increasing our cost of borrowing or limiting our ability to refinance indebtedness.
These provisions include: • establishing a classified board of directors such that not all members of the board are elected at one time; • allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our board of directors and granting to our board the sole power (subject to the rights of holders of any series of preferred stock or rights granted pursuant to the Stockholders Agreement) to fill any vacancy on the board; • limiting the ability of stockholders to remove directors without cause; • authorizing the issuance of “blank check” preferred stock by our board of directors, without further stockholder approval, to thwart a takeover attempt; 30 Table of Contents • prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders), if the Voting Group collectively ceases to own, or no longer has the right to direct the vote of, at least 50% of the voting power of our common stock; • eliminating the ability of stockholders to call a special meeting of stockholders, except for LGP and TPG, so long as the Voting Group collectively owns, or has the right to direct the vote of, at least 50% of the voting power of our common stock; • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at annual stockholder meetings; • requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our amended and restated certificate of incorporation or amended and restated bylaws if the Voting Group collectively ceases to own, or no longer has the right to direct the vote of, at least 50% of the voting power of our common stock; and • electing not to be governed by Section 203 of the DGCL.
These provisions include: • establishing a classified board of directors such that not all members of the board are elected at one time; 25 Table of Contents • allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our board of directors and granting to our board the sole power (subject to the rights of holders of any series of preferred stock or rights granted pursuant to the Stockholders Agreement) to fill any vacancy on the board; • limiting the ability of stockholders to remove directors without cause; • authorizing the issuance of “blank check” preferred stock by our board of directors, without further stockholder approval, to thwart a takeover attempt; • prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders), if the Voting Group collectively ceases to own, or no longer has the right to direct the vote of, at least 50% of the voting power of our common stock; • eliminating the ability of stockholders to call a special meeting of stockholders, except for LGP and TPG, so long as the Voting Group collectively owns, or has the right to direct the vote of, at least 50% of the voting power of our common stock; • establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at annual stockholder meetings; • requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our amended and restated certificate of incorporation or amended and restated bylaws if the Voting Group collectively ceases to own, or no longer has the right to direct the vote of, at least 50% of the voting power of our common stock; and • electing not to be governed by Section 203 of the DGCL.
Despite the security measures we have in place and our continuous assessment and improvements, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of cyber terrorism, demands for ransom, vandalism or theft, computer viruses, misplaced or lost data, programming and/or human errors or other similar events.
Despite the security measures we have in place and our continuous assessment and improvements, our systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of cyber terrorism, demands for ransom, vandalism or theft, computer viruses, misplaced or lost data, programming and/or human errors or other similar events.
These provisions could discourage, delay or prevent a transaction involving a change in control of our Company. They could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take corporate actions other than those which the stockholders desire.
These provisions could discourage, delay or prevent a transaction involving a change in control of our Company. They could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take corporate actions other than those which our stockholders desire.
Our plans for current and future expansion and development, including an increase in the number of our centers, development of new businesses and memberships, expansion of our “Healthy Way of Life” ecosystem and acquisitions of other businesses, as well as changes in the industry, may place significant demands on our administrative, operational, financial, technological and other resources.
Our plans for current and future expansion and development, including an increase in the number of our centers, development of existing and new businesses and memberships, expansion of our “Healthy Way of Life” ecosystem and acquisitions of other businesses, as well as changes in the industry, may place significant demands on our administrative, operational, financial, technological and other resources.
Compliance with evolving privacy and security laws, requirements and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes.
Compliance with evolving and fragmenting privacy and security laws, requirements and regulations may result in cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes.
We could be subject to claims related to the construction or operation of our facilities and in the use or condition of our premises, facilities, equipment, services, activities or products, which could have a negative effect on our results of operations and financial condition.
We could be subject to claims related to the construction or operation of our facilities and the use or condition of our premises, facilities, equipment, services, activities or products, which could have a negative effect on our results of operations and financial condition.
Any failure to manage growth and development effectively could seriously harm our business. To be successful, we will need to continue to develop technologically and implement management information systems and improve our operating, administrative, financial and accounting systems and controls.
Any failure to manage growth and development effectively could harm our business. To be successful, we will need to continue to develop technologically and implement management information systems and improve our operating, administrative, financial and accounting systems and controls.
In the future, we may also issue our securities in connection with investments or acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding common stock.
We may also issue our securities in connection with investments or acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding common stock.
We have also experienced escalating construction costs more generally due to inflation. The higher gross invested capital and higher occupancy costs at these centers would require increases in the value of sale-leaseback transactions or higher operating profits per center to produce our targeted level of return.
We have also experienced escalating construction costs more generally due to inflation. Higher gross invested capital and higher occupancy costs at these centers would require increases in the value of sale-leaseback transactions or higher operating profits per center to produce our targeted rate of return.
Our operations are subject to various United States and foreign national, federal, state, provincial and local laws and regulations, including but not limited to the following: • consumer protection laws related to the advertising, marketing and sale of our products and services; • statutes that regulate the sale and terms of our membership contracts; • health or safety regulations related to various center operations, such as our Dynamic Personal Training, LifeCafe, LifeSpa, Life Time Swim and Life Time Kids; 26 Table of Contents • regulation or licensing of ancillary health, fitness and wellness-related products and services; • licensing or other regulation of our service providers, such as cosmetologists, massage therapists and registered dietitians; • environmental and workplace safety laws and regulations; • laws and regulations on fair housing and accessibility; • laws and regulations governing privacy and security of information; and • wage and hour or other employment related laws and regulations.
Our operations are subject to various United States and foreign national, federal, state, provincial and local laws and regulations, including but not limited to the following: • consumer protection laws related to the advertising, marketing and sale of our products and services; • statutes that regulate the sale and terms of our membership contracts; • health or safety regulations related to various center operations, such as our Dynamic Personal Training, MIORA, LifeCafe, LifeSpa, Life Time Swim and Life Time Kids; • regulation or licensing of ancillary health, fitness and wellness-related products and services; • licensing or other regulation of our service providers, such as cosmetologists, massage therapists and registered dietitians; • environmental and workplace safety laws and regulations; • laws and regulations on fair housing and accessibility; • laws and regulations governing privacy and security of information; and • wage and hour or other employment related laws and regulations.
Moreover, any failure or unforeseen issues, such as bugs, data inconsistencies, outages, fires, floods, changes in business processes and other interruptions with our systems or the systems of third-party vendors could adversely impact our business and member experiences and cause us to lose members.
Moreover, any failure or unforeseen issues, such as bugs, data inconsistencies, cloud concentration issues, outages, fires, floods, changes in business processes and other interruptions with our systems or the systems of third-party vendors could adversely impact our business and member experiences and cause us to lose members.
In addition, our shares of common stock subject to outstanding awards or reserved for future issuance under our 2021 Incentive Award Plan and our 2021 Employee Stock Purchase Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements.
In addition, our shares of common stock subject to outstanding awards or reserved for future issuance under our 2021 Incentive Award Plan and our 2021 Employee Stock Purchase Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to any vesting agreements.
Competitors compete with us to attract members in our markets. Competitors may also attempt to copy all or portions of our business model, which could erode our market share and brand recognition or impair our business and results of operations.
Competitors compete with us to attract members in our markets and digitally. Competitors may also attempt to copy all or portions of our business model or services, which could erode our market share and brand recognition or impair our business and results of operations.
Risks Relating to Ownership of Our Common Stock Our share price may change significantly, and stockholders may not be able to resell our common stock at or above the price per share paid or at all. The stock market has experienced volatility, and the trading price of our common stock has also experienced volatility.
Risks Relating to Ownership of Our Common Stock Our share price may change significantly, and stockholders may not be able to resell our common stock at or above the price per share paid or at all. The trading price of our common stock has experienced volatility.
Holder has owned, actually or constructively, more than 5% of our common stock at any time during the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period in such stock. Item 1B. UNRESOLVED STAFF COMMENTS None.
Holder has owned, actually or constructively, more than 5% of our common stock at any time 26 Table of Contents during the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period in such stock. Item 1B. UNRESOLVED STAFF COMMENTS None.
Additionally, the collection, maintenance, use, disclosure and disposal of individually identifiable data by our businesses are regulated at the federal, state and foreign levels as well as by certain financial industry groups, such as the Payment Card Industry Security Standards Council, NACHA, Canadian Payments Association and individual credit card issuers.
Additionally, the collection, maintenance, use, disclosure and disposal of individually identifiable or other personal data by our businesses are regulated at the federal, state and foreign levels as well as by certain financial industry groups, such as the Payment Card Industry Security Standards Council, Nacha, Canadian Payments Association and individual credit card issuers.
Our ability to make scheduled payments on our indebtedness and lease obligations, to refinance our debt obligations or to negotiate favorable terms on new or expiring leases depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, market, legislative, regulatory, environmental and other factors beyond our control.
Our ability to make scheduled payments on our indebtedness and lease obligations, to refinance our debt obligations or to negotiate favorable terms on new or expiring leases depends on our financial condition and operating performance, which could be subject to prevailing economic and competitive conditions and to certain financial, business, market, legislative, regulatory, environmental and other factors beyond our control.
Finally, changes in the scope of our operations, including expansion to new products or new geographies, could increase the amount and type of taxes to which we are subject, and could increase our effective tax rate.
Changes in the scope of our operations, including expansion to new products or new geographies, could also increase the amount and type of taxes to which we are subject, and could increase our effective tax rate.
Many of our leases also have defined escalating rent provisions over the initial term and any extensions. As we continue to execute on our asset light approach, including sale-leaseback transactions, we expect to lease, rather than own, the majority of our new centers in the future.
Many of our leases also have defined escalating rent provisions over the initial term and any extensions. As we continue to execute on our asset-light growth strategy, including sale-leaseback transactions, we expect to lease, rather than own, the majority of our new centers in the future.
Furthermore, there is no assurance that any rights we have under indemnification provisions and/or insurance policies will be sufficient to cover any losses that might result from such claims. Any publicity surrounding such claims may negatively impact the value of our brand.
Furthermore, there is no assurance that any rights we have under indemnification provisions and/or insurance policies will be 22 Table of Contents sufficient to cover any losses that might result from such claims. Any publicity surrounding such claims may negatively impact the value of our brand.
It is also possible that competitors could introduce new products and services or new ways to provide those products and services that negatively impact consumer preference or willingness to pay for our business model.
It is also possible that competitors could introduce new products and services or new ways to provide those products and services that negatively impact consumer preference or willingness to pay for our products and services.
Additionally, we cannot be certain that these strategies will attract and retain members or deliver higher revenue per center membership. 17 Table of Contents Our business could be adversely affected by strong competition in the highly competitive health, fitness and wellness industry. We compete with numerous industry participants as detailed in “Item 1—Business—Competition” of this Annual Report.
