Earnings call transcript: Life Time Holdings Q1 2025 Surpasses Earnings Expectations

Life Time Group Holdings Inc. (LTH) reported its first-quarter 2025 earnings, exceeding Wall Street’s expectations with an impressive earnings per share (EPS) of $0.39, surpassing the forecasted $0.26. The company also reported revenues of $706 million, outstripping the anticipated $684.49 million. According to InvestingPro data, the company’s current market capitalization stands at $7.2 billion, with the stock trading above its Fair Value estimate. Despite these positive results, Life Time’s stock saw a decline of 7.25% in pre-market trading, reflecting broader market concerns.

Key Takeaways

• Life Time Holdings surpassed both EPS and revenue forecasts for Q1 2025.
• The stock experienced a 7.25% drop in pre-market trading despite strong earnings.
• The company raised its full-year comparable center revenue guidance to 8.5-9.5%.

Company Performance

Life Time Holdings demonstrated robust financial performance with a notable 18.3% increase in total revenue to $76 million. This growth was supported by a 12.9% rise in comparable center revenue. The company’s net income surged by 206% to $76.1 million, illustrating its operational efficiency and strong market position. InvestingPro analysis shows the company maintains a healthy gross profit margin of 46.9% and has achieved an impressive 125.2% price return over the past year. Memberships grew by 3% to 826,000, highlighting the company’s expanding customer base.

Financial Highlights

• Revenue: $706 million, up from $684.49 million forecasted.
• Earnings per share: $0.39, exceeding the $0.26 forecast.
• Net income: $76.1 million, a 206% increase year-over-year.
• Adjusted EBITDA: $191.6 million, a 31.2% increase.

Earnings vs. Forecast

Life Time Holdings reported an EPS of $0.39, beating the forecast of $0.26 by approximately 50%. Revenue also exceeded expectations by $21.51 million. This marks a significant earnings surprise, showcasing the company’s ability to outperform market predictions.

Market Reaction

Despite the positive earnings surprise, Life Time’s stock fell by 7.25% in pre-market trading, reflecting investor concerns about broader economic conditions and potential market volatility. InvestingPro data reveals the stock’s beta of 1.87, indicating higher volatility than the broader market. The stock’s decline comes after reaching a recent close of $32.97, with a 52-week range of $14.52 to $34.99. InvestingPro subscribers have access to 10+ additional exclusive insights about LTH’s market performance and volatility patterns.

Outlook & Guidance

The company has raised its full-year comparable center revenue guidance to 8.5-9.5%, indicating confidence in its growth strategy. Life Time plans to open 10-12 new clubs in 2025 and is focused on maintaining a strong balance sheet to navigate varying economic scenarios.

Executive Commentary

"We are well positioned to operate in any macroeconomic conditions," stated CEO Bahram Makradi, highlighting the company’s resilience. He added, "Our strategy is to win in either kind [of economy]," emphasizing Life Time’s adaptability.

Risks and Challenges

• Economic volatility could impact consumer spending and membership growth.
• Increased competition in the wellness and fitness sector.
• Potential supply chain disruptions affecting club expansions and operations.
• Market saturation in certain regions could limit new member acquisition.
• Macro-economic pressures influencing consumer behavior and spending patterns.

Q&A

During the earnings call, analysts inquired about strategies for managing club capacity and membership waitlists. Executives assured that flexibility in club development timing and a focus on enhancing member experience remain priorities. Additionally, the company highlighted minimal tariff exposure, which should mitigate some risks associated with global trade tensions.

Full transcript - Life Time Group Holdings Inc (LTH) Q1 2025:

Conference Operator: Greetings and welcome to Lifetime Group Holdings Inc. First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Conor Vienburg, Vice President of Capital Markets and Investor Relations. Please go ahead.

Conor Vienburg, Vice President of Capital Markets and Investor Relations, Lifetime Group Holdings: Good morning, and thank you for joining us for the first quarter twenty twenty five Lifetime Group Holdings earnings conference call. With me today are Bahram Makradi, Founder, Chairman and CEO and Eric Weaver, Executive Vice President and CFO. During the call, we 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 also 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 the reconciliations to the most directly comparable GAAP measures are included, when applicable, in the company’s earnings release issued this morning, our eight ks filed with the SEC and on the Investor Relations section of our website. With that, I will turn the call over to Eric.

