Athletic Country Clubs Propel Life Time’s Growth

Life Time

Life Time reported Q2’22 earnings on August 10. Continuing its pandemic recovery, the premium health club operator touted jumps in sales and memberships but tempered expectations for near-term growth.

By the numbers:

  • Total Q2 revenue increased 42.7% YoY, reaching $461.3M.
  • Adjusted EBITDA increased to $63.1M vs. $4.2M in Q2’21.
  • Center memberships hit 724,778, up 10.2% from the same time last year.
  • Life Time has gained 50,795 members since this March.

Between the lines: Bear in mind, nearly every brick-and-mortar gym will show YoY improvement from Q2’21 — many cities had at least some COVID capacity restrictions in place until mid-June last year.

Trending up, the influx of in-person membership is still ongoing. But Life Time CEO Bahram Akradi admitted on the call that, despite its gains through the first half, a slowdown is likely.

“While we are seeing current macroeconomic headwinds that may slow our near-term recovery, we remain confident in the growth of our business as we accelerate the rollout of our strategic initiatives.”

Pitfalls of premium. “Macroeconomic headwinds” are affecting the whole industry—both connected fitness and IRL health clubs—as disposable income dries up amid a higher cost of living.

After hiking membership dues all this year, Life Time’s growth may stall longer than predicted after pricing out a greater proportion of would-be exercisers.

Athletic country clubs. Undeterred, Life Time is committed to its growth strategy for “Athletic Country Clubs”—a concept it introduced earlier this year—opening 10 more campuses this year.

Making the experience worth the price tag, it’s investing in pickleball, spa and recovery services, personal training for aging members, and more.

Cash flow. Despite a projected $1.85B in 2022 revenue, Life Time is losing money, expecting a $55.6 to $73.6M net loss this year.

Freeing up cash flow to pay down debt (and safeguard against slowing sales), it closed two sale-leaseback transactions on its gyms during the quarter, with five closing in October and at least five more on top of that by the end of the year, a potential $675M in total.

Looking ahead: A wellness social club of sorts, Life Time’s all-inclusive resorts bring recreation, coworking, dining, and exercise together in one stop. But, the chain’s memberbase may peak if it prices out the everyday consumer.

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