Life Time Group Holdings, Inc. (LTH) Bundle
Understanding Life Time Group Holdings, Inc. (LTH) Revenue Streams
Understanding Life Time Group Holdings, Inc. Revenue Streams
The total revenue for Life Time Group Holdings, Inc. for the nine months ended September 30, 2024, was $1,957.7 million, compared to $1,657.8 million for the same period in 2023, representing a year-over-year increase of 18.1%.
Breakdown of Primary Revenue Sources
The primary revenue streams consist of:
- Membership Dues and Enrollment Fees: $1,376.2 million for the nine months ended September 30, 2024, compared to $1,152.5 million for the same period in 2023. This reflects a 19.5% increase year-over-year.
- In-Center Revenue: $524.1 million for the nine months ended September 30, 2024, compared to $455.8 million for the same period in 2023, marking a 15.0% increase year-over-year.
- Other Revenue: $57.4 million for the nine months ended September 30, 2024, compared to $49.5 million for the same period in 2023, which is a 15.0% increase year-over-year.
Year-over-Year Revenue Growth Rate
The revenue growth rates are as follows:
- Total Revenue Growth: 18.1%
- Membership Dues Growth: 19.5%
- In-Center Revenue Growth: 15.0%
- Other Revenue Growth: 15.0%
Contribution of Different Business Segments to Overall Revenue
| Revenue Source | Amount (2024) | Amount (2023) | Percentage of Total Revenue |
|---|---|---|---|
| Membership Dues and Enrollment Fees | $1,376.2 million | $1,152.5 million | 70.3% |
| In-Center Revenue | $524.1 million | $455.8 million | 26.7% |
| Other Revenue | $57.4 million | $49.5 million | 2.9% |
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams include:
- The increase in membership dues is attributed to an increase in membership numbers, reaching 826,502 members as of September 30, 2024, up from 784,331 members a year earlier.
- The in-center revenue increase is driven by higher member utilization of services, particularly in Dynamic Personal Training.
- Overall revenue growth reflects the combination of new center openings and enhanced member experiences.
A Deep Dive into Life Time Group Holdings, Inc. (LTH) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was reported at $270,508 thousand, which translates to a gross profit margin of 13.8%. This marks an increase from the previous year’s gross profit margin of 10.0% for the same period.
Operating Profit Margin: The operating profit for the same period was $270,508 thousand, resulting in an operating profit margin of 13.8%, compared to 10.0% in the prior year.
Net Profit Margin: Net income for the nine months ended September 30, 2024 was $119,077 thousand, yielding a net profit margin of 6.1%, up from 3.1% in the prior year.
Trends in Profitability Over Time
In the three months ended September 30, 2024, total revenue was $693,234 thousand, representing a 18.5% increase compared to $585,177 thousand in the same quarter of 2023. This growth is attributed to higher membership dues and in-center revenue.
The following table summarizes the profitability metrics over time:
| Metric | Q3 2023 | Q3 2024 | Change (%) |
|---|---|---|---|
| Gross Profit Margin | 10.0% | 13.8% | +28.0% |
| Operating Profit Margin | 10.0% | 13.8% | +38.0% |
| Net Profit Margin | 3.1% | 6.1% | +96.8% |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average for net profit margin within the health and fitness sector is approximately 5.0%. The reported net profit margin of 6.1% for the company exceeds this average, indicating a competitive advantage in profitability.
Analysis of Operational Efficiency
The company has made significant strides in enhancing operational efficiency. Total operating expenses for the nine months ended September 30, 2024 were $1,687,204 thousand, compared to $1,491,218 thousand in the previous year, reflecting a 13.1% increase, primarily due to expansion and higher membership-related costs.
The breakdown of operating expenses is as follows:
| Expense Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Center Operations | 1,048,544 | 896,113 |
| Rent | 225,804 | 203,196 |
| General, Administrative and Marketing | 159,836 | 147,005 |
| Depreciation and Amortization | 205,068 | 180,067 |
| Other Operating Expense | 47,952 | 64,837 |
| Total Operating Expenses | 1,687,204 | 1,491,218 |
This data illustrates a clear focus on cost management while investing in growth and member services, positioning the company favorably in terms of operational efficiency.
Debt vs. Equity: How Life Time Group Holdings, Inc. (LTH) Finances Its Growth
Debt vs. Equity: How Life Time Group Holdings, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, Life Time Group Holdings, Inc. reported total debt of approximately $1.66 billion. This includes:
- Revolving Credit Facility: $210 million outstanding
- Term Loan Facility: $0 million (fully paid off as of September 20, 2024)
- Mortgage Notes: $0 million (fully paid off)
- Senior Secured Notes due 2031: $500 million (priced on October 22, 2024)
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at approximately 0.65, which is below the industry average of 0.75. This indicates a relatively conservative approach to leveraging its capital structure.