Eric Weaver, Executive Vice President and CFO, Lifetime Group Holdings: Thank you, Conor. We appreciate you joining us this morning. Starting with our first quarter results. Total revenue increased 18.3% to $7.00 $6,000,000 driven by a 17.9% increase in our membership dues and enrollment fees and an 18.7% increase in our in center revenue. We continue to see strong revenue growth in our clubs opened within the last twelve months, which are outpacing their anticipated revenue plans.

In addition, we are seeing strong comparable center performance. Comparable center revenue was 12.9%, which increased from 11.1% in the prior year period. We continue to see robust comparable center revenue due to first, an increase in our membership dues revenue, which is primarily a result of a full quarter benefit of legacy member price increases taken in the previous year. We took virtually no legacy price increase in the first quarter and on average, members continue to pay approximately $30 per month below our RAC rate. And we also realized a benefit from new members joining at higher dues rates, replacing members who were paying a lower rate.

For example, if we lose an existing member paying monthly dues of $178 and gain a new member at a current dues rate of $2.00 $8 we realize a net revenue benefit. Second, our ramping clubs continue to perform to our expectations. And third, we continue to see strong performance in our in center businesses, particularly in our dynamic personal training. With our strong first quarter, we raised our guidance for our comparable center revenue to be between 8.59.5% for the full year as we normalize towards our long term revenue growth targets in the following quarters. Center memberships increased 3% compared to Q1 last year to end the quarter at more than 826,000.

When combined with our on hold memberships, total memberships ended the quarter at approximately 880,000. These membership totals are in line with our strategy. As noted in our earnings release this morning, we are focused on our member experience and adding memberships with higher revenue and visits per membership. In addition, retention continues to pace at record levels and our in center businesses are performing exceptionally well. Average monthly dues grew 11.8% year over year to $2.00 $8 We continue to open locations in premium markets with strong demand and higher news rates.

Average revenue per center membership was $844 an increase of 13.3% from the prior year quarter. Net income was $76,100,000 an increase of 206% and adjusted net income was $88,100,000 an increase of 189% from the prior year quarter. We received an income tax benefit of $14,600,000 related to the one time exercise of stock options by our CEO, which is now factored into our updated guidance. For the remaining quarters of fiscal year ’20 ’20 ’5, we expect net income to benefit from reduced interest expense as a result of entering into the fixed interest rate swap of under 6% on our Term Loan B. Adjusted EBITDA was $191,600,000 an increase of 31.2% and our adjusted EBITDA margin of 27.1% increased two sixty basis points versus the first quarter twenty twenty four.

Net cash provided by operating activities increased approximately 103% to $184,000,000 as compared to the first quarter twenty twenty four. This increase was largely a result in income from operations as well as timing of cash interest in the first quarter twenty twenty five. For the fourth consecutive quarter, we achieved positive free cash flow. Free cash flow was approximately $41,000,000 and we had no sale leaseback proceeds in the first quarter. We have signed a letter of intent for the sale leaseback of three properties for approximately $150,000,000 which we expect to complete in the second quarter.

Before I conclude my remarks, I will give a brief comments on how we look at our exposure to tariffs. We have completed a review of key areas of our company that could be subject to tariffs, including construction, equipment and retail, and we currently do not expect there to be a significant impact. As tariff policies are still evolving, we are diligently monitoring the situation to assess and respond as needed. After a strong first quarter, we have deleveraged our balance sheet to a net debt leverage ratio of two point zero times. We have clear visibility into our cash interest expense for the next three years, having fixed the interest rate on our entire term loan to below 6%.

