Life Time Group Holdings, Inc. (LTH) Q4 2024 Earnings Report, Transcript and Summary

Greetings, and welcome to the Life Time Group Holdings, Inc.'s Q4 2024 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 you to your host, Connor Weinberg, VP of Investor Relations and Capital Markets. Thank you, Connor. You may begin.

Good morning, and thank you for joining us for the fourth quarter and full year 2024 Life Time Group Holdings, Inc. earnings conference call. With me today are Bahram Akradi, Founder, Chairman and CEO, and Erik 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, 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 8-Ks filed with the SEC, and on the investor relations section of our website. With that, I will turn the call over to Erik.

Thank you, Connor, and good morning, everyone. As always, we appreciate you joining us for our business and financial update. 2024 was an exceptional year for our company. We achieved many significant milestones and exceeded our expectations with our strong results. Starting with our fourth quarter results, total revenue increased 18.7% to $663.3 million driven by an 18% increase in our membership dues and enrollment fees and a 19.4% increase in our in-center revenue. Our comparable center revenue of 13.5% was the largest of the year. This was a result of both membership dues and in-center revenue having the largest comparable center revenue growth of the year in Q4, which is a direct result of the significant engagement we are seeing from our members. Center memberships increased 6.4% compared to last year to end the quarter at more than 812,000 memberships. When combined with our digital on-hold memberships, total memberships ended the quarter at approximately 866,000. Average monthly dues were $201, up approximately 10% from the fourth quarter of last year, and average revenue per center membership was $796, up 12% from the prior year quarter. Net income was $37.2 million, up 57%, and adjusted net income was $60.3 million, up 59% from the prior year quarter. Adjusted EBITDA was $177 million, up 28.5%, and our adjusted EBITDA margin of 26.7% increased 210 basis points versus the fourth quarter of 2023 as we achieved leverage in both our center operations and general administrative and marketing. Net cash provided by operating activities increased approximately 24% to $163 million as compared to the fourth quarter of 2023. For the third consecutive quarter, we achieved positive free cash flow. Free cash flow was approximately $27 million, and we had no sale-leaseback proceeds in the fourth quarter. For the full year, total revenue increased 18.2% to $2.621 billion driven by a 19.1% increase in membership dues and enrollment fees, and a 16% increase in in-center revenue. Average revenue per center membership was $3,160, up 12.5% from the prior year. Net income increased 105% to $156.2 million, adjusted net income increased 55% to $200.5 million. Adjusted diluted earnings per share was $0.95 compared to $0.64 per share for the prior year. In addition to an increase in income from operations in 2025, we expect net income to benefit from reduced cash interest expense due to our reduced debt and the refinancing we completed in the fourth quarter. Based on recent SOFA rates, we expect net interest expense of $90 million to $94 million. Adjusted EBITDA increased 26.1% to $676.8 million, our adjusted EBITDA margin of 25.8% increased 160 basis points compared to the full year 2023. As a result of our intentional and strategic repositioning of the company in prior years, which included the rewiring of our operations, we have continued to expand our operating margins and now expect to achieve adjusted EBITDA margins in excess of 26%. With that, I will now pass the call over to Bahram.

Thank you, Erik. Based on the strength of what we have seen so far this year, we raised both our revenue and adjusted EBITDA guidance for 2025 from what we had preannounced in mid-January. Our revenue guidance is now $2.925 billion to $2.975 billion, and adjusted EBITDA guidance is now $780 million to $800 million. Our core business continues to deliver impressive results. The main driver of our success has been delivering on our incredible member experience. This has resulted in the best retention in our 32-year history, which is one of the most important key performance indicators. We continue to fine-tune our operations to improve the desirability of our places, programs, and performers, and therefore, we expect to exceed the 2024 retention levels in 2025. In connection with our record membership retention, we are seeing record levels of revenue per membership driven both from dues and in-center businesses. Additionally, our new club pipeline is as robust as it has ever been. We expect to open 10 to 12 clubs in 2025 with the ability to extend the number of openings for 2026 and 2027 given the depth of our pipeline. We intend to maintain our current debt levels of approximately $1.5 billion while we continue to grow revenue and EBITDA. This implies a net debt leverage ratio of less than two times by the end of this year. As a reminder, that number was just 2.28 times at the end of 2024 as you saw in our press release. We plan to use our operating cash flow and any proceeds from sale-leasebacks to accelerate the number of new club openings in the future, taking advantage of our robust pipeline. Our Life Time brand is providing significant additional asset-light growth opportunities. First, LT Digital, our free digital subscription which we launched last February, now has more than 1.7 million subscribers and it's growing more than 100,000 subscribers per month, naturally and without any marketing effort. LTH nutritional supplements are seeing strong growth month after month, and Miura, our health optimization and longevity offering, is progressing forward as planned and we are about to open our second location next week. With that, we're ready to answer your questions.

