Q4 2021 Life Time Group Holdings Inc Earnings Call
Okay.
[music].
Good morning, and welcome to the Lifetime Group Holdings Conference call to discuss financial results for the fourth quarter and full year fiscal 2021 at this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will be given at that time. Please be advised that reproduction of this call at whole or in part is not.
Permitted without written authorization from the company as a reminder, this call is being recorded during this call. The company will make forward looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from our forward looking statements. There is a comprehensive list of risk factors in the company's SEC filings, which you are encouraged to review.
You also the company will discuss certain non-GAAP financial measures, including adjusted EBITDA and free cash flow before growth capital expenditures. This information along with reconciliations to the most directly comparable GAAP measures are included in the earnings release issued this morning in the company's 8-K filed with the SEC and on the Investor Relations section of Lifetime's webs.
Right.
On the call from management today are <unk>, founder, Chairman and Chief Executive Officer, and Tom Bergman, President and Chief Financial Officer, I will now turn the call over to Mr. Ekati to get started please go ahead Sir.
Good morning, and thank you for joining our fourth quarter, there and year end earnings call.
I am pleased to share that we had a very good fourth quarter there.
Our revenue was slightly ahead of guidance and adjusted EBITDA was in line with our previous guidance. Despite the heavy headwinds from Delta and Army crime.
The timing of these COVID-19 variance, coupled with significant mask and vaccine mandate.
Was very disruptive to membership recovery trends in December January and early February .
However from mid February onwards.
We are seeing great momentum in club traffic and membership recovery.
Our main focus for 2022 is a steep revenue growth throughout the year to levels in fourth quarter, there that positions the company extremely well for 2023.
We made a very decisive decision to continue the offensive strategy, we started in 2021.
So we the delco and Amit Quant headwinds.
We believe that these strategies have put us in fantastic position to capture significant additional memberships.
At substantially higher average juice.
Our center growth pipeline is the most robust I have seen in nearly 50 years.
Throughout the pandemic, we established a high trust level with our real estate partners by paying 100% of the require rent.
Resulting in even closer relationships.
In addition, our partners are experiencing the very positive impact.
Our lifetime and the financial benefits it brings.
As a country club in their development.
We continue to see an increasing number of urban and suburban opportunities from these relationships.
For 2022 we plan to open 12, new athletic country clubs and our pipeline for 'twenty, two 'twenty, three and beyond continues to become stronger than ever.
We remain committed.
To further strengthening our balance sheet earlier this year, we entered into a nonbinding letter of intent.
The sale leaseback.
Four of our properties for aggregate proceeds of $175 million.
We expect to close on two of these properties by the end of this month and the other two properties by the end of September .
We continue to evaluate opportunities for additional sale leaseback transactions.
As a reminder.
Our owned real estate.
Has estimated market value of more than $3 billion.
Which exceeds the company's current debt levels of approximately $1 8 billion.
I'm looking forward to the Q&A portion of this call.
After Tom's remarks here you go Tom.
Great. Thank you Bob I'll provide some additional detail on our 2021 fourth quarter and full year results as well as our initial outlook for the first quarter and a few comments on fiscal year 2022.
In the fourth quarter total revenue increased 57.8% to $365 million driven by increases in both center revenue and to a lesser extent other revenue total center revenue increased 56, 8% to $352 9 million.
Dollars and was driven by increases in both membership dues and in center revenue.
Average center revenue per center membership increased to $536 from $414 in the prior year period, reflecting increased spending with our in center business says the continued execution of our pricing strategy and the opening of new clubs and more fluid.
Markets on a same store basis comparable center sales increased 52%.
Senator memberships increased approximately 30% to just over 649000 as of December 31st 2021, compared to just over 500000 as of December 31 2020.
As we discussed on the last call on a sequential basis, we typically lose members from the third quarter to the fourth quarter due to normal seasonality related to kids going back to school and our pools clothing in the fall the sequential decline of 19000 sensor memberships from the end of the third quarter to the end of the fourth quarter.
<unk> was in line with our expectations and included the loss of approximately 9000 central memberships related to the closure of four small atypical centers during the fourth quarter, each of which had an expiring lease and did not conform to our overall comprehensive lifestyle brand experience.
Average monthly dues per membership was $135 in the fourth quarter compared to $104 in the fourth quarter of last year, an increase of approximately 30%.
This increase was also in line with our expectation with the closure of the four small off brand Li centers that I, just mentioned combined with the expected opening of new higher priced premium clubs throughout 2022 and the continued layering in of price increases to our existing members we expect to.
ROE to continue to grow our average monthly dues per membership throughout this year.
Other revenue, which includes revenue generated from businesses outside of our centers more than doubled to approximately $7.6 million in the quarter and was primarily driven by our athletic events business.
Moving on to operating expenses in the fourth quarter total operating expenses were $698 $8 million and included noncash share based compensation expense and one time items of 327.8 million, excluding share based compensation expense and one time items.
Total operating expenses increased 21, 4% to $371 million.
Center operations expense was $218 $8 million and included $12 9 million of noncash share based compensation expense.
Excluding share based compensation expense and a $1.4 million onetime cost recovery center operations expense increased by 33, 9% or $52.5 million due to the impact of our center closures during last year's fourth quarter.
Rent expense increased 15, 7% to $55 $3 million, primarily driven by additional sale leasebacks compared to the prior year and additional noncash rent expense, where we've taken possession of a site to begin construction.
General administrative and marketing expenses were $353.6 million and included $309 9 million of noncash share based compensation expense and $2 $6 million of other one time items, excluding these items general and.
Administrative and marketing expenses increased 27, 4% to $41 $2 million, primarily due to the re staffing of our center support overhead functions at centers reopened and additional public company expenses.