And with over 30 of operating experience, we believe we are well positioned to navigate conditions. With that, I will now pass the call over to Bahram. Bahram?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Thank you, Eric. We had a great start to the year and the business has continued to perform well. We have raised our revenue and adjusted EBITDA guidance, but only modestly in recognition of the uncertainty in the macroeconomic environment. Our focus in the near term is to maintain our very strong balance sheet position and positive free cash flow as we grow the business. Our clubs continue to experience increased traffic with many at or near optimal levels.

Visits in our comparable centers are up 4.7% versus the first quarter of last year. Many clubs are using waitlist as a mean to protect the member experience. The large majority of our first quarter membership ads were full dues paying customers. This strategy is reflected in our results, including record visits per membership and retention, record in center performance and revenue per membership and record total revenue and adjusted EBITDA. We have a robust pipeline of club growth and we expect to deliver 10 to 12 clubs per year.

We will continue to use cash flow from business as well as proceeds from sale leasebacks to pay for our growth. We will maintain the strength of our balance sheet and our current debt levels while growing revenue and adjusted EBITDA. This aligns with our focus of achieving and maintaining a strong BB credit. We are well positioned to operate in any macroeconomic conditions. We are also pleased with the progress in our three additional growth areas, including LT Digital, which is already over 2,000,000 subscribers, Miura and LTH.

With that, we are ready to take your questions.

Conference Operator: And our first question comes from the line of John Heinbockel with Guggenheim. Please proceed.

John Heinbockel, Analyst, Guggenheim: How broad now how many clubs have wait lists? Where can that go? Can most of them have them? I know you on cases you’ve charged like a joint a country club like joint fee. How broad is that?

And then Bahram, the question is, I know the waitlist you’re trying to limit traffic as you’ve got capacity on visitation. I guess there’s no good way to increase capacity in a club, correct? It’s not like you can do an easy remodel and accommodate more members. So is there anything to be done on that front?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Let’s handle this once and for all because I’m sure this will be the number one question for everyone. We are extremely pleased with all the statistics of the company and everything working the way we want to. We have experienced this year an increased level of visits. We still also measure number of swipes or number of visits per clubs. And number of visits per clubs were up over a very healthy number in the past last years.

We have opportunistically focused on shutting down any sort of membership that would come with some any kind of a discount from a third party payers in some clubs. Some of their new clubs don’t have any opportunity for sort of the Aurora memberships. And we really have gained the memberships we wanted to gain as members who are joining with the full dues paying customers. So the focus of the business has been, as always, nothing changed, is manage the clubs, adapt the clubs so that we deliver the ultimate experience. The clear indication that our strategy is working is that we are basically getting the highest revenue per memberships, we’re getting the highest in center revenue.

Our in center revenue, as Eric mentioned, in the first quarter of this year outperformed the in center revenue of last year same quarter as a percentage of our revenue. So I think the only strong message that I can give you guys is that we are executing the strategy we’ve always executed. Member point of view first. And when the clubs feel like they’re being pinched, the peak hours of the clubs are like at a point where your experience might start getting pinched, we basically put the club on a waitlist and we definitely have the opportunity to take that waitlist both ways. It’s waitlist for the people who join and pay the full dues or a waitlist for the people who would join through the third party insurance programs.

And we basically execute one or the other or both. And this year, we definitively took steps to make sure more of the memberships we gained in the first quarter came from full dues paying customers rather than the third party customers. So that’s really the only major issue in this and the major point in this call. Otherwise, everything else is basically moving exactly. This is this moved exactly the way we wanted it and so is everything else in business.

John Heinbockel, Analyst, Guggenheim: Let me transition right to the club pipeline because that also you add more clubs that takes pressure off the existing locations. So the pipelines we’re getting visibility on that. You talked about 10 to 12. What’s the organization’s capacity to do more than that, right? So I think the opportunities you’re going to get from landlords and ground up would exceed 10 to eventually exceed 10 to 12.

What’s the your capacity to do more than that if you could?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: As the gestation of these clubs is longer, I can tell you that 10 to 12 for 25 is just the right number. For 26, we have the opportunity to do 10 to 12, we have the opportunity to do more. We are very, very carefully studying all the impacts of different scenarios that can happen with the economy. As you guys might have heard, right now, this is the first time that some of the new homebuilders are having a tough time moving inventory. That type of impact is a positive impact for us in the sense that once the some of the construction, I mean, it’s just spotty buys market by market.