Thank you. We will now be conducting a question and answer session. It may be necessary to pick up your handset. Thank you. Our first question comes from the line of Brian Nagel with Oppenheimer. Please proceed.

Congratulations on a fantastic quarter, fantastic year.

Thank you.

I have a couple of questions. First, I guess this is just more of a maybe a growth question, Bahram, but so you in your outlook here, you're talking about 10 to 12 new centers for 2025. So with the balance sheet where it is now, you know, you've done a great job of getting the debt ratios down to, I mean, frankly, below what you initially even targeted. But I guess, how are you thinking about the funding of that expansion? And particularly, I guess, the question I'm asking is, with regard to the sale-leaseback market, which you've been more active in lately?

Thank you so much, Brian. We just I just had a conversation with our CEO of largest pardon, Nara Barz, on sale-leaseback a couple of days ago. We have an agreement for them to step in, they want about $240 to $250 million worth of sale-leaseback from us for this year. And they're just phenomenal partners. We have incredible trust relationship, and so that is just one of the incoming demands for our buildings. As I've mentioned before, Brian, there aren't that many opportunities to lease large square footage from a singular tenant net lease where you have had a tenant who has basically continually paid rents even through the COVID period. So we have a significant amount of demand for our real estate. I think the $250 to $300, $350 million sale-leaseback is sort of easily in the expectation for this year on the low end. We expect to sort of spread that out so that we take the money, the net proceeds from the sale-leaseback, and basically apply it to additional growth. The pipeline, as I mentioned in my remarks, it has never been as strong as it is today. We literally have opportunities coming everywhere, urban, suburban, semi-urban. Buildings with apartments, buildings with offices, they need Life Time's traffic and brand to sort of improve the returns on those. We have just the traditional suburban sites, and I think we just basically are balancing, you know, as I mentioned, our expectation is to know, we have about $1.5 billion of debt as the, you know, we expect sometime this year to actually receive our double B rating for at least one more agency. We have positive conversations with them. With that, and with where the SOFR will be, our expectation is the cost of that debt is roughly 6%. It's a really, really great debt. With having $3.5 billion worth of owned market value real estate, $1.5 billion of debt is, you know, virtually could either apply that way or less than two times debt to EBITDA. So we don't need to reduce that debt at this point. With the potential we have in our pipeline, we would like to just use all the free cash flow we generate after interest payment and modernization and maintenance capital, take all of that, plus any proceeds from sale-leasebacks, and just continue to grow the business. We are having amazing results on our same stores, we have amazing results on all of our new clubs, so we're really, really happy with the way the business is functioning. And it's just really pacing correctly and managing the growth of the business correctly, but we have plenty of opportunity there.

That's very helpful, Bahram. And before I jump to my follow-up question, just quickly on that. So I know this is a big focus for investors broadly, but, I mean, how do you think about the on the sale-leaseback market? While the market's clearly wide open due and there's a lot of demand, how do you think about the rates?

Rates are it's so it's actually crazy to me. Since we went private, the blended average of everything we've done is somewhere, like, 6.5 to 6.7, 6.8. And I expect everything will happen in that same, like, a 6.5 to 7 it it won't touch 7, but in that same range. So it it's and frankly, if it was 25 basis higher or lower, it virtually has zero impact on the total economics of the business, the EBITDA margin for the business right now is so strong relative to our banner year of 2019, is 600 basis points better. So you're paying a quarter more on rent or something, you know, 25 basis points more on rent, it just is irrelevant. So we we really aren't hindered by, you know, by that, we can just take these sale-leasebacks with with the right partners. So long-term right partners. And just, you know, pace them in, as we want to bring that cash. And there's no reason to do them too fast. You know, if we can deploy that capital back into the market, there's really no value in doing it. But there is zero concern from my side that we would want to do a sale-leaseback, then there wouldn't be somebody taking it. In the in the in the in the cap rate range that is acceptable to us.

That's very, very helpful. Very Yeah. And so my second question, maybe more for Erik, but, you know, you look at that. So you preannounced positively. You know, Q4 results in, like, maybe, basically, in mid-January. You know, so here we are, a month later, a little bit more than a month later, and, you know, you're lifting guidance again, or you're lifting guidance, I guess, for 2025. On the top line, but particularly on the EBITDA line. So I guess the question is, as you look at the business, is there anything particular that changed over the last several weeks?