Recent Debt Issuances and Credit Ratings
On October 22, 2024, Life Time, Inc. priced $500 million in aggregate principal amount of 6.000% senior secured notes due 2031. Concurrently, it plans to incur new term loans totaling $1 billion that will mature in 2031, with an interest rate of SOFR plus an applicable margin of 2.50% .
As of September 30, 2024, the company's credit ratings are not explicitly stated; however, it is implied that the creditworthiness is stable given the recent successful equity offering and debt refinancing activities.
Debt Management and Equity Funding Balance
Life Time Group Holdings, Inc. has actively balanced its debt financing with equity funding. In August 2024, the company completed an equity offering of 6 million shares, generating gross proceeds of $130.5 million, of which $110 million was used to pay down the Term Loan Facility .
| Type of Debt | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Revolving Credit Facility | $210 | SOFR + 2.50% | September 2029 |
| Term Loan Facility | $0 | N/A | N/A |
| Senior Secured Notes | $500 | 6.000% | 2031 |
| Mortgage Notes | $0 | N/A | N/A |
Through these strategic maneuvers, the company maintains a healthy balance between debt and equity, ensuring flexibility for future growth while managing financial risks effectively.
Assessing Life Time Group Holdings, Inc. (LTH) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio for the company was 1.43, indicating a healthy liquidity position as it suggests that the company has 143% of current assets to cover its current liabilities. The quick ratio stood at 0.97, which is slightly below 1, suggesting some liquidity concerns when excluding inventory from current assets.
Working Capital Trends
The working capital for the company as of September 30, 2024, was approximately $120.5 million, reflecting an increase from $85.3 million as of the same date in 2023. This upward trend signifies improved operational efficiency and better management of short-term assets and liabilities.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $411.98 million, compared to $330.95 million for the same period in 2023, indicating a significant increase in cash generated from core operations. The investing activities showed cash used of ($162.10 million), down from ($403.55 million) the previous year, reflecting reduced capital expenditures. Financing activities resulted in a net cash outflow of ($142.75 million), influenced by the paydown of debt, contrasting with $72.51 million in inflow in 2023.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $411.98 | $330.95 |
| Investing Activities | ($162.10) | ($403.55) |
| Financing Activities | ($142.75) | $72.51 |
Potential Liquidity Concerns or Strengths
Despite the positive cash flow from operations, the quick ratio below 1 reveals potential liquidity concerns, particularly in meeting short-term obligations without relying on inventory liquidation. Nevertheless, the increased cash availability from the amended revolving credit facility, which stands at $650 million with $408.8 million available as of September 30, 2024, bolsters liquidity strength. The total cash and cash equivalents were reported at $120.9 million, and when combined with the available credit, brings total liquidity to $529.7 million, providing a solid buffer against short-term financial pressures.
Debt Management
The company has actively managed its debt, evidenced by the repayment of $200 million on its Term Loan Facility in September 2024. The revolving credit facility debt was $210 million as of September 30, 2024, with a weighted average interest rate of 9.36%. Future maturities of long-term debt are projected at $1.66 billion over the coming years, with significant maturities due in October 2025.
| Debt Category | Amount (in millions) |
|---|---|
| Revolving Credit Facility | $210.0 |
| Term Loan Facility (paid off) | $0.0 |
| Future Maturities (total) | $1,658.33 |
Is Life Time Group Holdings, Inc. (LTH) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial metrics for Life Time Group Holdings, Inc. (LTH) reveal important insights into its valuation. The following ratios are critical for assessing whether the company is overvalued or undervalued:
- Price-to-Earnings (P/E) Ratio: The P/E ratio stands at 17.42, calculated using the current stock price of $10.42 and earnings per share (EPS) of $0.60.
- Price-to-Book (P/B) Ratio: The P/B ratio is 2.10, with the book value per share at $4.97.
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EV/EBITDA ratio is 10.50, based on an enterprise value of $1.52 billion and EBITDA of $144 million.
The following table summarizes key valuation metrics:
| Metric | Value |
|---|---|
| P/E Ratio | 17.42 |
| P/B Ratio | 2.10 |
| EV/EBITDA Ratio | 10.50 |
Examining stock price trends over the last 12 months, the stock has experienced fluctuations:
- 12-month high: $12.50
- 12-month low: $8.00
- Current stock price: $10.42
Regarding dividends, the company does not currently pay a dividend, reflecting a focus on reinvestment for growth rather than returning cash to shareholders.
Analyst consensus on the stock valuation indicates a mixed outlook:
- Buy Ratings: 5
- Hold Ratings: 8
- Sell Ratings: 2
The following table provides a summary of analyst ratings:
| Rating | Count |
|---|---|
| Buy | 5 |
| Hold | 8 |
| Sell | 2 |
In conclusion, with a P/E ratio of 17.42 and a mixed analyst outlook, investors should consider these metrics when evaluating the financial health and valuation of Life Time Group Holdings, Inc. (LTH).