Some markets because of government contracts like Phoenix, etcetera, they’re not impacted. Most markets, you’ll be able to do the construction significantly better if you take the time to rebid before you have started construction. So we are methodically going through where the opportunities are and we can continue to deliver 10 to 12. And if the economy gets robust and the volatilities settle down that we are dealing with, we can step on the gas and do more. So otherwise, my approach, our approach is to focus on having a balance sheet that allows us to take advantage of the opportunities that will arise if the economy is tough or opportunities arise if the economy is robust.

It’s sort of a mathematical hedge, so that if it’s heads up, we win, just tails up, we win. And with that, think I have given you a very clear answer. For ’26, we could deliver more clubs if we want to. Thank you. Appreciate it.

Conference Operator: The next question comes from the line of Brian Nagel with Oppenheimer. Please proceed.

Brian Nagel, Analyst, Oppenheimer: Good morning. Nice quarter. Congratulations.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Thank you.

Brian Nagel, Analyst, Oppenheimer: So first question I want to ask, Eric, talked in your prepared comments, you mentioned just the pricing. And clearly, as we see every quarter, I mean, Lifetime has done a great job monetizing memberships. So the question I have is, with regard to the actions you took in Q1, if I heard you correctly, you didn’t raise dues on legacy members. So I want to make sure I heard that correctly. But was that planned?

And how should we think about that effort going forward?

Eric Weaver, Executive Vice President and CFO, Lifetime Group Holdings: Yes. We that’s right. We didn’t take a lot of legacy pricing in Q1. That was our intention. We’re obviously monitoring the macro very closely.

And so a lot of what we saw was legacy price increases that were from last year and those members are lapping a full quarter, right? The other important impact to understand is the churn. So when somebody attrits out, right, they attrit out at a lower rate typically. And so then the new member joins in at a higher rate. And so that was really the most of the what we call pricing benefit that we saw in Q1.

So not a lot from legacy in this quarter.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. We have had a schedule on when we roll out legacy price increases. That was not planned out for the first quarter. It was planned out for second quarter for April, May, June. We are executing exactly our plan.

We as I’ve mentioned to you, it’s extremely sophisticated programming, AI driven on how we do this. We’re that’s not something we’re going to get into the details of that for with anybody, but we are still experiencing best retention rates than we have ever experienced in the history of the company. We’re still having better retention than last year. And second quarter from second quarter of last year forward, we had our very, very best retention, and we’re still doing better than that at this moment in time. So all indication that the micro adjustments we are making on day to day, it’s all working, Brian.

Brian Nagel, Analyst, Oppenheimer: That’s very helpful. Then my second question, recognizing you don’t provide quarterly guidance anymore, we obviously have the updated But so you reported results through March. I mean, we’re into the I guess now the we’re into the kind of the pool season. I mean, any comment on how you’re seeing member sign ups or member activity as the pools get ready to go for the season?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. I think it’s too early to make any indications on that at this moment in time. The overall, the in centers are performing extremely well at this moment. And the days of the week and timing of the week, so it’s too early to actually get into how that’s moving, but it’s just pretty much right in line with what it has been.

Brian Nagel, Analyst, Oppenheimer: All right, guys. Thanks a lot. Appreciate it.

Alex Perry, Analyst, Bank of America: The

Conference Operator: next question comes from the line of Alex Perry with Bank of America. Please proceed.

Alex Perry, Analyst, Bank of America: Hi, thanks for taking my questions here and congrats on a strong quarter. I just wanted to talk about the guidance a little bit. So how much of the sort of same store center raise was 1Q flow through versus higher expectations in 2Q to 4Q. I think the guide implies a slowdown in comps in sort of the remainder of the year. What’s the driver here?

Is that just an element of conservatism? And then have you seen any impact to your business to joins or cancels as we’ve seen consumer confidence soften a bit here as of late? Thanks.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. I think the what we are seeing right now is a stronger retention and a strong in center spend. That means the customer who is inside of Lifetime is extremely happy. They’re having more visits into the club. They’re using the clubs more.