Yeah. I mean, actually, you know, as we we started 2025, we we saw a couple of things. We saw, you know, very strong membership dues, and that's that's really a result of continued strong average dues. Retention has been incredibly strong. So for for that to to hit the top line has been better than our expectations. And we've also been very good on cost control.

Apologies. You're experiencing some technical difficulties. Please hold. Again, sorry for the delays. Please hold. Alright. Apologies for the technical difficulties. I believe, Brian, you were we weren't finished answering your question. He's still in queue.

Okay. Brian, are are you able to hear us okay? Brian?

We we may have lost Brian. Okay. Alright. For the next pet. Let's go. Yep. Alright. Our next question comes from the line of Megan Alexander with Morgan Stanley. Please proceed.

Hi. Good morning. Can you guys hear me?

We gotcha.

Awesome. Okay. First question is just a little bit of a of a clarification.

To some of those the the comments, Bahram, you you made on on leverage expectations and sale-leasebacks. So I think in the release, you know, the guide you called out maintain leverage at or below 2.25 times. Bahram, I think you said in your prepared remarks it would imply less than two times by the end of the year. So I I just want to be clear on what exactly is your expectation as it relates to where leverage should end the year, presumably the level you're growing EBITDA at unless there's some other cash flow dynamics going on, it leverage should come down to end the year, but just want to make sure that I'm I'm totally clear on that. And is sale-leaseback something you're embedding in your cash flow expectations today or that you know, would be incremental?

Great question. So what I said was that our expectation is to make sure we keep our debt to EBITDA under 2.25 times. That's the goal. Is to stay under 2.25 times. That's the number that we understand we need to be to make sure we stay in that double B zone from the agencies. And that's the number that I believe would be perfectly fine for the company to maintain anything under 2.25. In my remarks, I'd merely suggested that based on where we expect the EBITDA to finish end of the year, and if you maintain roughly that $1.5 billion of debt, you're gonna end up naturally just under two times to EBITDA. So those are the goal is to stay under 2.25. And the forecast is gonna be if we make if we keep the $1.5 billion of debt, then we're gonna we we should be under two times debt to EBITDA. That's the first part of your question. For clarity. Is that helpful? Megan?

Yep. Crystal clear. Thank you. So now as far as the sale-leasebacks, so you know, as we've run through the math, you know, it looks like it's roughly around $500 million of cash flow generated, you know, give or take $50 million or whatever. So you have that to generate it from the core business after that and modernization and maintenance CapEx. So that $500 million plus any proceeds from sale-leasebacks allows us to just fund the continued growth of the build-out. When we lease things that up upfront, the capital spend in those is not more than $25 million on average that we've talked about before. When we build from the scratch, ground up, those will cost more than that $25 million. But when you're recycling the sale-leaseback dollars, you could basically so for simplicity, take that $25 to $30 million per opening and just apply that to however many. And then we just if they cost more than that than a ground up, you can expect that piece of it that is more than $25, $30 million bucks is coming from recycled capital from sale-leaseback. I am trying to make this as simple as possible for everyone to follow is how we think about staying cash, you know, at this point, we don't need to to be significantly free cash flow positive. After growth after all the growth because the debt levels, as we mentioned, is in the right place. So now we want to have sort of a cash flow positive to neutrality more or less in that range. That for the debt standpoint, and then take all the rest of the opportunity and apply it to growth.

Maybe if I could just follow-up on on EBITDA margin. So 26.7%, I think, for the year and you're guiding to that again in 2025. So it was a couple of quarters ago, I think, where you were really sticking to 26%. And I think at the time, you commented on maybe not wanting to squeeze more and start hurting the member experience. So obviously, the business has performed well, and it's it's nice to see the leverage you've gotten as that's as that's occurred. But how how are you thinking about margins today? Close to 27% is is does that comment still apply of you're not gonna try and squeeze the business for more? Are are there areas where you'd look to invest a bit more just should we think about kind of how you're thinking about the EBITDA margin outlook broadly? Going forward. Once again, another great clarification question.

I always said to you guys, here's what we would like you guys to sort of put in your models. I never said it can't be more. I did tell you guys it can be more. Just don't model more because we want to have the flexibility to invest in the quality of our offering. As the company is doing bigger dues, bigger revenues, bigger in-center, we are not compromising at all anything that is customer experience to generate more margins. The margins are beautiful. They're fantastic. I think that, you know, I I would be happy to have any business to generate north of 25% EBITDA margin. So but it doesn't mean we can't do more. I just don't want to keep being pushed by the streets to have to do more, more, more, because eventually, you're gonna hurt your business. We're not gonna allow that to happen. So for right now, what we are telling you is the margin for 2025, I think, is a very healthy EBITDA margin. It possibly could be slightly more as time goes on. But we just want to make sure we keep everybody's expectations in check.