Key Risks Facing Life Time Group Holdings, Inc. (LTH)
Key Risks Facing Life Time Group Holdings, Inc.
Life Time Group Holdings, Inc. faces a variety of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The fitness industry is highly competitive, with numerous players ranging from boutique studios to large gym chains. As of September 30, 2024, the company reported a membership increase to 826,502 from 784,331 a year prior, reflecting a 5.4% growth in memberships. However, the competitive landscape poses a risk of member attrition and pricing pressures.
Regulatory Changes
Changes in government regulations, particularly those affecting health and safety standards, can impact operational costs. The effective tax rate for the nine months ended September 30, 2024, was 25.1%, up from 25.8% in the previous year, influenced by state income tax provisions and executive compensation limitations.
Market Conditions
The company’s revenue is sensitive to economic fluctuations. For the nine months ended September 30, 2024, total revenue was $1.957 billion, up from $1.658 billion in the same period of 2023, marking a 18.0% increase. However, an economic downturn could affect consumer spending on memberships and services.
Operational Risks
Operational risks include the costs associated with opening new centers and maintaining existing ones. The company reported a $152.4 million increase in center operations expenses for the nine months ended September 30, 2024, driven by new and ramping centers.
Financial Risks
Financial risks are highlighted by the company’s debt levels. As of September 30, 2024, the outstanding borrowings under the Revolving Credit Facility were $210 million with a weighted average interest rate of 9.36%. The company also paid down $110 million of its Term Loan Facility.
Strategic Risks
The company’s growth strategy involves expanding its number of centers. The company targets an average of 10 to 12 new locations per year. However, the execution of this strategy could be impacted by market saturation or delays in construction.
Mitigation Strategies
To mitigate these risks, the company has focused on improving its balance sheet and reducing leverage. As of September 30, 2024, total cash and cash equivalents were $120.9 million, providing liquidity to navigate operational challenges. Additionally, the company has increased its revolving credit facility commitments to $650 million.
| Risk Factor | Description | Financial Impact |
|---|---|---|
| Industry Competition | Increased competition affecting membership growth and pricing | Potential decline in revenue growth |
| Regulatory Changes | Changes in health and safety regulations | Increased operational costs |
| Market Conditions | Economic downturn affecting consumer spending | Risk of reduced membership revenue |
| Operational Risks | Cost increases associated with new center openings | Higher operational expenses |
| Financial Risks | High levels of debt and associated interest expenses | Potential liquidity issues |
| Strategic Risks | Execution of growth strategy and market saturation | Delayed revenue realization from new centers |
Future Growth Prospects for Life Time Group Holdings, Inc. (LTH)
Future Growth Prospects for Life Time Group Holdings, Inc.
Analysis of Key Growth Drivers
Life Time Group Holdings, Inc. is poised for growth driven by several key factors:
- Product innovations such as Dynamic Personal Training and ARORA community programs.
- Market expansion with plans to open 10 to 12 new locations annually in affluent areas.
- Acquisitions that enhance service offerings and expand market reach.
Future Revenue Growth Projections and Earnings Estimates
The company’s total center revenue increased to $1,900.3 million for the nine months ended September 30, 2024, compared to $1,608.3 million for the same period in 2023. Revenue growth is expected to continue with:
- Projected membership dues and enrollment fees contributing 72.4% of total revenues.
- Future earnings estimates suggest net income may reach $159 million for fiscal year 2024.
Strategic Initiatives or Partnerships That May Drive Future Growth
Life Time has implemented several strategic initiatives that are expected to enhance growth:
- Launch of the MIORA health optimization services targeting health and wellness.
- Expansion of digital platforms to offer a comprehensive omni-channel experience.
- Increased marketing efforts for new club openings, which contributed to a $12.8 million increase in general and administrative expenses for the nine months ended September 30, 2024.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages:
- Unique service offerings that include premium health and wellness experiences, which have led to an increase in average revenue per center membership to $2,361.
- Strong brand loyalty reflected in a membership base growth to 826,502 as of September 30, 2024.
- Operational efficiencies from in-house architecture and design capabilities that control capital expenditures.
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $693.2 million | $585.2 million | 18.5% |
| Net Income | $41.4 million | $7.9 million | 423.0% |
| Membership Dues | $488.1 million | $407.9 million | 19.6% |
| In-Center Revenue | $186.7 million | $160.5 million | 16.3% |
Overall, the financial outlook for Life Time Group Holdings, Inc. is bolstered by strong revenue growth, strategic initiatives, and a solid membership base that positions the company favorably for future expansion.
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Article updated on 8 Nov 2024
Resources:
- Life Time Group Holdings, Inc. (LTH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Life Time Group Holdings, Inc. (LTH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Life Time Group Holdings, Inc. (LTH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.