Additionally, we cannot be certain that these strategies will attract and retain members or deliver higher revenue per center membership. Our business could be adversely affected by competition in the highly competitive health, fitness and wellness industry. We compete with numerous industry participants as detailed in “Item 1—Business—Competition” of this Annual Report.
Negative commentary about us or calls for collective action against us, such as boycotts, may be posted on social media platforms or similar devices at any time to a broad audience and may harm our brand, reputation or business without affording us an opportunity for redress or correction in a timely manner 19 Table of Contents or at all.
Negative commentary about us or calls for collective action against us, such as boycotts, may be posted on social media platforms or similar devices at any time to a broad audience and may harm our brand, reputation or business without affording us an opportunity for redress or correction in a timely manner or at all.
In addition, any litigation, regardless of the outcome, may distract our management from the operation of our business. 27 Table of Contents We may not be able to maintain the required type or level of insurance coverage on acceptable terms or at an acceptable cost.
In addition, any litigation, regardless of the outcome, may distract our management from the operation of our business. We may not be able to maintain the required type or level of insurance coverage on acceptable terms or at an acceptable cost.
Some of this data is sensitive and could be an attractive target of a criminal attack by malicious third parties with a wide range of motives and expertise. Federal, state and foreign regulators and financial industry groups have and may continue to also consider new privacy and security requirements that may apply to our businesses.
Some of this data is sensitive and could be an attractive target of a criminal attack by malicious third parties with a wide range of motives and expertise. Federal, state and foreign regulators and financial industry groups continue to adopt or consider new privacy and security requirements that may apply to our businesses.
Assuming no prepayments of the Term Loan Facility and that the Revolving Credit Facility is fully drawn (and to the extent that LIBOR is in excess of the floor rate applicable to the Term Loan Facility), each one percentage point change in interest rates would result in an approximately $7.5 million change in annual interest expense on the indebtedness under the Credit Facilities.
Assuming no prepayments of the Term Loan Facility and that the Revolving Credit Facility is fully drawn (and to the extent that SOFR is in excess of the floor rate applicable to the Term Loan Facility), each one percentage point change in interest rates would result in an approximately $7.9 million change in annual interest expense on the indebtedness under the Credit Facilities.
Risks Relating to Our Human Capital If we cannot retain our key employees, hire additional highly qualified employees and optimize our support structure, we may not be able to successfully manage our businesses, expand our margins and pursue our strategic objectives. We may also continue to face increased labor costs that could reduce our profitability.
Risks Relating to Our Human Capital If we cannot retain our key employees, hire additional highly qualified employees and optimize our support structure, we may not be able to successfully manage our businesses, achieve our growth targets and pursue our strategic objectives. We may also continue to face increased labor costs that could reduce our profitability.
Stockholders may also not be able to resell our common stock at or above the price per share paid due to a number of factors, such as those listed in other portions of this “Risk Factors” section and the following: • results of operations that vary from the expectations of securities analysts and investors; • if securities analysts do not publish research or reports about our business, or if they downgrade our common stock or our industry; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance and growth, including financial estimates and investment recommendations by securities analysts and investors; • investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; and • changes in accounting principles. 28 Table of Contents These broad market and industry fluctuations may materially adversely affect the market price of our common stock, regardless of our actual operating performance.
Stockholders may also not be able to resell our common stock at or above the price per share paid due to a number of factors, such as those listed in other portions of this “Risk Factors” section and the following: • results of operations that vary from the expectations of securities analysts and investors; • if securities analysts do not publish research or reports about our business, or if they downgrade our common stock or our industry; • results of operations that vary from those of our competitors; • changes in expectations as to our future financial performance and growth, including financial estimates and investment recommendations by securities analysts and investors; 23 Table of Contents • investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives; • the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; • guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; and • changes in accounting principles.
We experienced a significant reduction in membership levels, revenue per center membership, center activity and new center growth related to the COVID-19 pandemic, including the response of governmental authorities to community transmission of COVID-19, which required closure of our centers in March 2020 and the suspension of significant real estate development and construction projects.
We experienced significant reductions in membership levels, revenue per center membership, center activity and new center growth related to the COVID-19 pandemic, including the responses of governmental authorities to community transmission of COVID-19, which required closure of our centers in March 2020 and the suspension of significant real estate development and construction projects.
The operations, integrity and security of our systems and data and the data of our members, guests and employees is critical to us.
The operation, integrity and security of our systems and the security of our data and the data of our members, guests and employees is critical to us.
We may incur significant costs in 21 Table of Contents the development or refinement of these businesses and strategies, some of which may be outside of our core competency.
We may incur significant costs in the development or refinement of these businesses and strategies, some of which may be outside of our core competency.
Our ability to utilize our federal net operating carryforwards and disallowed interest expense carryforwards (the “Tax Attributes”) may become limited under Section 382 of the Code.
Our ability to utilize our federal net operating carryforwards and disallowed in terest expense carryforwards (the “Tax Attributes”) may become limited under Section 382 of the Code.
All of our members are able to cancel their membership at any time upon providing advance notice. We must therefore continually engage existing members and attract new members in order to maintain our membership levels and sales from in-center services and earn the membership dues that we charge our members.
All of our members are able to cancel their membership at any time upon providing advance notice. We must therefore continually engage existing members and attract new members in order to maintain our membership and in-center service levels and earn the membership dues and service fees that we charge our members.
Under these rules, a “controlled company” may elect not to comply with certain corporate governance requirements, including: • the requirement that a majority of our board of directors consist of “independent directors” as defined under the rules of the NYSE; • the requirement that we have a compensation committee that is composed entirely of directors who meet the NYSE independence standards for compensation committee members with a written charter addressing the committee’s purpose and responsibilities; • the requirement that our director nominations be made, or recommended to our full board of directors, by our independent directors or by a nominations committee that consists entirely of independent directors and that we adopt a written charter or board resolution addressing the nominations process; and • the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees. 29 Table of Contents We are currently relying on certain of the exemptions listed above, including that we do not currently have a nominating and corporate governance committee or compensation committee that consists entirely of independent directors.
Under these rules, a “controlled company” may elect not to comply with certain corporate governance requirements, including: • the requirement that a majority of our board of directors consist of “independent directors” as defined under the rules of the NYSE; 24 Table of Contents • the requirement that we have a compensation committee that is composed entirely of directors who meet the NYSE independence standards for compensation committee members with a written charter addressing the committee’s purpose and responsibilities; • the requirement that our director nominations be made, or recommended to our full board of directors, by our independent directors or by a nominations committee that consists entirely of independent directors and that we adopt a written charter or board resolution addressing the nominations process; and • the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.
At the same time, however, a result of opening new centers is that our center operating margins may be lower than they have been historically while the centers build membership base. We expect both the increase in pre-opening expenses and the lower revenue volumes characteristic of newly opened centers to affect our operating margins at these new centers.
At the same time, however, a result of opening new centers is that our center operating margins may be lower than they have been historically while the centers build membership base. An increase in pre-opening expenses and lower revenue volumes characteristic of newly opened centers would affect our operating margins at these new centers.
As of December 31, 2022, we had total consolidated indebtedness outstanding of approximately $1,840 million, as detailed in Note 8—Debt, to our consolidated financial statements included in Part II, Item 8 of this Annual Report. For the year ended December 31, 2022, our interest expense, net of interest income was $114 million.
As of December 31, 2023, we had total consolidated indebtedness outstanding of approximately $1,948 million, as detailed in Note 8—Debt, to our consolidated financial statements included in Part II, Item 8 of this Annual Report. For the year ended December 31, 2023, our interest expense, net of interest income was $131 million.
Because such attacks are increasing in sophistication and frequently change in nature, we and our third-party service providers may be unable to anticipate these attacks or implement adequate preventative measures, and any compromise of our systems, or those of our third-party providers, may not be discovered and remediated promptly.
Because such attacks are increasing in sophistication (including from the use of artificial intelligence) and frequently change in nature, we and our third-party service providers may be unable to anticipate these attacks or implement adequate preventative measures, and any compromise of our systems, or those of our third-party providers, may not be discovered and remediated promptly.
We offer directly or through third parties a variety of health, fitness and wellness-related products and services, such as nutritional products, blood screenings and other fitness assessments, health and fitness content and services, chiropractic services and medi-spa services.
We offer directly or through third parties a variety of health, fitness and wellness-related products and services, such as nutritional and weight loss products, blood screenings and other fitness assessments, anti-aging and longevity services, health and fitness content and services, chiropractic services and medi-spa services.
There are numerous factors that could lead to a decline in membership levels or sales of in-center services or that could prevent us from increasing membership and optimizing our revenue per center membership, any of which could adversely impact our business and results of operations.
There are numerous factors that could lead to a decline in membership or in-center service levels or that could prevent us from increasing our memberships and optimizing our revenue per center membership, any of which could adversely impact our business, results of operations and financial condition.
We cannot be certain that we will not need to close our centers, restrict operations within our centers or suspend or reduce the level of real estate or construction activities again related to continued community transmission of the coronavirus or its variants or another pandemic or health crisis.
We cannot be certain that we will not need to close our centers, restrict operations within our centers or suspend or reduce the level of real estate or construction activities again related to another pandemic or health crisis.
These factors include: • obtaining acceptable financing including executing sale-leaseback transactions to fund construction of new sites; • obtaining entitlements, permits and licenses necessary to complete construction of the new center on schedule and to operate the center; • securing access to and the costs of labor and materials necessary to develop and construct our centers; • delays or cost increases due to material shortages, labor issues, design changes, weather conditions, acts of God, pandemics or epidemics, discovery of contaminants, accidents, deaths or injunctions; • recruiting, training and retaining qualified employees; and • general economic conditions.
These factors include: • obtaining acceptable financing including executing sale-leaseback transactions to fund construction of new sites and negotiating tenant improvement contributions from developers and landlords; • obtaining entitlements, permits and licenses necessary to complete construction of the new center on schedule and to operate the center; • negotiating the terms of the acquisition or lease of new centers; • securing access to and the costs of labor and materials necessary to develop and construct or remodel our centers; • delays or cost increases due to material shortages, labor issues, design changes, weather conditions, acts of God, pandemics or epidemics, discovery of contaminants, accidents, deaths or injunctions; 16 Table of Contents • recruiting, training and retaining qualified employees; and • general economic conditions.
If we are unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis, or to adapt to and leverage technological advancements and changing standards as successfully as our competitors, we may be unable to compete effectively, which could materially and adversely affect our business, results of operations and financial condition.
If we are unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis, or to adapt to and leverage technological advancements and changing standards, our business, results of operations and financial condition could be materially and adversely affected.
Opening new centers in existing markets may attract some memberships away from other centers in those markets, thereby leading to diminished revenue and profitability.
Opening new centers in existing markets may attract some memberships away from other centers in those markets, which could lead to diminished revenue and profitability.
Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness that is subject to an applicable cross-acceleration or cross-default provision.
Additionally, a breach of any of the restrictive covenants could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness that is subject to an applicable cross-acceleration or cross-default provision.
