LTH Q2 2025: Raises Comparable Sales Guidance to 10%
- Strong Revenue Monetization: The discussions highlighted that legacy pricing and membership enhancements are driving increased revenue per membership, exemplified by an 11.8% increase to nearly $900 per membership, indicating robust pricing power without hurting retention.
- Robust Expansion Pipeline: Management emphasized a concrete plan to open 12 to 14 new clubs next year along with maintaining a pipeline of 85 to 100 deals, supporting sustained top‐line growth.
- Diversified Revenue Streams & Growth Initiatives: Executives discussed expanding in-center initiatives, launching new digital and nutritional supplement offerings, and enhancing personal training programs, suggesting multiple high‐margin growth drivers aside from traditional membership revenues.
- Seasonal and Timing Risks: Early in Q2, membership sign-ups were slower, and there's an expectation of a typical seasonal decline in Q3 due to roughly 50% less square footage supporting memberships, which might pressure future revenue trends.
- Pipeline and Construction Delays: The discussion noted that some projects, especially conversions or club constructions in urban markets, faced construction timing challenges. This reliance on a robust pipeline of 85 to 100 deals and variable construction durations could risk execution quality and delay revenue growth.
- Macroeconomic and Pricing Concerns: While Q2 pricing strategies maintained legacy rates, the caution expressed regarding macroeconomic uncertainties and the need to balance pricing with member experience could eventually pressure retention if economic headwinds intensify.
| Metric | YoY Change | Reason |
|---|---|---|
Q1 2024 Revenue | +16.8% ( ) | Revenue grew from Q1 2023 to Q1 2024 largely due to a 19% increase in membership dues/enrollment fees and a 10.5% boost in in-center revenue, reflecting higher monthly dues and increased member utilization that built on previous period performance. |
Q1 2024 Membership Growth | Center memberships increased by 5.0% to 802,010 ( ) | The increase in memberships was driven by stronger enrollments at new and ramping centers, which directly supported the uplift in revenue in the current period compared to the prior quarter’s base. |
Q1 2024 Operating Expenses | Center operations +17.4% to $321.9M; G&A&M +15.1% to $48.9M ( ) | Rising operating and administrative expenses were primarily due to higher costs associated with supporting new centers and increased membership, reflecting the cost structure from an expanding business model relative to the previous period. |
Q1 2024 Net Income | -9.5% ( ) | Despite improved revenue, net income declined by 9.5% mainly because one-time net benefits in the previous period (from sale-leasebacks and event sales) were not repeated in Q1 2024, partially offsetting gains from enhanced operations. |
Q1 2024 Adjusted Net Income & EBITDA | Adjusted net income up 31.5% to $30.5M; Adjusted EBITDA up 21.6% to $146.0M ( ) | Structural improvements in the business, with better flow-through of revenue increases and margin enhancements, led to significant improvements in adjusted net income and EBITDA compared to the prior period. |
Q1 2025 Revenue | +18.3% ( ) | In Q1 2025, revenue increased by 18.3% as a result of a 17.9% rise in membership dues/enrollment fees, an 18.7% increase in in-center revenue, and a higher comparable center revenue, illustrating ongoing benefits from previous pricing actions and membership growth trends. |
Q1 2025 Net Income | +205.6% ( ) | A dramatic 205.6% increase in net income in Q1 2025 reflects not only improved operational performance but also a $14.6 million tax benefit from stock option exercises, building upon the improved fundamentals seen in Q1 2024. |
Q1 2025 Adjusted Net Income & EBITDA | Adjusted net income up 188.9% to $88.1M; Adjusted EBITDA up 31.2% to $191.6M ( ) | The substantial rise in adjusted net income, coupled with a 31.2% increase in EBITDA, demonstrates the company’s enhanced margin profile and robust revenue growth, continuing the structural improvements initiated in the prior period. |
Q1 2025 Membership Growth | Center memberships increased by 3.0% to 826,374 ( ) | Incremental membership gains, although slightly lower in percentage than the previous year’s surge, indicate a maturing base alongside new enrollments at ramping centers, sustaining revenue improvements carried forward from Q1 2024. |
Q1 2025 Operating Expenses | Center operations +15.3% to $371.0M; G&A&M +18.2% to $57.8M ( ) | The increase in operating and general expenses in Q1 2025 was driven by further expansion and higher support costs for new centers, which, while increasing costs, were aligned with the ongoing revenue growth observed in earlier periods. |
Q1 2025 Cash Flow | Operating cash flow up 103.4% to $183.9M; free cash flow reached $41.4M ( ) | Improved operational efficiency and better timing in managing interest expenses have led to a substantial boost in operating cash flow and the achievement of positive free cash flow, reflecting stronger financial management compared to previous periods. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Comparable Center Revenue Growth | FY 2025 | no prior guidance [N/A] | 9.5% to 10% | no prior guidance |
Club Openings | FY 2025 | no prior guidance [N/A] | 10 club openings | no prior guidance |
Sale-Leaseback Transactions | FY 2025 | no prior guidance [N/A] | $100 million | no prior guidance |
Growth Strategy | FY 2025 | no prior guidance [N/A] | Accelerating club growth and expanding Lifetime Digital & Lacey to reach tens of millions of users | no prior guidance |
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Legacy Pricing
Q: What legacy pricing and pipeline outlook?
A: Management confirmed they applied consistent legacy pricing in Q2 and raised comparable sales guidance from 9.5% to 10%, while maintaining a robust pipeline that could expand club openings beyond the current 10–12 range if conditions remain favorable. -
Revenue Limits
Q: Is there a cap on revenue per membership?
A: They noted average revenue per membership is nearing $900 with strong growth from diverse services. There’s no sign of hitting a wallet share limit, as customer programming and personal training continue to drive performance without seasonal fatigue. -
Membership Growth
Q: How did new membership sign‐ups perform?
A: Despite a slower start in the first month, new membership sign‐ups recovered strongly in the latter half of the quarter, ultimately meeting expectations organically. -
Monetization Efforts
Q: Can membership monetization be further enhanced?
A: Management indicated that strategic pricing upgrades led to nearly 12% increased revenue per membership, confirming effective monetization without compromising retention. -
Unit Guidance
Q: How is the club opening guidance evolving?
A: They revised current guidance to about 10 club openings while targeting 12–14 new clubs for 2026, reflecting a cautious yet growth‐oriented build schedule. -
Pipeline Management
Q: How are you managing the development pipeline?
A: The team actively manages between 85 to 100 deals in the pipeline, providing flexibility to accelerate projects when cash flow and balance sheet strength allow. -
Club Maturation
Q: How are new clubs balanced for growth?
A: New clubs open at roughly 50% capacity to ensure a quality initial experience and then ramp up membership over time, maintaining efficient operations and long‐term customer satisfaction. -
Waitlist Role
Q: What’s the role of the waitlist in membership management?
A: Management clarified that the waitlist is used solely as a tool to manage member experience rather than a KPI, reflecting their emphasis on operational quality over chasing numbers. -
In-Center Revenue
Q: What drives your in-center revenue trends?
A: Initiatives such as dynamic personal training, club events, and the growing LTH nutritional line have been exceptional, with consistent month-over-month improvements at key Miura locations. -
Same Store Sales
Q: How do same store sales compare by club age?
A: Growth is robust and consistent across all clubs, whether mature or new, with all service areas like personal training, aquatics, and spa showing year-over-year improvement without regional variation.
Research analysts covering Life Time Group Holdings.