They’re doing their in center purchases, and they are staying with us longer, okay? That’s all positive news. The memberships coming in per sort of a which is extremely small piece of our business that when you think about one month worth of new membership sales versus last month versus the overall revenue impact, it’s very, very, very small. We are seeing sort of a customer who is a little more thoughtful about the timing of when they join, maybe they wait a little longer to before they start. We are seeing some of that conservative in that, but that is such a small piece of our business that I don’t think it has an immediate impact on our numbers.

But I think that if that type of a situation continues, where you have customer holding back for the next twelve months in a row, then you’re going to see a little more impact on the business. Therefore, our guidance is guarded for this potential macroeconomic volatility, customer sensitivity sustaining for a long period of time. Does that answer your question?

Alex Perry, Analyst, Bank of America: That’s perfect. And then I just my follow-up is just on tariffs, I guess, the net exposure here, is it like zero? Are construction equipment costs not going up for you? Do you source any of the fitness equipment out of China? Any of the tariff regions right now?

Are you seeing price increases on any of that? You just it sounds minimal, but could you just maybe walk through that? Look,

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: there are for the most part, on the big purchases, we are not seeing I mean, it’s like a 0.5%, zero point four %. And the big purchases, as an overall impact, it doesn’t have a huge impact. T shirts we buy for our athletic events, which is I mean, these are de minimis numbers in terms of the Lifetime’s total revenue EBITDA. You are seeing some things coming in like 30%, forty % higher, but those things don’t just don’t matter to us. And we’re talking about buying $60,000.200000 dollars worth of T shirts that we use for athletic events.

So it’s just not we are not a company that is heavily impacted directly by these events. And there are all the type of things that we are doing on continuation of value engineering on how we’re designing our new prototypes that we have, a dozen of them, that we basically choose which one works in what market. We’re continually working on having flexibility to be there use of steel or concrete when we build those. We have both types of plants. I mean, are working to make sure we mitigate any of those impact.

And at this point, I can tell you, we are super comfortable that we can bring in the new boxes in at or better prices than last year, despite changes in that. Furthermore, it’s two way street. If the economy does actually get a little more headwind, you hit recession, housing slows down, the contractors who basically before were like, this is the price, take it or leave it, I have too many jobs, they basically start begging for work. And then you can basically get them to do the work for 5% overhead and profit instead of 20% overhead and profit. So we can manage that.

I don’t believe we are in a position to worry about those type of things. We just we are going to continue to work on how to we basically mitigate any of those impact. And as Eric said and I said, we have been anticipating for two years, we’ve been wrong about the headwind sometimes we’re going to switch from tailwind to a headwind. And we’ve been preparing and preparing and preparing and preparing for what if we switch from sort of a tailwind economy to a tailwind economy. And our strategy is to win in either kind, okay?

And so based on our strong balance sheet, we just mentioned $150,000,000 of sale leaseback definite agreements to basically close by this year by this second quarter in the second quarter. Debt levels are at $1,000,000,000 without that cash coming in. So our growth is going to be funded pretty much entirely with either proceeds, taking the money from sale leaseback and putting it right back into new builds we just basically from the substantial free cash flow the company is generating on its own. So we feel like being in a super, super strong financial position allows us to basically negotiate better, get more deals, get better deals, be the game changer for the residential buildings. So we feel like we are stacked correctly for any kind of a wind, head or tail.

Eric Weaver, Executive Vice President and CFO, Lifetime Group Holdings: And Alex, I know you mentioned equipment as one of your questions specifically. We don’t source that from China. Most of our equipment comes from Italy and Sweden. And so given the size of what we do with those vendors, they have not passed on, and we do not expect any tariff impact there.

Alex Perry, Analyst, Bank of America: Perfect. That’s incredibly helpful. Best of luck going forward.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Thank you.

Conference Operator: The next question comes from the line of Megan Alexander with Morgan Stanley. Please proceed.

