Life Time Group Holdings, Inc. (NYSE:LTH) Q4 2023 Earnings Call Transcript February 28, 2024
Life Time Group Holdings, Inc. beats earnings expectations. Reported EPS is $0.19, expectations were $0.09. Life Time Group Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning, and welcome to the Life Time Group Holdings Fourth Quarter and Full-Year 2023 Earnings Conference Call. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, this conference is being recorded. I will now turn the call over to [indiscernible], Vice President of Corporate Finance.
Unidentified Company Representative: Good morning, and thank you for joining us for the Life Time 2023 annual earnings conference call. With me today are Bahram Akradi, Founder, Chairman and CEO; and Erik Weaver, Interim CFO and Chief Accounting Officer. During this call, the company will make forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today. There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA or what we refer to as net debt leverage ratio and free cash flow.
This information along with reconciliations to the most directly comparable GAAP measures are included in the company's earnings release issued this morning, our 8-K filed with the SEC and on the Investor Relations section of our website. With that, it is my pleasure to turn the call over to Erik Weaver. Erik?
Erik Weaver: Thank you, Danny, and good morning, everyone. Before I begin, I'd like to take a moment and share how excited I am to be on the call with you today. I've been with Life Time for over 20 years holding various roles in the finance department and have made a seamless transition into my role as Interim Chief Financial Officer. We have an amazing company and a strong financial team. I'm now pleased to share our financial results. Starting with our fourth quarter. Total revenue increased 18.2% to $558.8 million driven by a 20.9% increase in membership dues and enrollment fees and an 11% increase in incentive revenue. Access memberships increased 5.2% to end the year at more than 763,000 memberships. Total memberships ended the quarter at approximately 815,000.
Average monthly dues were $183 up 13.2% from the fourth quarter last year. Revenue per access membership increased to $711 from $640 in the prior year period as we continue to benefit from higher dues, increased visits, and increased in center activity. Net income for the fourth quarter was $23.7 million up 73% versus the fourth quarter 2022. Adjusted net income was $38 million an increase of $20.4 million versus the fourth quarter 2022. Adjusted diluted earnings per share was $0.19 compared to $0.09 per share in the fourth quarter last year. Adjusted EBITDA increased 28.7% to $137.7 million and our adjusted EBITDA margin of 24.6% increased 200 basis points as compared to the fourth quarter 2022. Our strong financial performance continues to drive growth in cash flow and a reduction of our net debt leverage.
Net cash provided by operating activities increased 74.7% to $132.1 million as compared to the fourth quarter 2022. We reduced our net debt to adjusted EBITDA leverage to 3.6x in the fourth quarter versus 6.5x in the prior year period. For the full-year, total revenue increased 21.6% to $2.217 billion driven by a 24.4% increase in membership dues and enrollment fees and a 15.3% increase in incentive revenue. Net income for 2023 was $76.1 million versus a $1.8 million net loss in 2022. Adjusted net income was $129.7 million which increased by $171.3 million versus a net loss in the prior year. Adjusted diluted earnings per share was $0.64 compared to a loss of $0.21 per share for the prior year. Adjusted EBITDA increased 90.6% to $536.8 million and our adjusted EBITDA margin of 24.2% increased 8.8 percentage points compared to the full-year in 2022.
We are extremely pleased with the company's financial performance in 2023. With momentum on our side, we are very excited about the opportunities in front of us in 2024. I will now turn the call over to Bahram.
A diverse group of people engaging in various activities in a modern fitness center.
Bahram Akradi: Thank you, Erik. For your commitment to the company for the past 20 years and for excelling at your new role as Interim CFO. Let me begin by expressing my gratitude to our 37,000 plus team members at Life Time. Our continued progress and success would not be possible without their passionate and relentless commitment to elevating our brand and delivering the finest member experiences in the leisure industry. We accomplished this through our innovative programming and services designed to delight our 1.5 million members across North America. I'm extraordinarily proud of our accomplishment this past year. 2023 was a great year of outstanding progress for Life Time. We achieved every one of our operating and strategic objectives, while exceeding our financial goals and our progress is continuing this year and has set us up very nicely for 2024.
Early 2024 has been among the strongest starts we have ever seen in terms of member engagement, member visits, and member retention. In terms of financial goals during 2023, we increased our revenue by over 20%. Even more impressively, our adjusted EBITDA almost doubled compared to the prior year. In addition, a primary financial objective has been to lower our net debt to adjusted EBITDA. We are making progress here and we expect this ratio to be under 3x by the end of 2024. As it relates to our operating and strategic progress, we continue to elevate our brand, our programming, and our member experiences are the finest in the high end leisure industry. The enhancements we have developed in the areas such as a small group training, pickleball, and Aurora offering have increased the desirability of our brand and the engagement of our members.
As a measure of remarkable progress we achieved during 2023, by the back half of the year, member visits in our same-store clubs had essentially caught up to the very high levels of 2019. The clubs look and feel healthy and energized, a trend that we're seeing into the 2024. With the increased demand for our membership, we have now more than 20 clubs with waitlists, and we expect to have additional clubs on the waitlist by the April,, May timetable. While establishing waitlist for our busiest club is designed to maintain our extraordinary member experience, it also improves our member at retention. We are experiencing record visits per membership as a result of the strategic initiatives we developed and implemented over the last several years.
Increased visits per membership translates into higher retention rates and enhanced member satisfaction. We expect to realize the highest retention rates in the history of the Life Time for 2024. Like most high end leisure brands, we're not seeing any weaknesses in our demands or traffic so far in 2024. Right now, we see no reason to suggest the positive trends we're experiencing today should change going forward. Importantly, we're not seeing any negative impact on our business from the new weight loss drugs we're all hearing so much about. For individuals on such programs, exercise and strength training is absolutely vital for avoiding the loss of lean muscle mass and for maintaining healthy weight long term. We are confident that this megatrend will be particularly positive for Life Time.
I will be glad to expand on this with more details during Q&A. Now, our key financial objectives for 2024 are: first, to deliver double-digit growth for revenue and adjusted EBITDA. As stated in our earnings release this morning. We're guiding to a revenue of $2.46 billion to $2.5 billion and adjusted EBITDA of $595 million to $610 million for 2024. And secondly, to be cash flow positive after all capital expenditure for the year. At this point, we're still expecting to turn positive during the Q2 of this year. Again, we'll be glad to expand on this during Q&A. Now that Life Time's recovery is very much behind us, going forward our intention is to issue guidance on an annual basis consistent with our high end leisure industry peers such as Vail Resorts.
We plan to visit this annual guidance quarterly and update as needed throughout the year. To help with this transition, we're providing first quarter revenue and adjusted EBITDA guidance, and this will be our last quarterly guidance. With that, we're guiding to the revenue of $585 million to $595 million and adjusted EBITDA of $142 million to $146 million for the first quarter. Over the last 30 years Life Time has repeatedly demonstrated the ability to respond to major challenges and emerge better and stronger every time. We have become a highly coveted high end leisure brand and as such. Our growth opportunities have continued to expand as our business has evolved. As a highly evolved subscription business, our priority is to be the most desirable brand in the leisure industry by providing the finest destinations, the strongest programming, and the best customer experiences.
To track our success, we constantly measure member engagement, which has never been higher as illustrated by visits per membership and our improving retention rates. In sum, for 2024, we look forward to continue to build upon the progress and the successes that we delivered in 2023, and the momentum we're enjoying so far this year. Thank you. We're happy to take your questions now.