Understood. Thank you.

Thank you. Our next question comes from the line of Alex Perry with Bank of America. Please proceed.

Hi. Thanks for taking my question. I guess just given some of the commentary in the press release, is it is it fair to say that the comps in our sales are sort of running above the 7% to 8% for the year in the first quarter sort of given you lifted your guide versus the preannouncement just over a month ago. Then I think you raised your sort of implied EBITDA guide, by 60 basis points versus your preannouncement. You know, what is the key driver there? I think the EBITDA guide sort of came up a bit more than the revenue guide. Can you just talk about, you know, how you're how you're thinking about that? Thanks.

Yeah. I think you've got it you've got it right there, Alex. The 7% to 8% is is kind of the the full year there. And, you know, we're still we're we're lapping some of the strategic things that we did. So the expectation is that that would be, you know, a little bit higher in Q1. So that that slope you're thinking about that that exactly right. So we would expect, you know, Q2, Q3, Q4. Again, in terms of, you know, how we started the year, just what we're seeing in the flow, the strong flow through from the revenue, we're seeing strong average dues. We're seeing strong retention in both Jan and Feb. So so that's really, you know, part of that flow through directly attributable to the the increased margin.

Thank you. And then my follow-up question is maybe to piggyback on on Megan's question from earlier, do you in managing the club experience, do you have a desired club capacity number for your large format clubs? And then you know, how do you think about sort of the pricing opportunity as you start to approach that, you know, what you see as the, you know, desired club capacity. It looks like you're starting to implement enrollment fees on in a lot of your clubs. You know, is there a lot of, you know, continued embedded pricing opportunity as as we look into the business this year? Thanks.

Alex, as always, you have great questions, great insights. So let me help help help out to everyone with your question here. Really, when you think about a club, there is a certain amount of visits you can generate within a particular club. Not necessarily just based on square footage, it's based on all kinds of things, based on the flow of the club, the design of the club, the parking lot, and just basically whatever is your bottlenecks, your your your biggest bottlenecks in a particular location is basically creates a natural number of how many people can visit a club successfully to our, you know, sort of an incredible experiential visit for that customer, and that becomes your limiting factor on how many visits you have. And then if you take that number, say, okay. Twelve visits a month. Thirteen visits a month, right, per customer. She gives you a number for how many members you can have in that club and deliver the the Four Seasons, the Ritz Carlton quality, the Life Time always delivers. To do that basically gives you that number. Now your opportunities come very differently in different locations. If a particular club is significantly below that maximum comfort swipe number from on a monthly basis, right? Then you can work on your programming, on your talent that you bring in, to try to have more visits in that particular club, which results in more members. If you have reached a point where your club is saturated from that number of swipes, number of visits per day, now you have pricing opportunity. You have wait no. You have your wait list, then you, you know, you start adding enrollment fees and and you raise the dues to to where the find the right equilibrium in that club. And then that will add more of that what we have talked to you guys about. Like, we it's interesting to me a year and a half ago, we were having these conversations and we had about $17 million worth of dues per month if we had taken everybody who's not paying the rack rate to the rack rate. During this last, you know, eighteen months, we have raised dues on those legacy customers, the people who are paying below, and now we're up to $20 million plus of dues per month, which is the gap. Because as we've been managing the right value proposition in each club to make sure we give the right experience, those rack rates naturally have come up which then has not, you know, basically, expanded that difference between the differential between the non-rack paying customers to the to the rest. So now when you look at our company and we look in the in the next several years, you know, three years, four years, five years, we expect that just the natural flow of the dynamics of everything we told you is gonna generate strong same-store growth on the dues side. And then very, very interestingly, as we are focusing on this more affluent, sophisticated customer who really is only interested in the best experiences, which is what we are just very strategically getting more and more of that type of customer in the club. We have experienced the lowest attrition rates with this customer base and we're experiencing the highest in-center spend on top of their dues. So right now, all the strategies we have implemented over the last five years, they are working individually and collectively. And so we have a strong momentum on the business, and we think we have so much momentum that even if there is some macroeconomic compression, which is likely to happen at some point, it wouldn't be felt through our numbers because of the backlog of opportunity. If that makes sense.

Yep. That's very helpful. Best of luck going forward.

Thank you so much, Alex.

Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed.