Megan Alexander, Analyst, Morgan Stanley: Hey, good morning. I wanted to start with a question on the balance sheet and then I do have a quick follow-up just to one of Alex’s questions. You took your leverage target down, you’re now talking about under two times versus 2.25 last quarter. Going to get some sale leaseback proceeds here in the second quarter. So the leverage is already at two times.

So it should be pretty easy for you to stay under there. Bahram, you talked about wanting to have a strong balance sheet to give you some flexibility. But I guess theoretically, let’s say the macro remains volatile and maybe it doesn’t make sense to accelerate club How does the strategy around capital allocation evolve? And do you start to think about other uses of cash like something like buybacks? Or would you rather just sit on higher cash balances and lower leverage and build some ammo for when things settle down?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. Definitely the latter. We are not Amazon. We’re not Apple. We’re not JPMorgan.

We’re a very strong, good sized mid cap company. We need to be thoughtful about our balance sheet and make sure that works to our strength. So we’re going to have the ability, at least with half of our development, which is the ground up, to start a couple of months later if we want to. We have the ability to start faster because we have the permits. So we want to have the full flexibility to basically navigate through how the world shakes up in here.

So, I feel super strong. I’m just telling you, I feel really, really, really strong about how we are positioned right now. We basically have put the company in a situation where we have every option.

Megan Alexander, Analyst, Morgan Stanley: That’s great. So

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: We don’t need to start as many, and we have the ability not to. So if you have something just massively wrong, we’re still going to grow revenue, we’re still going to like 2,009, we’re still going to grow EBITDA, we’re still going to grow EPS. And we can be an extremely well tucked in defensive position. If things go robust, then we can step on it and go faster on development and build out. I don’t know what else I could tell you guys other than based on our feel of what’s straight ahead, we want to be in full control of how we manage our balance sheet.

I absolutely want achieve a BB from the next one from either S and P or Moody’s to get the company to that BB status. That’s super important. It’s been my next big objective. And we’re putting the company in a position where we can get that and stay in that position as we go forward.

Megan Alexander, Analyst, Morgan Stanley: Great. Awesome. And then just a follow-up on the response to Alex’s first question. Bahram, you said you’re seeing a customer, I think you said that’s more thoughtful on when they’re joined, maybe waiting a bit longer. Can you just expand a little bit maybe on when you started to see that?

Clearly, there was a lot of there’s been a lot of volatility over the last couple of months. Was that something you started to see with some of the stock market volatility we saw in the March, April timeframe? And are there any markets in particular where you’re seeing it more than others? Just hoping you could expand a bit more on that comment.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yeah. It’s a dynamic situation, Megan. We have clubs that they’re on a waitlist, and even the and they’re operating at such a maximum level of output from visits to in center revenue, EBITDA margins, everything. And so there are some natural limitations on how many more people you can take in. So they’re on a wait list.

So we’re managing that the best way we can. There are clubs where I’ve always said, there are some clubs that they have the extra capacity. And so when we’re looking at the macro picture, we see that April

John Baumgartner, Analyst, Mizuho Securities: and

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: May that new members sign up, which is again, a de minimis, de minimis number for our total picture is slightly softer than it has been the last couple of years. So, but that’s partially because clubs are more full. Retention is higher. We’re not losing as many people. When you don’t lose as many people, you don’t have as many opportunity for rejoins.

So at this point, it’s not something to have a huge concern about, but we got to shake this out through really Memorial Day, June to see how that shakes up. So for right now, I think everything is just fine.

Megan Alexander, Analyst, Morgan Stanley: Okay, great. Thanks, Ram. I’ll pass it on.

Conference Operator: The next question comes from the line of Kate McShane Please proceed.

Kate McShane, Analyst: Hi, good morning. Thanks for taking our question. You mentioned a few times that people are using the clubs more and there’s higher in center spend. And so we’re wondering if there’s a way to tell if you’re just capturing more share of wallet and more share of time too. Is there a way do you think that it’s coming from other health and wellness activities?