Additionally, while we have been a company focused on environmental, social and governance (“ESG”) matters from our formation, as we continue to develop and execute on our ESG initiatives, we could incur additional costs or risks that adversely impact our business. Our results of operations are subject to seasonal and quarterly variations in our revenues and results of operations.
Additionally, while we have been a company focused on environmental, social and governance (“ESG”) matters from our formation, as we continue to develop and execute on our ESG initiatives, we could incur additional costs or risks that adversely impact our business.
We have experienced and may continue to experience a labor market that requires higher wages, which places pressure on our profitability and margin expansion initiatives. Increases in minimum wage rates could also result in increased costs for us, which may adversely affect our results of operations and financial condition.
Payroll costs are a major component of the operating expenses at our centers. We have experienced and may continue to experience a labor market that requires higher wages, which places pressure on our profitability. Increases in minimum wage rates could also result in increased costs for us, which may adversely affect our results of operations and financial condition.
Our business and operations may consume resources faster than we anticipate. We may need or choose to raise additional funds through the issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms, or at all.
Our business requires capital to operate and grow. We may need or choose to raise additional funds through the issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms, or at all.
Additionally, if our analysis of the suitability of a site is incorrect or if we do not anticipate all of the challenges relating to the expansion of our operations, we may not be able to expand profitably or recover our capital investment in developing and building the new center on the timeline or at the rate we expected.
Additionally, if our analysis of the suitability of a site is incorrect or if we do not adapt to or anticipate all of the challenges relating to the expansion of our operations, including the more diverse locations, sizes and types of buildings, remodels and timelines in new markets and spaces, we may not be able to expand profitably or recover our capital investment in developing and building or remodeling the new center on the timeline or at the rate we expected.
As of December 31, 2022, we had 156 leased properties, including 122 center leases (of which 11 are ground leases) and centers under construction. For the year ended December 31, 2022, our rent expense was $245 million.
As of December 31, 2023, we had 165 leased properties, including 129 center leases (of which 11 are ground leases) and centers under construction. For the year ended December 31, 2023, our rent expense was approximately $275 million.
They also may impose further restrictions on our collection, disclosure and use of individually identifiable information that are housed in one or more of our databases.
They also may impose further 18 Table of Contents restrictions on our collection, disclosure and use of information that is housed in one or more of our databases.
Additionally, the development of a trading market on the NYSE for our common stock and how active and liquid that market may become may be impacted by the fact that certain of our existing stockholders who were stockholders before the IPO, who we collectively refer to as the “Voting Group,” collectively held as of December 31, 2022, approximately 84.3% of the voting power of our common stock.
Additionally, how active and liquid the trading market on the NYSE for our common stock is or may become may be impacted by the fact that certain of our existing stockholders who were stockholders before the IPO, who we refer to as the “Voting Group,” collectively held as of February 26, 2024, approximately 74.7% of the voting power of our common stock.
We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our operating needs or our scheduled debt service obligations.
We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our operating needs or our scheduled debt service obligations. Our ability to raise capital in the future may be limited, which could impact our operations and ability to grow.
These factors include changing desires and behaviors of consumers and our ability to anticipate and respond to shifts in consumer preferences, changing consumer confidence, changes in discretionary spending trends and general economic conditions, market or center maturity or saturation, a decline in our ability to deliver quality service, direct and indirect competition in our trade areas, a decline in the public’s interest in health and fitness, as well as social fears such as terror or health threats.
These factors include our ability to deliver premium member experiences, changing desires and behaviors of consumers and our ability to anticipate and respond to shifts in consumer preferences, introductions of new products, services or technology, changing consumer confidence, changes in discretionary spending trends and general economic conditions, market or center maturity or saturation, direct and indirect competition in our trade areas, as well as social fears such as terror or health threats.
The Voting Group includes investment funds affiliated with Leonard Green & Partners, L.P. and its affiliates (“LGP”) and TPG Inc. and its affiliates (“TPG”), which collectively hold approximately 52.4% of the voting power of our common stock.
The Voting Group includes investment funds affiliated with Leonard Green & Partners, L.P. and its affiliates (“LGP”) and TPG Inc. and its affiliates (“TPG”), which collectively held approximately 51.8% of the voting power of our common stock as of February 26, 2024.
If interest rates were to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, would correspondingly decrease.
As interest rates increase, our debt service obligations on the variable rate indebtedness increases even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, correspondingly decreases.
Our growth and success will depend, in part, on our ability to continue to elevate and broaden our member experiences, including through developing our omni-channel ecosystem, licensing leading technologies, systems and use rights, enhancing our existing platforms and services and creating new platforms and services, and to respond to member demands, technological advances and emerging industry standards and practices on a cost-effective and timely basis.
Our growth and success will depend, in part, on our ability to continue to elevate and broaden our member experiences, including through developing our omni-channel ecosystem, licensing leading technologies, systems and use rights, enhancing our existing platforms and services and creating new platforms and services.
In addition, price volatility may be greater if the public float and trading volume of our common stock remain low. In the past, following periods of market volatility, stockholders have instituted securities class action litigation.
These broad market and industry fluctuations may materially adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock remain low. In the past, following periods of market volatility, stockholders of companies have instituted securities class action litigation.
Any adverse incidents, including any involving the potential safety of our members, guests or employees, physical or sexual abuse or other harm to a child at any of our children play areas or events or negative publicity regarding us, our competitors or the health, fitness and wellness industry, may damage our brand and our reputation, cause a loss of consumer confidence in Life Time and our industry and could have an adverse effect on our market share, business, results of operations and financial condition.
Any operation of our centers that does not meet expectations, any adverse incidents, including any involving the potential safety of our members, guests or employees, physical or sexual abuse or other harm to a child at any of our children play areas, or any negative events or publicity regarding us, our competitors or the health, fitness and wellness industry, may damage our brand and our reputation, cause a loss of consumer confidence in Life Time and our industry and could have an adverse effect on our market share, business, results of operations and financial condition. 14 Table of Contents Use of social media platforms, and email, text messaging, phone and social media marketing, may adversely impact our reputation, business, results of operations, and financial condition or subject us to fines or other penalties.
The Voting Group is party to an amended and restated stockholders agreement with the Company (the “Stockholders Agreement”) and collectively held as of December 31, 2022 approximately 84.3% of the voting power of our common stock.
The Voting Group is party to an amended and restated stockholders agreement with the Company (the “Stockholders Agreement”) and collectively held approximately 74.7% of the voting power of our common stock as of February 26, 2024.
This competition may limit our ability to attract and retain members or to optimize our revenue per center membership, each of which could materially and adversely affect our business, results of operations and financial condition.
Additionally, consolidation in the health, fitness and wellness industry could result in increased competition among participants. This competition may limit our ability to attract and retain members or to optimize our revenue per center membership, each of which could materially and adversely affect our business, results of operations and financial condition.
These investments may impact our short-term results of operations and cash flows as our investments in our business may be made more quickly than we see the returns on our investments.
Elevating our member experiences requires investment in our team members, programs, products, services and centers. These investments may impact our short-term results of operations and cash flows as our investments in our business may be made more quickly than we see the returns on our investments.
The macroeconomic environment in which we operate can adversely impact our business, results of operations and prospects, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession . For example, the inflation rate has remained elevated, which impacts our expenses in several areas, including wages, construction costs and other operating expenses.
The macroeconomic environment in which we operate can adversely impact our business, results of operations and prospects, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession .
Any of these results could have a negative impact on our revenue growth rate and profits. 20 Table of Contents Our current focus for new centers continues to include wealthier demographic locations, including in urban and coastal markets and at mall/retail and residential tower locations.
Any of these results could have a negative impact on our revenue growth rate, profits, cash flow and return on invested capital. Our focus for new centers continues to include wealthier demographic locations, including in urban and coastal markets and at ground-up suburban builds, mall or retail locations, vertical residential and urban locations.
Our ability to attract and retain members and expand our business depends, in part, upon the external perceptions of Life Time, the quality of our centers and services and our corporate and management integrity.
Our ability to attract and retain members and expand our business may be impacted by the external perceptions of Life Time, the quality and consistency of our centers and premium services and our corporate and management integrity.
As a result, we qualify for and are currently relying on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies. As a result of the Voting Group owning a majority of our common stock, we are a “controlled company” within the meaning of the corporate governance standards of the NYSE.
As a result, we qualify for and are currently relying on exemptions from certain corporate governance requirements that provide protection to stockholders of other companies.
As of December 31, 2022, we had U.S. federal and state net operating loss carryforwards of approximately $393.8 million ($82.7 million tax effected) and $295.6 million ($16.9 million tax effected), respectively, and disallowed interest expense carryforwards under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “Code”), of approximately $143.4 million ($35.3 million tax effected).
As of December 31, 2023, we had U.S. federal and state net operating loss carryforwards of approximat ely $329.1 million ($69.1 million tax effected) and $196.9 million ($11.0 million tax effected), respectively, and disallowed interest expense carryforwards under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “Code”), of approximately $229.6 million ($57.8 million tax effected).
Any prolonged closures may adversely affect our results of operations and financial condition and may also result in longer term reductions in revenue as a result of termination of memberships at the affected centers.
That severity and impact could also be greater in the various geographical locations across the country where we operate multiple centers and as we expand. Any prolonged closures may adversely affect our results of operations and financial condition and may also result in longer term reductions in revenue as a result of termination of memberships at the affected centers.
To the extent our members are not prepared to invest or lack the necessary resources or infrastructure, the success of any new initiatives may be compromised. 22 Table of Contents If we fail to properly maintain the operations, integrity and security of our systems and data or the data of our members, guests and employees, to comply with applicable privacy laws, or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be adversely affected.
If we fail to properly maintain the operation, integrity and security of our systems and the security of our data or the data of our members, guests and employees, to comply with applicable privacy laws, or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be adversely affected.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations and ability to grow our business or satisfy our obligations. Rates under our senior secured credit facility are variable and currently use LIBOR as a benchmark for establishing certain interest rates.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations and ability to grow our business or satisfy our obligations. Rates under our senior secured credit facility are variable, which could result in increased debt service obligations and decreased net income and cash flows.
Furthermore, we may rely on the ability of our members to have the necessary hardware products (smartphones, tablets, watches, etc.) to support our new product offerings.
Furthermore, we may rely on the ability of our members to have the necessary hardware products (smartphones, tablets, watches, etc.) to support our new product offerings. To the extent our members are not prepared to invest or lack the necessary resources or infrastructure, the success of any new initiatives may be compromised.
Risks Relating to Legal Compliance and Risk Management We are subject to extensive governmental laws and regulations, and changes in these laws and regulations could have a negative effect on our results of operations and financial condition.
These or similar agreements, legislation or changes in regulations could disrupt our operations, reduce our profitability or interfere with the ability of our management to focus on executing our business and operating strategies. 21 Table of Contents Risks Relating to Legal Compliance and Risk Management We are subject to extensive governmental laws and regulations, and changes in these laws and regulations could have a negative effect on our results of operations and financial condition.
