Life Time Group Holdings Inc - Company Report

The fitness and wellness industry is experiencing significant growth, driven by increased consumer interest in holistic health and premium lifestyle services.

Life Time Group is taking advantage of this with its extensive range of health, fitness, and wellness experiences through its network of over 170 athletic country clubs across the United States and Canada. Serving nearly 1.5 million individual members across approximately 815,000 memberships, Life Time has established itself as a leader in delivering luxurious, all-inclusive health services.

Life Time’s centers are more than just gyms, they are resort-like destinations that cater to a wide array of wellness needs. Each center typically features expansive fitness floors with state-of-the-art equipment, group fitness studios, indoor and outdoor pools, tennis and pickleball courts, and dedicated spaces for children’s activities.

Additional amenities include the LifeSpa, offering a range of beauty and wellness treatments, and LifeCafe, which provides healthy dining options. These facilities are strategically located in affluent suburban and urban areas, making high-quality health services accessible to families and individuals seeking a comprehensive lifestyle experience.

With revenue primarily driven by membership dues, Life Time offers a range of options, including base memberships with multi-center access, signature memberships with enhanced services, and junior memberships that cater to families with young children.

As it emerged from the challenges of the COVID-19 pandemic, the company has focused on optimizing its operations and expanding its footprint through an asset-light model, which includes leasing a significant portion of its centers. This strategy has enabled the company to enter high-demand markets more efficiently while maintaining financial flexibility.

Additionally, Life Time continues to innovate with new services, such as its dynamic personal training, while also leveraging the growing popularity of niche sports such as pickleball, which have contributed to increased member engagement and higher average revenue per membership.

Life Time was founded in 1992 by Bahram Akradi with a vision to create a comprehensive health and fitness experience that combines high-quality fitness facilities with wellness offerings under one roof. The first center in Brooklyn Park, Minnesota, set the standard for the company’s unique approach, which included resort-style amenities such as spas, cafes, and childcare services. Throughout the 1990s and early 2000s, Life Time expanded across the United States, building a reputation for luxury fitness and wellness services.

In 2004, Life Time went public, providing the capital needed to accelerate its growth. By 2010, the company had over 90 locations, and its offerings had expanded to include specialized fitness programs, full-service spas, and a variety of wellness services. The introduction of concepts like Life Time Work, coworking spaces integrated with fitness centers, and Life Time Living, luxury residences promoting a healthy lifestyle, further diversified its portfolio.

The company was taken private in 2015 through a $4 billion buyout, which allowed Life Time to focus on optimizing its operations and expanding its market presence without the pressures of quarterly earnings.

Despite the challenges posed by the COVID-19 pandemic in 2020, Life Time has continued to grow by building on its integrated model, which combines physical and digital offerings.

In 2021, the company returned to the public markets, and by 2023, it had over 170 locations across the United States and Canada, maintaining its position as a leader in the premium fitness and wellness industry.

Bahram Akradi continues to lead Life Time having been instrumental in developing the company’s diverse offerings. From the beginning, Akradi led the company with a focus on serving members’ needs first, designing and delivering the company’s athletic country clubs, programs, products, and events from a member point of view.

Before founding Life Time, Akradi co-founded U.S. Swim & Fitness Corporation, where he served as executive VP and part owner. He successfully expanded the business, making it the second-largest health club company in the Minneapolis-St. Paul area before its sale to Bally Total Fitness in 1986.

Life Time serves a diverse customer base that spans individuals, families, and corporate clients who seek premium health, fitness, and wellness experiences. The company’s offerings are centered around its extensive network of athletic country clubs, which provide a wide range of services designed to meet the needs of members of all ages, from infants to seniors. Life Time’s customers are typically health-conscious individuals and families residing in affluent suburban and urban areas who value a comprehensive and luxurious approach to wellness.

The company’s services are enjoyed via membership-based access to its athletic country clubs, which feature expansive fitness floors, group fitness studios, indoor and outdoor pools, tennis and pickleball courts, and dedicated spaces for children’s activities. Members also benefit from additional services such as LifeSpa, which offers beauty and wellness treatments, and LifeCafe, which provides healthy dining options. These services are designed to create a holistic wellness experience that extends beyond physical fitness to include mental and emotional well-being.

In addition to individual and family memberships, Life Time offers corporate wellness programs tailored to companies looking to promote health and wellness among their employees. These programs provide employees with access to the company’s facilities and services, as well as customized wellness initiatives aimed at improving employee health and productivity.