Hey. Hey, Bahram. I wanted to start that you, you know, you now have you don't lack for capital. Right? So if you think about gating factor, which is which is people, so how do you think about managing that, you know, higher level and then at the club level, and then your thoughts on org structure. Operational org structure and if if you may want to make some changes there such that you tighten up span and control right to safeguard you know, the the people aspect of growth.

It's an interesting question, John. Look. I we have we have two elements that we have to be cognizant of. Number one, I don't think anybody is asking about our company. Which is interesting because I'm sure you're not thinking this is a tech business. But I have been driving AI relentlessly for the last couple years to our company. And my belief is if you are not implementing strong AI in every part of your business, you're gonna fall behind miserably. So then that breaks down to two categories with AI. AI as it relates to efficiency of operations and executing what you do. And those all will have impact on cost of efficiencies. And then AI as it relates to the customer experience, which is Or Lacey, we try simply cannot wait till sometime this summer should be holding the investor conference to basically unveil what our digital platform coupled with Laci, our lifetime AI companion, can do for customers and how it can serve as a gateway to healthy living and healthy aging for all people. So we are we are in a moment in time I believe, is revolutionary, not evolutionary. In the next decade, in how we can think about everything we do. So I don't necessarily believe that you need to have more people or more layers to deliver the best experiences to the customer. And it's basically you have to have a vision for what that ultra high-end experiential delivery is and then figure out how you can deliver that most efficiently. And frankly, sometimes having significantly less layers which actually improves the customer's experience which is what has happened at Life Time over the last four years. We have like I mentioned before, which is only three my expectation, there is only three people to any decision. No more than three layers. More than that, just slowing things down, and I don't think you get anything for it. So we are John, we're in a really, really great place. We have tons of initiatives internally. On, you know, taking advantage of all that is happening with the technology both on customer experience and efficiencies in the company. And then my follow-up is when you think about the the 143 visits per year, I'm not sure what the you know, what the what the best or the the most loyal members where they're at I don't know if they're 160, 170, 180, but any thoughts on that? And then sort of keep waiting right for the the in-center revenue spend per month you know, to to start to accelerate right? Because you've got all this traffic and you're improving DPT and other things, and the wallet is there. Know you've wanted to do that organically. Right? Let let them find you know, these services. So do you do you think the the potential is there, but it's gonna be slow? Or does anything accelerate that?

Oh, John, if you look at the same store business, of fourth quarter. And why we are raising the guidance again just after five weeks, it's because of what you just said. We are seeing more throughput right now with our in-centers as well as the dues. We have record numbers on PT, we have record numbers of dynamic personal trainers that they are super engaged, we have we have record amounts of applicants high high-end, best performing, talent, in health and wellness. Wanting to come join Life Time because of our the strength of our brand. And our position. So I expect we grow dues and I expect we grow in-centers.

And if if I could just add to that just to to back up what what Bahram said there. If I look at just PT comparable revenue for this for Q4 this year versus last year. This year, that that metric is nearly triple. So it it's it's not a it's not a small thing. And, again, those are in our comparable store. So really, really large growth there.

There's two things that I mentioned in my remarks. That we aren't interested in hyping our business, as you guys know, and you call me a sandbag, I appreciate that, John. But we we don't want to give so sort of a hype to the investors or analyst about things that might happen. That's not an engineer's mind. We need to deliver results when we have mathematical projections then we can give you guys some I expect by the summer, we can show you guys again not only the growth of that digital. The digital has grown from zero. This is not existing members. So the if you take our members using the app, that's probably a million and a half, a million six total members on that 800 and some thousand memberships, put that aside, in addition to that, within a year, we have acquired 1.7 million subscribers, free subscribers, we expect that number to get to three to four million by end of this year. That foundationally is helping once again make the brand reach to a much broader number of eyeballs, other that, comes some actual regular members who are coming out of that day out of that group naturally without spending any money. Creating more demand for the Life Time membership. That's the biggest win. But what yet to come is as you see the the Miura rollout over the next two, three years in the clubs. In addition to LTH, growth, these are additional opportunities that will continue to improve the opportunity to do more in-centers. So in-center revenue. So the weird as as you guys can imagine, we're not sitting on our rear end and thinking all results are good, so they're gonna stay good. We are thinking, okay. What else can we do for our customer? To make their life better to create more of a one-stop shop for all aspects of their healthy living, healthy aging, health tracking in in and out of our clubs. They don't even if when they're away from Life Time. So that all of that has incredible momentum. And, again, we're super eager to find the day that makes sense. Sometimes this early you know, sometimes early summer, to get everybody together and share the new things that are above and beyond the current business model.

Thank you.

Thank you. Our next question comes from the line of Michael Hirsh with Wells Fargo. Please proceed.