The termination of our ability to process payments through ACH transactions or on any major credit or debit card would significantly impair our ability to operate our business. 23 Table of Contents Risks Relating to Our Capital Structure and Lease Obligations Our substantial indebtedness and lease obligations, and the restrictive covenants in the documents governing such indebtedness and lease obligations, could adversely affect our financial condition and prevent us from growing our business, taking certain actions, responding to changes in the economy or our industry or fulfilling our obligations under our indebtedness and lease obligations.
Risks Relating to Our Capital Structure and Lease Obligations Our level of indebtedness and lease obligations, and the restrictive covenants in the documents governing such indebtedness and lease obligations, could adversely affect our financial condition and prevent us from growing our business, taking certain actions or responding to changes in the economy or our industry.
As of December 31, 2022, we had a total of 194,271,493 shares of common stock outstanding and the Voting Group held 163,820,107 shares, or approximately 84.3%, of our common stock. The shares of our common stock held by the Voting Group are “restricted securities” under Rule 144 of the Securities Act and subject to certain restrictions on resale.
As of February 26, 2024, we had a total of 196,705,443 shares of common stock outstanding and the Voting Group held 146,864,926 shares, or approximately 74.7%, of our common stock. The shares of our common stock held by the Voting Group are “restricted securities” under Rule 144 of the Securities Act and subject to certain restrictions on resale.
We increasingly use electronic and digital means to interact with our members, provide services and products to our members and collect, maintain and store individually identifiable information. We use an integrated and proprietary member management system to manage the flow of member information within each of our centers and between centers and our corporate office.
We use an integrated and proprietary member management system to manage the flow of member information within each of our centers and between centers and our corporate office.
If our investment is higher than we had planned, including due to the macroeconomy as detailed above, or if our investment takes longer to execute due to any number of reasons, we may need to outperform our operational plan to achieve our targeted return.
If our investment in new centers is higher than 13 Table of Contents we had planned, if the capitalization rates on our sale-leaseback transactions are higher than historical levels or if our investment takes longer to execute due to any number of reasons, we may need to outperform our operational plan to achieve our targeted return.
Additionally, o ur business could be sensitive to reductions in discretionary consumer spending and in a depressed economic and consumer environment, consumers and businesses may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a negative effect on the demand for our services and products.
Additionally, consumers and businesses may reduce or postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a negative effect on the demand for our services and products. Global pandemics or other health crises can also adversely impact our business, results of operations, financial condition and prospects.
We are highly dependent on the services of our senior management team and other key employees at both our corporate headquarters and our centers. Competition for such employees is intense.
We are highly dependent on the services of our senior management team and other key employees at both our corporate headquarters and our centers. Competition for such employees is intense. Our inability to attract, retain, train and motivate qualified employees could reduce member satisfaction, harm our brand and reputation and adversely affect our operating efficiency and financial results.
Our ability to open new centers on schedule and on budget or at all depends on a number of factors, many of which are beyond our control.
In addition, delays in opening these new centers could hurt our ability to meet our growth objectives and could have an adverse effect on our results of operations and financial condition. Our ability to open new centers on schedule and on budget or at all depends on a number of factors, many of which are beyond our control.
Any such failure to successfully protect our intellectual property rights, or to defend against any claims or infringement, invalidity, misappropriation or unenforceability, for any reason, could have an adverse effect on our business, results of operations and financial condition.
Any such failure to successfully protect our intellectual property rights, or to defend against any claims or infringement, invalidity, misappropriation or unenforceability, for any reason, could have an adverse effect on our business, results of operations and financial condition. 15 Table of Contents Risks Relating to the Growth of O ur Business If we are unable to successfully execute our asset-light growth strategy, our results of operations, cash flow and return on invested capital may be negatively impacted.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur corporate headquarters, located in Chanhassen, Minnesota next to our Chanhassen center, is comprised of two 105,000 square foot, free-standing, three-story buildings that we own. 32 Table of Contents The table below contains information about our centers as of December 31, 2022: Number of Owned Centers Number of Leased Centers Total Number of Centers Aggregate Square Feet United States: Alabama 0 1 1 103,647 Arizona 2 4 6 638,776 California 3 2 5 453,933 Colorado 3 3 6 657,557 Florida 1 3 4 315,898 Georgia 3 4 7 668,827 Illinois 7 6 13 1,456,901 Indiana 2 0 2 122,956 Iowa 0 1 1 110,376 Kansas 1 1 2 222,190 Maryland 0 4 4 348,983 Massachusetts 0 6 6 687,568 Michigan 2 5 7 682,638 Minnesota 13 9 22 1,997,354 Missouri 0 2 2 236,990 Nebraska 0 1 1 115,030 Nevada 1 1 2 261,673 New Jersey 1 5 6 683,135 New York 2 7 9 686,346 North Carolina 1 3 4 375,252 Ohio 1 5 6 508,297 Oklahoma 0 2 2 237,769 Pennsylvania 0 3 3 310,170 Tennessee 0 2 2 228,625 Texas 10 17 27 2,668,283 Utah 0 1 1 108,925 Virginia 1 4 5 510,131 Washington 0 1 1 39,597 Wisconsin 0 1 1 126,423 Canada: Ontario 3 0 3 400,435 Total Centers 57 104 161 15,964,685 In a few of our centers, we sublease space to third parties.
Biggest changeOur corporate headquarters, located in Chanhassen, Minnesota next to our Chanhassen center, is comprised of two 105,000 square foot, free-standing, three-story buildings that we own. 28 Table of Contents The table below contains information about our centers as of December 31, 2023: Number of Owned Centers Number of Leased Centers Total Number of Centers Aggregate Square Feet United States: Alabama 0 1 1 104,336 Arizona 2 5 7 681,917 California 3 4 7 622,477 Colorado 3 3 6 642,716 Connecticut 0 1 1 53,198 Florida 1 3 4 361,958 Georgia 3 4 7 695,937 Illinois 6 7 13 1,450,388 Indiana 2 0 2 127,512 Iowa 0 1 1 110,378 Kansas 1 1 2 222,712 Maryland 1 3 4 351,878 Massachusetts 0 6 6 688,938 Michigan 2 5 7 686,407 Minnesota 13 9 22 1,964,328 Missouri 0 2 2 238,287 Nebraska 0 1 1 116,409 Nevada 1 1 2 258,062 New Jersey 1 5 6 677,195 New York 2 9 11 734,242 North Carolina 1 3 4 378,804 Ohio 1 5 6 515,011 Oklahoma 0 2 2 232,206 Oregon 1 0 1 133,526 Pennsylvania 0 3 3 324,509 Tennessee 0 2 2 236,129 Texas 10 19 29 2,941,783 Utah 0 1 1 109,800 Virginia 1 5 6 601,008 Washington 0 1 1 34,385 Wisconsin 0 1 1 126,423 Canada: Ontario 3 0 3 397,853 Total Centers 58 113 171 16,820,712 In a few of our centers, we sublease space to third parties.
They offer expansive fitness floors, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa personal care services, LifeCafe healthy restaurants and child care and Kids Academy learning spaces.
Depending on the size and location, they offer expansive fitness floors, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa personal care services, LifeCafe healthy restaurants and child care and Kids Academy learning spaces.
Item 2. PROPERTIES We operate distinctive, resort-like athletic country club destinations in both affluent suburban and urban locations centered around major metropolitan areas in the United States and Canada. As of December 31, 2022, we operated 161 centers in 29 states and one Canadian province, 57 of which were owned (including ground leases) and 104 of which were leased.
Item 2. PROPERTIES We operate distinctive, resort-like athletic country club destinations in both affluent suburban and urban locations centered around major metropolitan areas in the United States and Canada. As of December 31, 2023, we operated 171 centers in 31 states and one Canadian province, 58 of which were owned (including ground leases) and 113 of which were leased.
Excluding renewal options, the terms of our leased centers, including ground leases, expire at various dates from January 2024 through December 2049. Including renewal options, only seven of our 104 leases expire in the next 15 years. The majority of our leases have renewal options and a few grant us the right to purchase the property.
Excluding renewal options, the terms of our leased centers, including ground leases, expire at various dates from October 2024 through December 2054. Including renewal options, only nine of our 113 leases expire in the next 15 years. The majority of our leases have renewal options and a few grant us the right to purchase the property.
Of our 57 owned properties, 24 are pledged as collateral under our senior secured credit facility as well as our secured notes, and 13 are pledged as collateral under our mortgage notes.
Of our 58 owned properties, 24 are pledged as collateral under our Credit Facilities as well as our secured notes, and 13 are pledged as collateral under our mortgage notes.
These include tennis-only facilities that we own in Oakdale, Minnesota; Centennial, Colorado; and Plano, Texas; along with leased small centers in Austin, Texas; Battery Park, New York; and Hackensack, New Jersey. 33 Table of Contents Other Property Data : December 31, 2022 2021 2020 (Number of centers) Center age: Open 1 to 12 months 10 6 3 Open 13 to 48 months 18 23 27 Open 48+ months 133 122 119 Total centers 161 151 149 Center ownership: Own 32 33 34 Own/ground lease 11 11 11 Own/mortgaged outside of Credit Facilities 13 18 18 Joint venture 1 1 1 Leased 104 88 85 Total centers 161 151 149
These include tennis-only facilities that we own in Oakdale, Minnesota; Centennial, Colorado; and Plano, Texas; along with leased small centers in Austin, Texas; Battery Park, New York; and Hackensack, New Jersey. 29 Table of Contents Other Property Data : December 31, 2023 2022 2021 (Number of centers) Center age: Open 1 to 12 months 11 10 6 Open 13 to 37 months 17 12 13 Open 37+ months 143 139 132 Total centers 171 161 151 Center ownership: Own 33 32 33 Own/ground lease 11 11 11 Own/mortgaged outside of Credit Facilities 13 13 18 Joint venture 1 1 1 Leased 113 104 88 Total centers 171 161 151
During 2022, we opened 10 new centers. Our luxurio us athletic country clubs total approximately 16 million square feet in the aggregate and measure approximately 99,000 square feet on average.
During 2023, we opened 11 new centers. Our luxurio us athletic country clubs total approximately 17 million square feet in the aggregate and measure approximately 98,000 square feet on average.
In addition to the centers listed in the table above, as of December 31, 2022, we had incurred $456 million of capital expenditures invested in future center development, including 12 centers under construction. We also operate six facilities that we classify as satellite locations.
In addition to the centers listed in the table above, as of December 31, 2023, we had seven new centers under construction, with $241 million of growth capital expenditures already invested into these new centers that have yet to open. We also operate six facilities that we classify as satellite locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOn March 15, 2021, certain of the Life Time Parties filed a First Amended Complaint in the Action adding claims against Zurich under a Builders’ Risk policy related to the suspension of multiple construction projects. The parties are currently in discovery. The Action is subject to many uncertainties, and the outcome of the matter is not predictable with any assurance.