Digital offerings, which include the Life Time Digital app, provide members with access to on-demand workouts, virtual training sessions, and a variety of wellness content. This digital platform caters to members who prefer to engage with Life Time’s services remotely or supplement their in-center activities with digital resources. The company also hosts over 30 iconic athletic events annually, which attract participants from various demographics, further expanding Life Time’s reach and engagement with its members.

Life Time is implementing a range of strategies to grow its business, enhance member experiences, and increase revenue across its centers. The company is focused on expanding in-center service offerings, optimizing membership revenue, and growing its national footprint.

Broadening its national footprint remains a key priority for Life Time. The company is targeting affluent metropolitan areas with a more asset-light model, which includes acquiring existing facilities, taking over leases with tenant improvement contributions, and adapting existing retail or office spaces. This approach allows Life Time to expand more cost-effectively while maintaining a focus on high-return investments. The company opened 11 new centers in 2023 and plans to open an additional nine to 10 centers in 2024, with 66% of its centers now leased rather than owned.

Significant investments in enhancing its service offerings have resulted in notable growth in member engagement. Life Time now has over 500 permanent pickleball courts, with participation in this sport increasing by 841% over the past two years. Dynamic personal training sessions have also seen a substantial rise, averaging 160,000 sessions per month in 2023, up by 26% over two years. Small group training and ARORA classes have experienced similar growth, with participation increasing by 277% and 344% respectively, further driving member engagement and incremental revenue.

Life Time is also expanding its omni-channel offerings to cater to the growing demand for integrated health, fitness, and wellness services. The company continues to invest in its Life Time app and other technologies to support a comprehensive Healthy Way of Life ecosystem. This platform includes live-streaming fitness classes, remote personal training, and an improved e-commerce platform.

Optimizing revenue per center membership has led to a significant increase in average revenue per membership, growing from $2,098 in 2021 to $2,810 in 2023. Life Time expects this trend to continue as new centers mature and more centers are opened. The shift towards a model that balances membership numbers with higher membership dues has been instrumental in this revenue growth.

While the impacts of COVID-19 put a dent in a two-decade run of revenue growth, Life Time has since recovered to once again achieving record revenue numbers. In 2023, the company delivered $2.22 billion following 22% year-over-year growth. This was driven primarily by continued strength in membership dues and in-center revenue, reflecting the company’s ability to attract and retain members while expanding its service offerings.

Life Time has also managed to keep its operational costs in check, with center operations expenses increasing by just 10.9% to $1.18 billion, largely due to costs associated with new and ramping centers and the overall growth in memberships. Coupled with successfully reducing center support overhead and advertising costs, this operational efficiency contributed to a significant increase in net income, which rose by $77.9 million to $76.1 million.

In the first half of 2024, Life Time continued its positive momentum, with revenue rising by 17.9% to $1.26 billion. The growth was fueled by higher membership dues, increased membership at new centers, and greater utilization of in-center services. Operating and general expenses remained under control. Consequently, net income for the first six months of 2024 increased by $33.2 million to $77.7 million.

Looking ahead, Life Time has set its full-year 2024 revenue guidance at $2.56 billion to $2.59 billion, with analysts projecting revenue at $2.57 billion, representing a year-over-year increase of approximately 16%. Earnings per share are expected to rise by 24.5% to $0.80, up from $0.64 in 2023.

The health, fitness, and wellness industry is extremely competitive, with challenges coming from a variety of players, including traditional gyms, boutique fitness studios, and other premium health clubs. Major competitors of Life Time include Equinox, LA Fitness, and 24-Hour Fitness, each offering different models of fitness services ranging from budget-friendly options to luxury experiences. Additionally, boutique studios such as SoulCycle, Orangetheory, and Pure Barre pose competition by catering to niche markets with specialized fitness programs.

However, Life Time differentiates itself by offering a comprehensive, all-in-one experience that goes beyond fitness to include wellness, lifestyle, and community-focused amenities. This holistic approach, combined with its resort-like athletic country clubs, allows Life Time to cater to a broad demographic, from families to high-income individuals who prioritize a luxury lifestyle.

In addition to expanding its in-center service offerings and optimizing membership revenue, rising participation in new activities is also driving solid growth for Life Time. As the company continues to open new centers in affluent markets and enhance its digital platform, it remains well-positioned to sustain this momentum in the premium health and wellness industry.