Thank you for taking my questions. Just to touch on your your last point there, your hinting at an investor day or or something like that. Early summer. So I'm wondering, are you looking to talk about you know, maybe updated long-term targets or are you hoping to accomplish with that?

What I'm hoping is to introduce the new opportunities that they're asset-light that we've been working on for the last several years. We we should be at a point there would be no point having an investor day unless we are we're not gonna just have people coming here, analysts coming, investors coming in to give them that regular update on the on the business moving forward nicely. That we do just like we're doing right now. Is we would be unveiling new opportunities out of the Life Time brand that, as I mentioned to you, we expect to deliver the perfect gateway for all people on health and well-being. So that's what we are working on, and I hope that we are at a place that we can fully expecting that we would announce something for the first week of August, that's my goal right now, but we have to we have to fine-tune that and confirm it. But that's our expectation at this point.

Okay. And then you've spoken about the LT Digital app quite a bit. So do you anticipate monetizing this app or, you know, beyond getting some incremental members from it, how should we think about the opportunity from from the app?

That's exactly what we want to unveil to you in this in this summer. Time firm. We are building the ecosystem for that digital platform, my expectation is that it will be able to help you register for any athletic events. It will allow you to track your health data, it will have knowledge of how you use the club if you're a member. If you're a nonmember, your other activities, and it basically will become your companion by guiding and helping you on your health and wellness journey. With the expectation that we will deliver everything you would want from the streaming to on-demand podcast education a real, real companion to help you with all of your health and wellness journey. Well, then how do you monetize that? I mean, the objective is to have something that is a one-stop shop for all people. And then monetization will happen naturally. You know? As you grow as you build the most definitely, most trusted nutritional products for me, which I take not 50, but 80 to 90 supplements a day, so I have energy for you, Michael. So I want to make sure what goes in my body has gone for the last 15, 20 years. It's something that has no negatives. It has all the right stuff. So we have been relentless on quality of LTH products for 20 plus years, but now it's at with under the LTH brand. And the month-over-month growth we're seeing we expect that business to be a, you know, billion-dollar revenue business in the years to come, and the LT Digital, what? Tens of millions of subscribers on it over the next four, five, six years, will become an easy natural foundation for the people to find the LTH product and be able to just easily spot it. And Lacey will help them answer any question they have about any product coupled with understanding of who they are, how they're using their you know, how how they're the all their activity levels, so all of this has been being built for the last several years, quietly. We are at a point that I think we can demonstrate this and get you guys all super excited about it.

Thank you.

Thank you. Our next question comes from the line of Owen Rickert with Northland Securities.

Hey, Bahram. Erik. Once again, congrats on quarter in 2025 looking looking to be pretty great. But can we just dive a little bit deeper into this 1.7 million app subscriptions. I guess, how do these figures compare to your club membership numbers? And are they separate or overlapping?

What a great question. No. That's all incremental to the club members. That's those are not any customer who is paying dues to use the club. So that's that question. That number is just free digital subscribers, nonmembers, non-access, free subscribers to the app. And it's just the platform to bringing people in and give them the best on-demand content, the best streaming content, the best educational content, information on their health and wellness, you know, and on their the profile, is basically it's all one-stop shop. Again, I call it you know, my partner, John Donahue called it the gateway to healthy living, healthy aging. I'd like that. It's basically a gateway to everything for your health and wellness.

Perfect. That's clarified a lot. And then on another note, our our new center openings, you know, the 10 to 12 this year, still skewed more towards those asset-light opportunities, versus ground-up builds? And then should we still expect that dynamic to shift more towards ground-up builds in 2026?

Yeah. You know, our pipeline is so robust right now on both fronts. Like, literally, it's significant. Right. It's we we could do a lot more clubs in 2026 or 2027. If we didn't want to demonstrate the discipline of staying within that $1.5 billion of debt. Right. And and having the right experience to the customers. Right? But we again, I if I'm if I as an investor, I think about it. Do they have a chance that they can deliver enough growth? Of course, there is a chance it's just not probable. We have such a pipeline. And we can mix and match between some of the ones that they're, you know, basically going into already existing spaces, and the ones we build from ground up. Frankly, I don't think we should try to guide to so many of this and so many of that at any given time. Because it has no value in it. I think we really need to make sure we help the analyst to, you know, figure out a a way that basically, they think about the total score this growth. And then the the relative membership growth to that square footage and dues growth, etcetera. So but we are we really have significant opportunity on all fronts.

Awesome. Thanks so much for the color, guys.

Thank you. Thank you.

Thank you. Our next question comes from the line of Jessilyn Wong with Evercore ISI. Please proceed.