Biggest changeOn March 15, 2021, certain of the Life Time Parties filed a First Amended Complaint in the Action adding claims against Zurich under a Builders’ Risk policy related to the suspension of multiple construction projects. The Action is subject to many uncertainties, and the outcome of the matter is not predictable with any assurance.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the symbol “LTH” and began trading on October 7, 2021.
Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is listed on the NYSE under the symbol “LTH” and began trading on October 7, 2021. Prior to that date, there was no public market for our common stock.
Stock Performance Graph The following graph compares the change in total cumulative stockholder return on our common stock for the period from the close of trading on October 7, 2021, which was the first day our common stock began to trade publicly on the NYSE, to the end of fiscal 2022 relative to the performance of the S&P 500 Index, the S&P 400 Index and the Russell 2000 (Total Return) Index.
Stock Performance Graph The following graph compares the change in total cumulative stockholder return on our common stock for the period from the close of trading on October 7, 2021, which was the first day our common stock began to trade publicly on the NYSE, to the end of fiscal 2023 relative to the performance of the S&P 500 Index, the S&P 400 Index and the Russell 2000 (Total Return) Index.
The performance graph shall not be deemed “soliciting material” or considered to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act. 35 Table of Contents Item 6. [RESERVED]
The performance graph shall not be deemed “soliciting material” or considered to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act or the Exchange Act. 31 Table of Contents Item 6. [RESERVED]
Dividends We do not currently expect to pay any cash dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used to support our operations and to finance the growth and development of our business.
Dividends We do not currently expect to pay any cash dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings in the foreseeable future will be used to support our operations, to finance the growth and development of our business and to pay down debt.
Purchases of Equity Securities During the fourth quarter of the fiscal year ended December 31, 2022, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act.
Purchases of Equity Securities During the fourth quarter of the fiscal year ended December 31, 2023, we did not purchase any of our equity securities that are registered under Section 12(b) of the Exchange Act.
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Prior to that date, there was no public market for our common stock. 34 Table of Contents Holders A s of March 6, 2023, there were 26 holders o f record of our common stock.
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Life Time Group Holdings, Inc. consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock for total gross proceeds of $702.0 million on October 12, 2021.
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Additionally, on November 1, 2021, Life Time Group Holdings, Inc. consummated the sale of nearly 1.6 million additional shares of its common stock pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $28.4 million. 30 Table of Contents Holders A s of February 26, 2024, there were 26 holders o f record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 2021 2020 ($ in thousands, except for Average Center revenue per center membership data) Membership Data Center memberships 725,206 649,373 500,948 Digital On-hold memberships 51,470 74,767 248,641 Total memberships 776,676 724,140 749,589 Revenue Data Membership dues and enrollment fees 70.7% 70.5% 70.0% In-center revenue 29.3% 29.5% 30.0% Total Center revenue 100.0% 100.0% 100.0% Membership dues and enrollment fees $ 1,251,693 $ 907,111 $ 651,116 In-center revenue 517,827 379,523 278,850 Total Center revenue $ 1,769,520 $ 1,286,634 $ 929,966 Average Center revenue per center membership (1) $ 2,528 $ 2,098 $ 1,317 Comparable center sales (2) 33.0% 35.3% (52.2)% Center Data Net new center openings (3) 10 2 3 Total centers (end of period) (3) 161 151 149 Total center square footage (end of period) (4) 16,000,000 15,000,000 14,800,000 GAAP and Non-GAAP Financial Measures Net loss $ (1,793) $ (579,369) $ (360,192) Net loss margin (5) (0.1) % (44.0) % (38.0) % Adjusted EBITDA (6) $ 281,724 $ 80,299 $ (62,966) Adjusted EBITDA margin (6) 15.5 % 6.1 % (6.6) % Center operations expense $ 1,068,208 $ 844,098 $ 660,046 Pre-opening expenses (7) 12,399 7,021 7,463 Rent 245,226 209,823 186,257 Non-cash rent expense (open properties) (8) 27,737 9,959 24,480 Non-cash rent expense (properties under development) (8) 10,797 12,643 12,625 Net cash provided by (used in) operating activities 200,969 (20,029) (95,981) Free cash flow before growth capital expenditures (9) 19,226 (143,630) (197,441) (1) We define Average Center revenue per center membership as Center revenue less Digital On-hold revenue, divided by the average number of Center memberships for the period, where the average number of Center memberships for the period is an average derived from dividing the sum of the total Center memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.
Biggest changeYear Ended December 31, 2023 2022 2021 ($ in thousands, except for Average Center revenue per center membership data) Membership Data Center memberships 763,216 725,206 649,373 Digital On-hold memberships 51,720 51,470 74,767 Total memberships 814,936 776,676 724,140 Revenue Data Membership dues and enrollment fees 72.3% 70.7% 70.5% In-center revenue 27.7% 29.3% 29.5% Total Center revenue 100.0% 100.0% 100.0% Membership dues and enrollment fees $ 1,557,289 $ 1,251,693 $ 907,111 In-center revenue 597,040 517,827 379,523 Total Center revenue $ 2,154,329 $ 1,769,520 $ 1,286,634 Average Center revenue per center membership (1) $ 2,810 $ 2,528 $ 2,098 Comparable center revenue (2) 15.3% 33.0% 35.3% Center Data Net new center openings (3) 10 10 2 Total centers (end of period) (3) 171 161 151 Total center square footage (end of period) (4) 16,800,000 16,000,000 15,000,000 GAAP and Non-GAAP Financial Measures Net income (loss) $ 76,063 $ (1,793) $ (579,369) Net income (loss) margin (5) 3.4 % (0.1) % (44.0) % Adjusted net income (loss) (6) $ 129,704 $ (41,569) $ (305,370) Adjusted net income (loss) margin (6) 5.9 % (2.3) % (23.2) % Adjusted EBITDA (7) $ 536,831 $ 281,724 $ 80,299 Adjusted EBITDA margin (7) 24.2 % 15.5 % 6.1 % Center operations expense $ 1,184,370 $ 1,068,208 $ 844,098 Pre-opening expenses (8) 7,280 12,399 7,021 Rent 275,122 245,226 209,823 Non-cash rent expense (open properties) (9) 33,626 27,737 9,959 Non-cash rent expense (properties under development) (9) 3,918 10,797 12,643 (1) We define Average Center revenue per center membership as Center revenue less Digital On-hold revenue, divided by the average number of Center memberships for the period, where the average number of Center memberships for the period is an average derived from dividing the sum of the total Center memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.
Accordingly, during the period from the effective date of the IPO through April 4, 2022 , we recognized share-based compensation expense associated with these stock options in an amount equal to the proportion of the total service period that passed from the respective grant dates associated with each of these stock option awards through April 4, 2022 .
Accordingly, during the period from the effective date of the IPO through April 4, 2022 , we recognized share-based compensation expense associated with these stock options in an amount equal to the proportion of the total service period that passed from the respective grant dates associated with each of these stock option awards through April 4, 2022 .
We believe the steps we have taken to strengthen our balance sheet and to reduce our cash outflows leave us well-positioned to manage our business. As the opportunity arises or as our business needs require, we may seek to raise capital through additional debt financing or through equity financing.
We believe the steps we have taken to strengthen our balance sheet and to reduce our cash outflows leave us well-positioned to manage our business. As the opportunity arises or as our business needs require, we may seek to raise capital through additional debt or equity financing.
Financing Activities The $251.6 million decrease in net cash provided by financing activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by net proceeds we received from borrowings under our Term Loan Facility and our secured and unsecured notes during the year ended December 31, 2021.
The $251.6 million decrease in net cash provided by financing activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by net proceeds we received from borrowings under our Term Loan Facility and our secured and unsecured notes during the year ended December 31, 2021.
Our cash requirements greater than twelve months from various contractual obligations and commitments include: Debt Obligations and Interest Payments Refer to Note 8, Debt, to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further detail of our debt and the timing of expected future principal and interest payments.
Our cash requirements greater than twelve months from various contractual obligations and commitments include: Debt Obligations and Interest Payments Refer to Note 8, Debt, to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further detail of our debt and the timing of expected future principal payments.
Investment in Business We have continued to invest in our business to elevate and broaden our member experiences and drive additional revenue per center membership, including improving our in-center services and products, such as pickleball, Dynamic Personal Training, small group training and our ARORA community, introducing new types of memberships, providing concierge-type member services and expanding our omni-channel offerings.
Investment in Business We have continued to invest in our business to elevate and broaden our member experiences and drive additional revenue per center membership, including improving our in-center services and products, such as pickleball, Dynamic Personal Training, Dynamic Stretch, small group training and our ARORA community, introducing new types of memberships, providing concierge-type member services and expanding our omni-channel offerings.
These strategic initiatives include pickleball, Dynamic Personal Training, small group training such as Alpha, GTX and Ultra Fit, and our ARORA community focused on members aged 55 years and older, where we have experienced a significant increase in our unique participants or total sessions.
These strategic initiatives include pickleball, Dynamic Personal Training, Dynamic Stretch, small group training such as Alpha, GTX and Ultra Fit, and our ARORA community focused on members aged 55 years and older, where we have experienced a significant increase in our unique participants or total sessions.
Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Liquidity and Capital Resources Liquidity Our principal liquidity needs include the development of new centers, lease requirements and debt service, investments in our business and technology and expenditures necessary to maintain and update or enhance our centers and associated fitness equipment and member experiences.
Liquidity and Capital Resources Liquidity Our principal liquidity needs include the acquisition and development of new centers, lease requirements and debt service, investments in our business and technology and expenditures necessary to maintain and update or enhance our centers and associated fitness equipment and member experiences.
(8) Reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments. Non-cash rent expense for our open properties represents non-cash expense associated with properties that were operating at the end of each period presented.
Non-cash rent expense Non-cash rent expense reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments. Non-cash rent expense for our open properties represents non-cash expense associated with properties that were operating at the end of each period presented.
Net loss Net loss consists of our total revenue, less our total operating expenses, and then adjusted for other (income) expenses and benefit from income taxes, as set forth on our consolidated statements of operations.
Net income (loss) Net income (loss) consists of our total revenue, less our total operating expenses, and then adjusted for other (income) expenses and provision for (benefit from) income taxes, as set forth on our consolidated statements of operations.
Based upon our review and analysis, no material impairments of goodwill or indefinite-lived intangible assets were deemed to have occurred during any of the periods presented. 45 Table of Contents Impairment of Long-Lived Assets We test long-lived asset groups for impairment when events or circumstances indicate that the net book value of the asset group may not be recoverable.
Based upon our review and analysis, no material impairments of goodwill or indefinite-lived intangible assets were deemed to have occurred during any of the periods presented. 40 Table of Contents Impairment of Long-Lived Assets We test long-lived asset groups for impairment when events or circumstances indicate that the net book value of the asset group may not be recoverable.