Or do you see this behavior as incremental? And then you called out the dynamic personal training as one of the higher growth areas of in center revenues, but we wondered if you could speak to the growth in other offerings?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. So the spa and cafes are doing better than they were doing last year. They’re not doing as good as I want them. We haven’t still implemented all of our strategies in all the clubs. We’re just we’re basically going location by location, trying to improve the offering.

The personal training, dynamic personal training, dynamic stretch is one of the first things that we implemented three years ago to transform how that business is done. Because as I mentioned during IPO, I didn’t believe that business as it was before, it would actually have the ability to kind of get its legs back under it. So we changed it to a program where truly, truly has an incremental value. So and we’ve been working an amazing execution of strategies. And I believe that the win on the personal training, which is substantial, is really just due to the function of all the things that we have been putting in place, and we’re getting the benefits, the fruits of our groundwork that we’ve been putting in the last two, three years, okay?

We still have opportunity to continue to improve in cafes and spas significantly. I’m not by any means thrilled with what we are, even though they are better than last year, I want to be clear. There is significant more opportunity for us to execute better. That’s within our control. And that it has nothing to do with the macroeconomic, and we got to work on that.

The customer who comes to Lifetime wants to interact with us. They want to do more things with us. All we have to do is deliver to them the type of things they want in a high level, and spend the money. And we aren’t and they love the brand. So I mean, it’s a constant repetition of they love the brand, they travel around lifetime.

And when the economy gets a little as I’ve gone through this with all of you guys, when you get through a recessionary period, customers start pulling back on spending on big spends, right? So they have more time. As they have more time, they’ve used the stuff they own more. They’re going to spend more time in the clubs. They’re going to utilize that membership better.

And that extra utilization means better retention for us. And so we are well positioned for economy that is growing or an economy that might be in recession for two, three quarters.

Kate McShane, Analyst: Thank you.

Conference Operator: The next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed.

John Baumgartner, Analyst, Mizuho Securities: Good morning. Thanks for the question.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: You’re welcome.

John Baumgartner, Analyst, Mizuho Securities: First off, on programming, given the uncertainty in the consumer, do you see a situation similar to COVID where you take advantage and sort of accelerate programming here, you throttle back a little bit given the uncertainty? And in terms of the programming you’re offering, any highlights you can offer in terms of anything new rolling out over the next twelve months, whether it’s recovery, cold plunge, whatever it may be?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. So we have been on a steady execution. I was just talking to our regional VP for Texas. And so far in that market, 30 plus clubs, seven clubs have converted to cold plunge. We have we’re putting a recovery in, we’re putting in work launches.

So we have a steady planned in our budget, sort of the modernization and CapEx and we’re executing on those. And those are really, really great adds to our business. As far as the other question you had regarding programming, we’re obviously, always working on whether the programs that naturally are losing steam and people aren’t participating naturally in as big of a format. And then there are other ones that people are sort of kind of growing leaning into. As I’ve always told you guys, modality of exercise, how you achieve your fitness, your wellness, your health, that is more like a fad.

People will do everybody goes crazy about spinning and you can’t teach enough spin classes, then all of a sudden, the changes goes to some other form and spinning starts kind of getting weighed down. So we have always designed and adapted the clubs to move and adjust those fads. And then lifetime is a big part of people’s lifestyle. We position Lifetime, so it’s part of your life. You’re using it 10 times a month, 12 times a month, 14 times a month.

It is how you live. And within that, we keep adapting what inside of there we need to adapt to keep our customer with us for as we have customers who’ve been with us for thirty years, twenty years, ten years. And that is the approach that we take on running the business. So it’s constant adjustments and constant adaptation.

John Baumgartner, Analyst, Mizuho Securities: Okay. And if I think about how that ties into the P and L on the center operations expense this quarter, there was some nice leverage. I think that’s the lowest it’s been seasonally for a number of years now. And I know it’s a line that you want to give yourself flex to reinvest back in terms of guidance. Was there any timing benefit this quarter?

Or are we starting to see some sort of a rollover where the return on incremental investment is better relative to history? How do we think about that line in the context of the broader guide, especially given, I think, the EBITDA margins implied for the rest of the year are pretty solid relative to Q1?