Hey, thanks guys. Congrats on the results. Just to follow-up on Alex's questions on comps. I mean, we saw accelerating of comps each quarter into the fourth quarter there. Based on your comment, it seems to suggest that year-to-date trends have been strong. Just curious, has comp accelerated year-to-date there? And and when I think about the bull case, you know, what's stopping the company to deliver low double comparable growth in 2025 or maybe just another way to think about it. What is baked in your assumptions, for comps to slow down to 7% to 8%, in 2025?

Yeah. So I I can take that. Yeah. Our comps, yeah, to your point, have been accelerating, you know, as we talked about with Q4, obviously, being the strong really more strongly across our Internet businesses, but also but also with dues. So, you know, we're guiding, like we've said, to 7% and 7% to 8%. And, you know, we're we're on the on the due side, you know, we're lapping some of the, initiatives that we had had done over the past year or two. So on the due side, that's you would expect that to know, come down a little bit. But look, there's there's nothing to say that there's additional growth accelerators, Bahram's talked about, on things that we can do, you know, to increase those. But right now, where we're comfortable guiding is into that 7% to 8% range.

That doesn't range it? Doesn't mean there isn't more opportunities. Right. Again, this always in a balance between giving you guys a number that is certain and then beyond that, know, it's extra potential and exactly. We are we are generally extremely conservative on what we commit to.

Got it. Just a follow-up on other revenues. I I know it's a really small part of the business there, but it grew really well this quarter. I believe you percent there. What's driving that, and and how should we think about this line item in terms of growth into the next year?

Yeah. I mean, that line is gonna include things like our lifetime living, our lifetime work, and a lot of our athletic events. So that can be that can be a little bit lumpy just given the timing of events. You know, we we've kinda just penciled in roughly, you know, 5% to 6% growth. But, again, that that can be a little bit lumpy just given the time of year and the timing of those events.

Alright. Thank you, guys, and good luck.

Thank you.

Thank you. Our next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed.

Good morning. Thanks for the question.

You bet.

Maybe, you know, in in terms of the next steps for growth, I'm wondering, Bahram, if you could discuss, you know, a bit of the opportunities for recovery. Which seems to be a topic of increasing interest for folks in the wellness space. We've seen the news of the rollout of the cold plunge. I'm curious if you can discuss your vision for the recovery space overall. Where you believe Life Time could take that, the intensity of CapEx required, and how do we think about recovery as a contributor to either in-center revenue or even a new driver for membership's growth going forward.

Yeah. It's a great question. Look. It's it's really an interesting business we're in. The customer is in front of you, going through their experiences, so you can actually just observe and watch and see what are the things the customer customers are really interested in. We have been rolling out all of the last couple years. The recovery space, every new club has recovery. All the old clubs have been getting the recovery space. We are systematically putting in cold plunges into the clubs. As we can roll them out and pace them out correctly, but depending on the opportunity of each club. We are very, very optimistic on Miura, our longevity business, it it has literally been a very, very fast pace of my expectation. You know, we opened Miura last year, but we took till September to hire the physician assistants to actually have the teams and train and have employee trained then deliver that customer experience that was like, exceptional. By September. We did that. By December, we were looking for a business that is generating substantial revenue and margins. And and since then, we still January was bigger month over December. February is growing over over January despite lower, you know, lower number of days, that that business is moving exactly as we had hoped and it proves to be a business that can long term, you know, if it doesn't do know, what our personal training business will do, think long term that business can do at least 50% of our revenue of our personal training incrementally in in our clubs. So we are constantly digging to find out how else we can make the life of our member their health and wellness journey more complete so they can do more of the things they wanna do related to health and wellness in one place with one trusted brand. So I fully expect we will continue to grow our in-center revenue from more nutritional products, more recovery, more dynamic stretch, more Miura. But we're not gonna bombard our customer by pushing promotional nonsense. We deliver the best experiences for them. We deliver the best programs. We deliver the best service and they come to us naturally. There's tons of companies who are trying to do this longevity things remotely or whatever, but their attrition rate is ridiculous. And our attrition rate on our Miura customer is substantially below the attrition rate of our customer right now which is the best it's ever been in 32 years. So we we are we are really, really encouraged with the strategy that my team has put together, and the execution of that strategy, and is 100% focused from the customer point of view. We've been we're we've been committed to that for 30 some years. Customer point of view. So our inventions our creations is how do we make your life as a member better and then that's the results that you're receiving right now. In those growth and in-center penetration is just because of our direct focus on making that experience more comprehensive and better for the customer.