Throughout this Annual Report, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when we refer to “COVID-19,” such as when we describe the “impact of COVID-19” on our operations, we mean the coronavirus-related orders issued by governmental authorities affecting our operations and/or the presence of coronavirus in our centers, including COVID-19 positive members or team members.
Throughout this Annual Report, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when we refer to “COVID-19,” or “the pandemic” such as when we describe the “impact of COVID-19” on our operations, we mean the coronavirus-related orders issued by governmental authorities affecting our operations and/or the presence of coronavirus in our centers, including COVID-19 positive members or team members.
General, administrative and marketing expenses General, administrative and marketing expenses include: • Costs relating to our centralized support functions, such as accounting, information systems, procurement, real estate and development and member relations, as well as share-based compensation expense. • Marketing expenses, which primarily consist of marketing department costs and media and advertising costs to support and grow Center membership levels, in-center businesses, new center openings and our businesses outside of our centers. 38 Table of Contents • Indirect support costs related to the operation of our centers, including payroll-related expenses associated with our regional center management structure and in-center business support.
General, administrative and marketing expenses General, administrative and marketing expenses include: • Costs relating to our centralized support functions, such as accounting, information systems, procurement, real estate and development and member relations, as well as share-based compensation expense; • Marketing expenses, which primarily consist of marketing department costs and media and advertising costs to support and grow Center membership levels, in-center businesses, new center openings and our businesses outside of our centers; and • Indirect support costs related to the operation of our centers, including payroll-related expenses associated with our regional center management structure and in-center business support.
We adjust for these costs (credits) as they do not represent costs (credits) associated with our normal ongoing operations. We believe that adjusting for these costs provides a more accurate and consistent representation of our actual operating performance from period to period.
We adjust for these expenses (credits) as they do not represent expenses (credits) associated with our normal ongoing operations. We believe that adjusting for these expenses (credits) provides a more accurate and consistent representation of our actual operating performance from period to period.
Depreciation and amortization expense Consists of depreciation and amortization for our depreciable long-live assets, including assets related to our owned centers. Other operating (income) expenses Consists primarily of expenses related to our other revenue, which is generated from our businesses outside of our centers.
Depreciation and amortization expense Depreciation and amortization expense consists of depreciation and amortization for our depreciable long-lived assets, including assets related to our owned centers. Other operating expense (income) Other operating expense (income) consists primarily of expenses (income) related to our other revenue, which is generated from our businesses outside of our centers.
Deferred Compensation Obligations Refer to Note 14, Executive Nonqualified Plan, to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further detail of our deferred compensation plans. Contracted Services Contracted services include agreements with third-party service providers for software licenses and support, and marketing services .
Deferred Compensation Obligations Refer to Note 14, Executive Nonqualified Plan, to our consolidated financial statements included in Part II, Item 8 of this Annual Report for further detail of our deferred compensation plans. 45 Table of Contents Contracted Services Contracted services include agreements with third-party service providers for software licenses and support, and marketing services .
Capital Expenditures Our primary capital expenditure requirements include growth capital expenditures, which include new center land and construction, growth initiatives and major remodels of acquired centers, as well as maintenance capital expenditures to keep our centers operational and meeting our standards.
Capital Expenditures Our primary capital expenditure requirements include growth capital expenditures, which include new center land and construction, growth initiatives and major remodels of existing centers, as well as maintenance capital expenditures to keep our centers operational and meeting our standards.
These figures are approximations. (5) Net loss margin is calculated as net loss divided by total revenue. (6) We present Adjusted EBITDA as a supplemental measure of our performance.
These figures are approximations. (5) Net income (loss) margin is calculated as net income (loss) divided by total revenue. (6) We present Adjusted net income (loss) as a supplemental measure of our performance.
We include a center, for comparable center sales purposes, beginning on the first day of the 13th full calendar month of the center’s operation, in order to assess the center’s growth rate after one year of operation. 41 Table of Contents (3) Net new center openings is calculated as the number of centers that opened for the first time to members during the period, less any centers that closed during the period.
We include a center, for comparable center revenue purposes, beginning on the first day of the 13th full calendar month of the center’s operation, in order to assess the center’s growth rate after one year of operation. 36 Table of Contents (3) Net new center openings is calculated as the number of centers that opened for the first time to members during the period, less any centers that closed during the period.
In addition, we record other non-recurring operating expenses that we believe are not indicative of our core operating performance, as a component of other operating expenses.
In addition, we record other non-recurring operating expenses (income) that we believe are not indicative of our core operating performance, as a component of other operating expense (income).
Because the exercisability of these stock options was contingent upon the occurrence of a change of control or an initial public offering, no share-based compensation expense associated with these stock options was recognized prior to the IPO. 42 Table of Contents (c) Represents the incremental net expenses (credits) we recognized related to the COVID-19 pandemic.
Because the exercisability of these stock options was contingent upon the occurrence of a change of control or an initial public offering, no share-based compensation expense associated with these stock options was recognized prior to the 37 Table of Contents IPO. (b) Represents the incremental net expenses (credits) we recognized related to the COVID-19 pandemic.
These are not measurements of our financial performance under GAAP and should not be considered as alternatives to any other performance measures derived in accordance with GAAP. 40 Table of Contents Set forth below are certain GAAP and non-GAAP measurements and key performance indicators for the years ended December 31, 2022, 2021 and 2020.
These are not measurements of our financial performance under GAAP and should not be considered as alternatives to any other performance measures derived in accordance with GAAP. 35 Table of Contents Set forth below are certain GAAP and non-GAAP measurements and key performance indicators for the years ended December 31, 2023, 2022 and 2021.
In 2018, we launched Life Time Work, an asset-light branded co-working model that offers premium work spaces in close proximity to our centers and integrates ergonomic furnishings and promotes a healthy working environment. Life Time Work members also generally receive access to all of our resort-like athletic destinations across the United States and Canada.
In 2018, we launched Life Time Work, an asset-light branded co-working model that offers premium work spaces in close proximity to our centers and integrates ergonomic furnishings and promotes a healthy working environment. Life Time Work members also have the ability to receive access to all of our resort-like athletic country club destinations across the United States and Canada.
We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 160 centers—distinctive, resort-like athletic country club destinations—across 29 states in the United States and one province in Canada. Our track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance.
We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 170 centers—distinctive, resort-like athletic country club destinations—across 31 states in the United States and one province in Canada. Our brand loyalty and track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance.
We are continuing to invest in our digital capabilities in order to strengthen our relationships with our members and more comprehensively address their health, fitness and wellness needs so that they can remain engaged and connected with Life Time at any time or place.
We are continuing to invest in our digital capabilities, including our integrated digital app and artificial intelligence, in order to strengthen our relationships with our members and more comprehensively address their health, fitness and wellness needs so that they can remain engaged and connected with Life Time at any time or place.
Share-Based Compensation During the year ended December 31, 2022, we recognized share-based compensation expense associated with stock options, restricted stock, restricted stock units and our ESPP that launched on December 1, 2022, totaling approximately $37.3 million.
During the year ended December 31, 2022, we recognized share-based compensation expense associated with stock options, restricted stock, restricted stock units and our ESPP, totaling approximately $37.3 million.
For details on the gain on sale-leaseback transactions that we recognized during the year ended December 31, 2022 , see “Sale-Leaseback Transactions” within Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report.
For details on the loss and gain on sale-leaseback transactions that we recognized during the years ended December 31, 2023 , 2022 and 2021, see “Sale-Leaseback Transactions” within Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report.
(d) We adjust for the impact of gains or losses on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations.
(c) We adjust for the impact of losses and gains on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations.
We offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.
Depending on the size and location of a center, we offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.
During 2021, we refinanced a significant portion of our outstanding debt and we completed a sale-leaseback transaction associated with two properties. For information regarding the refinancing actions we took during 2021, see Note 8, Debt, to our consolidated financial statements in Part II, Item 8 of this Annual Report.
During 2021, we refinanced a significant portion of our outstanding debt and we completed sale-leaseback transactions associated with two 43 Table of Contents properties. For information regarding the debt refinancing transactions, see Note 8, Debt, to our consolidated financial statements in Part II, Item 8 of this Annual Report.
A significant portion of the share-based compensation expense that we recognized during the year ended December 31, 2021 is associated with stock options that were granted prior to 2021.
Share-based compensation expense recognized during the year ended December 31, 2022 is associated with stock options, restricted stock, restricted stock units and our ESPP. A significant portion of the share-based compensation expense that we recognized during the year ended December 31, 2021 is associated with stock options that were granted prior to 2021.
The $76.0 million decrease in net cash used in operating activities for the year December 31, 2021 as compared to the year ended December 31, 2020 was primarily the result of higher profitability, before the impact of non-cash share-based compensation expense, due to the recovery from the impact of COVID-19 on our business.
The $221.0 million increase in net cash provided by operating activities for the year December 31, 2022 as compared to the year ended December 31, 2021 was primarily the result of higher profitability, before the impact of non-cash share-based compensation expense, due to the recovery from the impact of COVID-19 on our business.
For more information regarding the sale-leaseback transactions that were consummated during 2022 and 2021, see Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report. We continue to explore potential sale-leaseback opportunities for a number of our properties.
For more information regarding the sale-leaseback transactions that were consummated during 2023, 2022 and 2021, see Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report.
Business Life Time, the “Healthy Way of Life Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a community of nearly 1.4 million individual members, who together comprise more than 776,000 memberships, as of December 31, 2022.
Overview Business and Strategy Life Time, the “Healthy Way of Life Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a community of nearly 1.5 million individual members, who together comprise nearly 815,000 memberships, as of December 31, 2023.
Our Life Time Living offering is generating interest from new property developers and presenting opportunities for new center development that we had not previously had.
Our Life Time Living offering is generating interest from new property developers and presenting opportunities for new center development that were not previously available to us.
Other revenue also includes revenue generated from our Life Time Work and Life Time Living locations. Center operations expenses Center operations expenses consist of direct expenses related to the operation of our centers, such as salaries, commissions, payroll taxes, benefits, real estate taxes and other occupancy costs (excluding rent), utilities, repairs and maintenance, supplies and pre-opening expenses.
Center operations expenses Center operations expenses consist of direct expenses related to the operation of our centers, such as salaries, commissions, payroll taxes, benefits, real estate taxes and other occupancy costs (excluding rent), utilities, repairs and maintenance, supplies and pre-opening expenses.
Furthermore, we compensate for the limitations described above by relying primarily on our GAAP results and using Adjusted EBITDA and free cash flow before growth capital expenditures only for supplemental purposes. See our consolidated financial statements included elsewhere in this Annual Report for our GAAP results.
Furthermore, we compensate for the limitations described above by relying primarily on our GAAP results and using Adjusted net income (loss) and Adjusted EBITDA only for supplemental purposes. See our consolidated financial statements included elsewhere in this Annual Report for our GAAP results.