Eric Weaver, Executive Vice President and CFO, Lifetime Group Holdings: Yes. I think full year, I think our guidance implies, I want say, 7%. So yes, I think what we’re seeing is a couple of things. We’re seeing the flow through from the additional membership revenue and also our some of our Insert businesses, particularly our PT, as that continues to grow, also has a flow through margin. So, there’s nothing to answer your question directly, there’s nothing in terms of timing or anything like that.

It really is kind of the strength of the model we’ve built and that additional flow through.

John Baumgartner, Analyst, Mizuho Securities: Thanks, Eric. Thanks,

Conference Operator: And the next question comes from the line of Owen Rickert with Northland Securities. Please proceed.

Conor Vienburg, Vice President of Capital Markets and Investor Relations, Lifetime Group Holdings0: Hey, Bahram. Hey, Erica. Thank you a ton for taking my question here. Can

Conference Operator: you guys just

Conor Vienburg, Vice President of Capital Markets and Investor Relations, Lifetime Group Holdings0: talk a bit more about how LT Health or LTH is performing over the past couple of months? There were a decent chunk of press releases during the quarter on this growth initiative. Maybe just provide us a bit more color there and kind of what you’re seeing going forward?

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. So the strategy there is to grow LTH to the most trusted nutritional brand that exists. So we are working on building the product lineup, make sure it is absolutely the best. One of the things about nutritional products is that there isn’t any sort of a regulated, vigorous testing for them. We have always, for twenty years, tested our products to make sure they have the right ingredients, the right efficacy.

So as I take I just took my 4D plus supplements that I now normally take in the morning while we were having your call. And we want to make sure what’s in them, they’re the best and that’s the right product. We had a significant growth, like a 40% plus month over month in March. We expect to see LTH grow substantially over the years. And then we are diligently working on LT Digital and Lacey, our AI companion.

And that is moving exactly on our timetable right now. We’re not behind. We expect to deliver an AI option for health and wellness, not for just building a workout, not just for meditation, not just for taking classes. I mean, the entire ecosystem that Lifetime offers physically will be offered digitally, and we’re continuing to work. We open our, LT Digital Studio this week next week in New York to be able to generate more amazing content there.

So and all ties in together between that and LTH and Miura. Miura is right on schedule in terms of the execution, the growth of the few places that we have open. We have scheduled openings for at least a half a dozen more throughout the rest of the year. And then we’ll expand and start speeding up. So we’re still looking for basically rollout of additional revenue opportunities that they’re asset light.

And those are all in the works, we look forward to them.

Conor Vienburg, Vice President of Capital Markets and Investor Relations, Lifetime Group Holdings0: Great. Super helpful. And then just quickly, does do the LT Health products have any tariff exposure?

Eric Weaver, Executive Vice President and CFO, Lifetime Group Holdings: The LT Health? Yes. I mean, look, there’s a there are obviously with warehouse some of the ingredients there, there are some potential risks there. Again, we don’t think it’s anything that’s going to be material, but we continue to monitor that.

Bahram Makradi, Founder, Chairman and CEO, Lifetime Group Holdings: Yes. And we are based on everything that we have done, there is at least going to be half a dozen months before we get to the point where we might have to feel an exposure from that. So between now and then, our strong belief is that something will be worked out. As I’ve said before, I’m not in disagreement with our administration that the government that The U. S.

Needs to be treated with more respect and a more fair trade. However, I think having tariffs is basically nothing short of just additional friction for the growth of the economy worldwide. So I am not an expert on which way it’s going to go. All I can say to you is that our expectation is that it will level off. And we are well insulated for our core business and for these type of things.

All we have to do is execute better than other people. That’s it.

Conference Operator: You. Ladies and gentlemen, there are no further questions at this time. I’d like to turn the call back to Conor Weinberg for closing remarks.

Conor Vienburg, Vice President of Capital Markets and Investor Relations, Lifetime Group Holdings: Yes. Thank you, operator, and thank you, everyone, for the good questions. We’re looking forward to next quarter.

Conference Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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