Thanks for that. And then as a follow-up, coming back to the digital investments, the Lacey, a lot of discussion this morning around the vision. But I'm curious what you're seeing already. The downloads have been very strong. At this point, can you parse anything out in terms of activity or engagement between members versus nonmembers? Maybe what features are seeing the most traffic, whether it's the online store, the health advice, any takeaways thus far?

Yeah. It's growing fast. We are adapting it fast. And we are learning in an incredible pace. We would love to take the next five or six months. Continue to improve not only the number of subscribers, that's going to grow significantly by the time we see you we hope to be at 2.5 million to 3 million subscribers. Then we like to have show you all the breakdown. What percent of these people come in? How often they come in? What what are they interested in? How do we incorporate Lacey for them to be completely and entirely customized to each individual subscriber with with incredible AI attached to it. I am incredibly excited about it. We're working relentlessly on it, and I don't want to speak out of turn. I think summer is when we will be able to really put on a demonstration that would be satisfactory to me. And you will you will get all these great questions you're asking. We will be able to give you answers with with enough with enough data that that data is meaningful. We just we need a lot more number of, you know, we need we just need a lot more engagement, a lot more data, we need a lot more so that those those are statistics are legitimately accurate. Does that make sense? It's a little early right now, but the early results are amazing. All I can say to you.

Thanks, Bahram.

Thank you. Our next question comes from the line of Alex Fuhrman with Craig Hallum Group. Please proceed.

Hi, everyone. Thanks for taking my question, and congratulations on a really strong year. Wanted to ask about your kids' offer. You have a really unique offering in the marketplace for families. I'm curious if you could kinda help quantify for us how many of your members or how much of your business is associated with with members who have a kid's membership, associated with that member? And and how much of an opportunity is that going forward?

Yeah. Alex, that's a great observation. It's it's an incredible part of our business. It always has been part of the strategy to create unmatchable environments for families with children, and our kids camps, summer camps, kids academy, parents night out, all the different things we do in there are humongous part of Life Time's overall success. We have never broken that information out to go ahead and pass. Like, we of course, have it, but we do not share that information. We haven't. We gotta be conscientious of how many different information we share, you know, in a on a regular basis. Because it can honestly become confusing to the potential investors. The overall factor, things I can tell you, is that our our family memberships have the highest utilization as a utilization per membership, obviously. And they have the highest retention. And it's it's more or less part of the overall strategy that we laid out 30 years ago to create a facility that was the best experience for singles and the best experience for couples and even better experience for families with kids. It's part of a overall strategy of Life Time.

Yeah. And if I could just add to that, I mean, it is part it's a it's a big differentiator for for Life Time, but, you know, Bahram did mention we don't break out statistics, but what we can what I can tell you is, this year from an engagement standpoint and a penetration standpoint, you know, some of the camps and things we do around our kids kids programming, we we had some, you know, record participation. So it's just another component of the engagement we're seeing.

Yeah. And most of like I summer camps pretty much universally are sold out. Mhmm. We we we sell out long ahead of this season starting. So and when we are seeing stronger trends right now than last year, and last year was an incredible year. So everything looks everything is looking great, Alex.

That's great to hear. Really appreciate all the color.

Mhmm. Thank you.

Thank you. Our last question comes from the line of Chris Woronka with Deutsche Bank. Please proceed.

Okay. Thanks. Hey hey, guys. Gordon, thanks for squeezing me in. So my my question, I I know there's been a lot covered, but I I don't know that we talked a lot about the you know, the the the pretty recent launch of the the online supplement sales and the in-center supplement sales and you know, Bahram, I think it was about three or four months ago that you you expanded the launch. So I'm just curious as to what how you how you look at it now if it's going according to plan or or better and, you know, what what kind of next phases of growth are for that for that segment. Thanks.

I believe it'll be a incremental game changer for Life Time. In the next two to three years, you're gonna see explosive growth out of LTH. We we are I I would I would say we are in the super, super early stages of building the ground work, the the, basically, the root system for all systems for LTH to go. But we're seeing strong, like, 25% month-over-month, like, you know, right now, February, is 25% more than it was February of 2024. But but, you know, I expect that number to get to 100% by sometimes this year versus what we were doing the same month the year before. So it's moving a full system. All systems are go on that, and it will be a huge growth factor for Life Time years to come.

Great. Thanks, Bahram.

Thank you so much.

Thank you. There are no further questions at this time. I'd like to pass the floor back over to Connor for any closing remarks.

Yes. Thank you everybody for joining us today. We look forward to seeing you at the upcoming Bank of America and UBS Consumer Conferences. Otherwise, we'll see you at our next quarterly earnings call.

This concludes today's teleconference. You may disconnect your lines at this time.