For the year ended December 31, 2021, COVID-19 related credits primarily consisted of the recovery of certain qualifying expenses under the CARES Act, partially offset by COVID-19 legal-related costs in pursuit of our claim against Zurich .
For the year ended December 31, 2021, COVID-19 related credits primarily consisted of the recovery of certain qualifying expenses under the CARES Act, partially offset by COVID-19 legal-related costs in pursuit of our claim against Zurich . For more information regarding this claim against Zurich, see Item 3, Legal Proceedings, in this Annual Report.
We expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, sale-leaseback transactions, the borrowing capacity available under our Revolving Credit Facility and additional debt and equity financing as needed. 53 Table of Contents
We believe we have adequate amounts of cash to meet our requirements and plans for cash in the short-term and long-term and expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, sale-leaseback transactions, the borrowing capacity available under our Revolving Credit Facility and additional debt and equity financing as needed.
These are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by (used in) operating activities as a measure of our liquidity and may not be comparable to other similarly titled measures of other businesses.
These are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.
Benefit from income taxes . The benefit from income taxes was $0.8 million for the year ended December 31, 2022 as compared to $140.3 million for the year ended December 31, 2021 . The effective tax rate was 31.5% and 19.5% for those same periods, respectively.
Provision for (benefit from) income taxes . The provision for income taxes was $18.7 million for the year ended December 31, 2023 as compared to a $0.8 million benefit from income taxes for the year ended December 31, 2022 . The effective tax rate was 19.8% and 31.5% for those periods, respectively.
The $26.4 million decrease in net cash used in investing activities for the year December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by a higher amount of proceeds that we received from sale-leaseback transactions, partially offset by a higher level of new center construction activity during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
The $26.4 million decrease in net cash used in investing activities for the year December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by a $277.9 million increase in the amount of proceeds that we received from sale-leaseback transactions during the year ended December 31, 2022 as compared to the year ended December 31, 2021, partially offset by a $262.3 million increase in capital expenditures for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
To date, we have not experienced difficulty accessing the credit and capital markets; however, volatility in these markets, particularly in light of the rising interest rate environment and any continued impacts of COVID-19 may increase costs associated with issuing debt instruments or affect our ability to access those markets, which could have an adverse impact on our ability to raise additional capital, to refinance existing debt and/or to react to changing economic and business conditions.
Volatility in these markets, particularly in light of the higher interest rate environment, may increase costs associated with issuing debt instruments or affect our ability to access those markets, which could have an adverse impact on our ability to raise additional capital, to refinance existing debt and/or to react to changing economic and business conditions.
With respect to the $482.9 million increase in Center revenue for the year ended December 31, 2022 as compared to the year ended December 31, 2021: • 71.4% was from membership dues and enrollment fees, which increased $344.6 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021.
With respect to the $384.8 million increase in Center revenue for the year ended December 31, 2023 as compared to the year ended December 31, 2022: • 79.4% was from membership dues and enrollment fees, which increased $305.6 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022.
We expect to pay approximately $129.7 million of interest in the next 12 months and approximately $281.4 million of interest beyond 12 months.
We expect to pay approximately $146.4 million of interest in the next 12 months and approximately $218.9 million of interest beyond 12 months.
Other operating (income) expenses . Other operating income for the year ended December 31, 2022 was $44.4 million as compared to Other operating expenses of $43.7 million for the year ended December 31, 2021.
Other operating expense for the year ended December 31, 2023 was $86.4 million as compared to Other operating income of $44.4 million for the year ended December 31, 2022.
Adjusted EBITDA and free cash flow before growth capital expenditures have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results or cash flows as reported under GAAP.
Adjusted net income (loss) and Adjusted EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results as reported under GAAP.
Other revenue Other revenue includes revenue generated from our businesses outside our centers, which are primarily media, athletic events and related services. Our media revenue includes our magazine, Experience Life ® , our athletic events revenue includes endurance activities such as running and cycling, and our related services revenue includes revenue from our race registration and timing businesses.
Our media revenue includes our magazine, Experience Life ® , our athletic events revenue includes endurance activities such as running and cycling, and our related services revenue includes revenue from our race registration and timing businesses. Other revenue also includes revenue generated from our Life Time Work and Life Time Living locations.
The $35.4 million increase in Rent expense for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by our taking possession of nine properties since June 30, 2021 for future centers where we started incurring GAAP rent expense, most of which is non-cash, and the sale-leaseback of nine centers during the year ended December 31, 2022.
The $29.9 million increase in Rent expense for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by the timing of sale-leaseback transactions during both the current and prior year as well as our taking possession of six properties since May 31, 2022 for future centers where we started incurring GAAP rent expense, most of which is non-cash.
The decrease in benefit from income taxes for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by a decrease in our loss before income taxes, partially offset by a decrease in the valuation allowance associated with certain of our deferred tax assets. 48 Table of Contents Net loss .
The increase in provision for income taxes for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by the increase in earnings before income taxes, partially offset by the decrease in valuation allowance associated with certain of our deferred tax assets.
We believe that no other company in the United States delivers the same quality and breadth of health, fitness and wellness experiences that we deliver, which enabled us to consistently grow our annual membership dues and in-center revenues for 20 consecutive years, prior to the impact of the COVID-19 pandemic, and now again as we emerge from the pandemic.
We believe that no other company in the United States delivers the same quality and breadth of health, fitness and wellness experiences that we deliver, which has enabled us to consistently grow our annual membership dues and in-center revenues.
Adjusted EBITDA and free cash flow before growth capital expenditures should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
Adjusted net income (loss) and Adjusted EBITDA should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.
We have implemented several strategic initiatives as we continue to evolve our premium lifestyle brand in ways that elevate and broaden our member experiences and allow our members to integrate health, fitness and wellness into their lives with greater ease and frequency. We believe these initiatives are driving significant increases in center usage and higher memberships.
We have also implemented several strategic initiatives that are driving revenue, engagement and memberships as we continue to elevate and broaden our member experiences and allow our members to integrate health, fitness and wellness into their lives with greater ease and frequency.
We also continue to enhance our digital platform to deliver a true omni-channel experience for our members. Our Life Time Digital offering delivers live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content.
Additionally, our enhanced digital platform is delivering a true omni-channel experience for our members, including live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content.
Center revenue Center revenue consists of membership dues, enrollment fees and revenue generated within a center, which we refer to as in-center revenue.
Components of Our Results of Operations Total revenue Total revenue consists of center revenue and other revenue (each defined below). Center revenue Center revenue consists of membership dues, enrollment fees and revenue generated within a center, which we refer to as in-center revenue.
In-center revenue includes fees for Dynamic Personal Training, aquatics and kids programming and other member services, as well as sales of products at our cafés, and sales of products and services offered at our spas and tennis and pickleball programs.
In-center revenue includes fees for Dynamic Personal Training, aquatics and kids programming and other member services, as well as sales of products at our cafés, and sales of products and services offered at our spas and tennis and pickleball programs. 33 Table of Contents Other revenue Other revenue includes revenue generated from our businesses outside our centers, which are primarily media, athletic events and related services.
Management uses Adjusted EBITDA to evaluate the Company’s performance. We believe that Adjusted EBITDA is an important metric for management, investors and analysts as it removes the impact of items that we do not believe are indicative of our core operating performance and allows for consistent comparison of our operating results over time and relative to our peers.
We believe that Adjusted net income (loss) and Adjusted EBITDA are important metrics for management, investors and analysts as they remove the impact of items that we do not believe are indicative of our core operating performance and allow for consistent comparison of our operating results over time and relative to our peers.
We expect to pay approximately $12.2 million for contracted services in the next 12 months and approximately $10.7 million beyond 12 months.
We expect to pay approximatel y $12.5 million for contracted services in the next 12 months and approximately $4.0 million beyond 12 months.
We evaluate long-lived asset groups for impairment at the lowest levels for which there are identifiable cash flows, which is generally at an individual center or ancillary business level.
We evaluate long-lived asset groups for impairment at the lowest levels for which there are identifiable cash flows, which is generally at an individua l asset group le vel.
As of December 31, 2022, there were $20.0 million of outstanding borrowings under our Revolving Credit Facility and there were $31.4 million of outstanding letters of credit, resulting in total availability under our Revolving Credit Facility of $423.6 million.
As of December 31, 2023, there were $90.0 million of outstanding borrowings under our Revolving Credit Facility and there were $32.9 million of outstanding letters of credit, resulting in total availability under our Revolving Credit Facility of $352.1 million.
Benefit from income taxes The benefit from income taxes consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in the tax law.
Equity in earnings (loss) of affiliates Equity in earnings (loss) of affiliates includes investments in unconsolidated subsidiaries, which we account for using the equity method of accounting. 34 Table of Contents Provision for (benefit from) income taxes The provision for (benefit from) income taxes consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in the tax law.
At December 31, 2022, 11 Life Time Work locations were open and operating. A dditionally, we have opened our first two Life Time Living locations, which offer luxury wellness-oriented residences in close proximity to one of our athletic country clubs.
A dditionally, our Life Time Living locations offer luxury wellness-oriented residences, also in close proximity to one of our athletic country clubs. As of December 31, 2023, we had 14 Life Time Work and four Life Time Living locations open and operating.
Our centers were also impacted in 2021 as a result of the Delta variant and then again later in 2021 and into 2022 with the Omicron variant.
Our centers were also impacted in 2021 as a result of the Delta variant and then again later in 2021 and into 2022 with the Omicron variant. The performance of our centers has improved significantly as our centers have ramped back from the adverse impacts of COVID-19.
The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to that center or ancillary business, compared to the carrying value of the related assets.
The determination of whether impairment has occurred is based on an estimate of undiscounted future cash flows directly related to tha t asset group, c ompared to the carrying value of the related assets.
Macroeconomic Trends We have been actively monitoring the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession . See “—Overview—Business” for additional information.
Macroeconomy We continue to monitor the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession .
As a result of the factors described above, net loss decreased by $577.6 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021 .
Net income (loss) . As a result of the factors described above, net income was $76.1 million for the year ended December 31, 2023 as compared to a net loss of $1.8 million for the year ended December 31, 2022 .
We use Adjusted EBITDA to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies, and to establish annual budgets and forecasts.
We use Adjusted net income (loss) and Adjusted EBITDA to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and to establish annual budgets and forecasts. We also use Adjusted EBITDA or variations thereof to establish short-term incentive compensation for management.
Our premium service offerings are delivered by over 34,000 Life Time team members, including over 8,800 certified fitness professionals, ranging from personal trainers to studio performers.
Our premium service offerings are delivered by over 37,000 Life Time team members, including over 9,800 certified fitness professionals, ranging from personal trainers to studio performers. Our members are highly engaged and draw inspiration from the experiences and community we have created.
Interest expense, net of interest income Interest expense, net of interest income consists primarily of cash interest expense on borrowings and non-cash interest expense which includes the amortization of debt issuance costs, partially offset by interest earned. Equity in earnings (loss) of affiliates Includes investments in unconsolidated subsidiaries which we account for using the equity method of accounting.
Interest expense, net of interest income Interest expense, net of interest income consists primarily of cash interest expense on borrowings and non-cash interest expense, which includes the amortization of debt issuance costs, partially offset by interest earned.
We remain focused on providing exceptional experiences to our members, while also focusing on center efficiencies and expense control given our recovery of a significant portion of our center memberships and membership dues. Components of Our Results of Operations Total revenue Total revenue consists of center revenue and other revenue (each defined below).
While we remain focused on providing exceptional experiences to our members and growing our revenue, we are also focused on center and overhead support efficiencies given our recovery of membership dues and a significant portion of our center memberships.
While determining fair value requires a variety of input assumptions and judgment, we believe our estimates of fair value are reasonable. 46 Table of Contents Results of Operations Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table sets forth our consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the periods indicated: Year Ended December 31, As a Percentage of Total Revenue 2022 2021 2022 2021 Revenue: Center revenue $ 1,769,520 $ 1,286,634 97.1 % 97.6 % Other revenue 53,037 31,419 2.9 % 2.4 % Total revenue 1,822,557 1,318,053 100.0 % 100.0 % Operating expenses: Center operations 1,068,208 844,098 58.6 % 64.0 % Rent 245,226 209,823 13.4 % 15.9 % General, administrative and marketing 213,976 480,543 11.7 % 36.5 % Depreciation and amortization 228,883 235,124 12.6 % 17.9 % Other operating (income) expenses (44,355) 43,653 (2.4) % 3.3 % Total operating expenses 1,711,938 1,813,241 93.9 % 137.6 % Income (loss) from operations 110,619 (495,188) 6.1 % (37.6) % Other income (expense): Interest expense, net of interest income (113,537) (224,516) (6.2) % (17.0) % Equity in earnings (loss) of affiliates 300 (9) — % — % Total other expense (113,237) (224,525) (6.2) % (17.0) % Loss before income taxes (2,618) (719,713) (0.1) % (54.6) % Benefit from income taxes (825) (140,344) — % (10.6) % Net loss $ (1,793) $ (579,369) (0.1) % (44.0) % Total revenue .
While determining fair value requires a variety of input assumptions and judgment, we believe our estimates of fair value are reasonable. 41 Table of Contents Results of Operations Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table sets forth our consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the periods indicated: Year Ended December 31, As a Percentage of Total Revenue 2023 2022 2023 2022 Revenue: Center revenue $ 2,154,329 $ 1,769,520 97.2 % 97.1 % Other revenue 62,264 53,037 2.8 % 2.9 % Total revenue 2,216,593 1,822,557 100.0 % 100.0 % Operating expenses: Center operations 1,184,370 1,068,208 53.4 % 58.6 % Rent 275,122 245,226 12.4 % 13.4 % General, administrative and marketing 201,131 213,976 9.1 % 11.7 % Depreciation and amortization 244,397 228,883 11.0 % 12.6 % Other operating expense (income) 86,363 (44,355) 3.9 % (2.4) % Total operating expenses 1,991,383 1,711,938 89.8 % 93.9 % Income from operations 225,210 110,619 10.2 % 6.1 % Other (expense) income: Interest expense, net of interest income (130,797) (113,537) (5.9) % (6.2) % Equity in earnings of affiliates 377 300 — % — % Total other expense (130,420) (113,237) (5.9) % (6.2) % Income (loss) before income taxes 94,790 (2,618) 4.3 % (0.1) % Provision for (benefit from) income taxes 18,727 (825) 0.9 % — % Net income (loss) $ 76,063 $ (1,793) 3.4 % (0.1) % Total revenue .
For the year ended December 31, 2022, COVID-19 related expenses primarily consisted of site development cost write-offs and l egal-related costs in pursuit of our claim against Zurich. For more information regarding this claim, see Item 3, Legal Proceedings, in this Annual Report.
For the year ended December 31, 2023, COVID-19 related expenses primarily consisted of l egal-related costs in pursuit of our claim against Zurich, partially offset by a subsidy for our Canadian operations. For the year ended December 31, 2022, COVID-19 related expenses primarily consisted of site development cost write-offs and l egal-related costs in pursuit of our claim against Zurich.
Our luxurious athletic country clubs, which are located in both affluent suburban and urban locations, total approximately 16 million square feet in the aggregate.
Our luxurious athletic country clubs total approximately 17 million square feet in the aggregate. Our centers are located in affluent suburban and urban locations and include ground-up suburban builds, mall or retail locations, vertical residential and urban locations.
Total cash and cash equivalents, exclusive of restricted cash, at December 31, 2022 was $25.2 million, resulting in total cash and availability under our Revolving Credit Facility of $448.8 million. 51 Table of Contents The following table sets forth our consolidated statements of cash flows data (amounts in thousands): Year Ended December 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 200,969 $ (20,029) $ (95,981) Net cash used in investing activities (243,542) (269,919) (6,115) Net cash provided by financing activities 36,798 288,399 87,395 Effect of exchange rate on cash and cash equivalents (353) (9) (55) Decrease in cash and cash equivalents $ (6,128) $ (1,558) $ (14,756) Operating Activities The $221.0 million increase in net cash provided by operating activities for the year December 31, 2022 as compared to the year ended December 31, 2021 was primarily the result of higher profitability, before the impact of non-cash share-based compensation expense, due to the recovery from the impact of COVID-19 on our business.
The following table sets forth our consolidated statements of cash flows data (amounts in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 463,004 $ 200,969 $ (20,029) Net cash used in investing activities (574,160) (243,542) (269,919) Net cash provided by financing activities 115,552 36,798 288,399 Effect of exchange rate on cash and cash equivalents 61 (353) (9) Increase (decrease) in cash and cash equivalents $ 4,457 $ (6,128) $ (1,558) Operating Activities The $262.0 million increase in net cash provided by operating activities for the year December 31, 2023 as compared to the year ended December 31, 2022 was primarily the result of higher profitability.
The reconciliations of the Company’s non-GAAP financial measures to the corresponding GAAP measures should be carefully eva luated. We use Adjusted EBITDA as an important performance metric for the Company.
The reconciliations of the Company’s non-GAAP financial measures to the corresponding GAAP measures should be carefully eva luated.
Rent expense, which includes both cash and non-cash rent expense, will continue to increase as we lease more centers and will therefore impact the comparability of our results of operations.
Approximately 66% of our centers are now leased, including approximately 88% of our new centers opened since 2015, versus a predominantly owned real estate strategy prior to 2015. Rent expense, which includes both cash and non-cash rent expense, will continue to increase as we lease more centers and will therefore impact the comparability of our results of operations.
Our average revenue per center membership increased to $2,528 for the year ended December 31, 2022 as compared to $2,098 for the year ended December 31, 2021 and $1,317 for the year ended December 31, 2020, which demonstrates the significant value that our members place on engaging with Life Time.
Our average revenue per center membership increased to $2,810 for the year ended December 31, 2023 as compared to $2,528 for the year ended December 31, 2022 and $2,098 for the year ended December 31, 2021.
Rent expense Rent expense consists of both cash and non-cash expense related to our operating leases booked on straight-line basis over the lease term in accordance with GAAP. Non-cash rent expense Non-cash rent expense reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments.
Rent expense Rent expense consists of both cash and non-cash expense related to our operating leases booked on a straight-line basis over the lease term in accordance with generally accepted accounting principles in the United States (“ GAAP”).
The $201.0 million increase in net cash provided by financing activities for the year ended December 31, 2021 as compared to the year ended December 31, 2020 was primarily driven by the $702 million of gross proceeds we received in connection with the IPO, offset by repayments of our Term Loan Facility and Revolving Credit Facility.
Financing Activities The $78.8 million increase in net cash provided by financing activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by net incremental proceeds we received from borrowings under our Term Loan Facility, Revolving Credit Facility and our construction loan and proceeds from stock option exercises during the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−1 removed1 unchanged
Biggest changeOur Term Loan Facility is also subject to variable rates of LIBOR plus 4.75% or base rate plus 3.75% and had an outstanding balance of $273.6 million at December 31, 2022.
Biggest changeIn December 2023, we amended our Term Loan Facility to reduce the interest rate by 0.50%. Our Term Loan Facility variable rates are SOFR plus the applicable credit adjustment spread plus 4.00% or base rate plus 3.00% and had an outstanding balance of $310.0 million at December 31, 2023.
Assuming no prepayments of the Term Loan Facility and that the Revolving Credit Facility is fully drawn (and that LIBOR is in excess of the floor rate applicable to the Term Loan Facility), each one percentage point change in interest rates would result in an approximately $7.5 million change in annual interest expense on the indebtedness under the Credit Facilities.
Assuming no prepayments of the Term Loan Facility and that the Revolving Credit Facility is fully drawn (and that SOFR is in excess of the floor rate applicable to the Term Loan Facility), each one percentage point change in interest rates would result in an approximately $7.9 million change in annual interest expense on the indebtedness under the Credit Facilities.
Interest rate risk Our cash consists primarily of an interest-bearing account at a large United States bank with limited interest rate risk. At December 31, 2022, we held no investments in marketable securities. We incur interest at variable rates under our Revolving Credit Facility.
Interest rate risk Our cash consists primarily of an interest-bearing account at a large United States bank with limited interest rate risk. At December 31, 2023, we held no investments in marketable securities.
Given our limited amount of operations outside of the United States, fluctuations due to changes in foreign currency exchange rates would not have a material impact on our business. 54 Table of Contents
Foreign currency exchange risk We operate primarily in the United States with three centers operating in Canada. Given our limited operations outside of the United States, fluctuations due to changes in foreign currency exchange rates would not have a material impact on our business. 46 Table of Contents
At December 31, 2022, there were $20.0 million of outstanding borrowings on the Revolving Credit Facility and there were $31.4 million of outstanding letters of credit, resulting in total revolver availability of $423.6 million , which was available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.00% or base rate plus 3.00%.
At December 31, 2023, there were $90.0 million of outstanding borrowings under the Revolving Credit Facility and $32.9 million of outstanding letters of credit, resulting in total revolver availability of $352.1 million , which was available at intervals ranging from 30 to 180 days at interest rates of SOFR plus an applicable credit adjustment spread ranging from 0.11448% to 0.42826% depending on the duration of borrowings plus 3.50% or base rate plus 2.50%.
Removed
We plan to replace LIBOR with Term Secured Overnight Financing Rate (“SOFR”) no later than June 30, 2023, and our Credit Facilities have a built-in mechanism to transition automatically from LIBOR to SOFR. Foreign currency exchange risk We operate primarily in the United States with three centers operating in Canada.
Added
In connection with the refinancing of our Term Loan Facility in May 2023, we converted the facilities under the Amended Credit Agreement from LIBOR to Term Secured Overnight Financing Rate (“SOFR”). We incur interest at variable rates under both our Term Loan Facility and Revolving Credit Facility.

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