Depreciation and amortization decreased one 8% to $58 $1 million.
And other operating expenses were $13 million and included $4 $6 million of noncash share based compensation expense and point $8 million of gains related to sale leasebacks. Excluding these items other operating expenses decreased 21, 1% to $9.
$2 million.
Our GAAP reported loss from operations for the quarter was $338.3 million compared with a loss of $79 $7 million in the prior year period.
Excluding the $327 8 million of share based compensation expense and one time items. The adjusted loss from operations was 10 $5 million compared to an adjusted loss from operations of $77.3 million in last year's fourth quarter.
Net interest expense was $48 4 million and included $15 9 million of cost incurred in connection with the partial pay down of our term loan facility, including a $5 $7 million prepayment penalty. Excluding these onetime items net interest expense decreased approximately point <unk>.
7% to $32 $5 million.
Our fourth quarter effective tax rate was 21, 1% compared with 25, 3% in the prior year period.
The lower effective tax rate is primarily a result of valuation allowances against our state net operating loss carry forwards and certain other non deductible tax items.
Our fourth quarter GAAP net loss was $304 $8 million compared with a net loss of $83 $9 million in 2020.
Excluding share based compensation expense of $258 $3 million and $12 9 million of one time items, our adjusted net loss improved to $33 6 million from $82 1 million.
Fourth quarter, adjusted EBITDA increased to $48 million from a loss of $18 million in the prior year period.
For the full year.
Total revenue increased 39% to $1 $3 billion driven by a 38, 4% increase in center revenue and a 70.6 increase in other revenue.
<unk> Center sales increased to 35, 3% average center revenue per center membership increased to approximately $2100 versus approximately $1300 in the prior year period.
Our GAAP net loss was $579 4 million compared with a net loss of $360 2 million in 2020 <unk>.
Excluding share based compensation expense of $269 1 million and $73 4 million of one time items adjusted net loss improved to $236 8 million from $324 2 million.
Adjusted EBITDA increased to $80 3 million from a loss of 63 million.
Moving on to the balance sheet cash and cash equivalents as of December 31, 2021 was $31 6 million compared to $33 $2 million as of December 31, 2020.
As we discussed on last quarter's call, we completed our IPO during the fourth quarter and used the proceeds to pay down $576 million of our senior secured term loan facility, including a $5 $7 million prepayment penalty with the remaining proceeds used for general corporate purposes.
We also announced during the fourth quarter that we increase the size of our revolving credit facility from approximately 357 million to $475 million and extended the maturity to December 2026.
As Brian mentioned, just a few weeks ago, we announced that the company has entered into a nonbinding letter of intent for the sale leaseback of four properties with an estimated aggregate transaction price of $175 million.
We plan to complete the sale leaseback of two of these properties on or before March 31, 2022 for approximately $80 million in gross proceeds.
The sale leaseback of the two additional properties is expected to be completed prior to September 30th 2022 for approximately $95 million in gross proceeds.
We will continue to consider and evaluate additional sale leaseback transactions in the future as a tool to continue to strengthen our balance sheet and fund the attractive growth opportunities we have in front of us.
As a reminder, as we continued to execute sale lease back transactions and incur incremental rent expense, we look at adjusted EBITDA plus the impact of rent expense as reported in our financial statements to better understand our underlying operating performance and trends.
Capital expenditures totaled $328 $9 million during the year compared with $265 6 million in 2020. The increase was primarily related to the higher number of club openings and properties currently under construction, we opened six new clubs in 2021 and as.
<unk> mentioned, we plan to open 12, new clubs in 2022.
Turning to our initial outlook for the first quarter of 2022 for the first quarter of 2022, we expect <unk>.
Revenue to be in the range of $385 million to $395 million.
Our net loss of 64 million to $60 million.
Adjusted EBITDA to be in the range of $38 million to $42 million.
This outlook reflects the omicron impact we experienced in late December January and February and the increased strategic investments, we have made and the numerous initiatives.
<unk> previously mentioned to drive membership and revenue growth throughout 2022 and beyond.
Let me provide some additional commentary on how we are thinking about the year from both a revenue and profitability standpoint.
We are forecasting revenue to be in the range of 1.8 to $1 $9 billion.
We expect revenue to accelerate throughout the year as we move further away from the pandemic open our pools during the second quarter and gain momentum from our new initiatives.
As you think about our revenue growth throughout the year. It's important to remember that we are different than most typical gyms or fitness companies that generate the majority of their memberships in the first couple of months of the year. For example in 2019, we sequentially grew our net center memberships by just over 31000 in the first quarter.
And 24000 in the second quarter totaling net new center memberships of just over 55000 in the first six months of that year.
For this year with our initiatives gaining momentum the opening of our outdoor pools and expecting to be free of any COVID-19 mass mandates or other restrictions, we expect second quarter net new center memberships to exceed first quarter net New center memberships.
A few other comments as we think about 2022 .
We are forecasting full year rent expense to be in the range of $235 million to $245 million or approximately 13% of total company revenue.
This includes noncash rent expense of $35 million to $40 million.
As we build membership revenue throughout 2020 to continue to gain operating leverage on our fixed cost base and achieve returns on the new initiatives. We are investing in we are targeting our adjusted EBITDA margin to steadily improve and be in the 18% to 20% range during the third and fourth quarter.
Orders of 2022.
We think this will position us well for additional margin expansion heading into 2023.
Outside of the numbers, let me just start to wrap up by saying, while the timing of omicron disrupted our business in late December January and early February . We believe this is temporary and have started to see encouraging membership and usage trends over the last few weeks with the removal of mass mandates around the country.
During omicron, we had nearly 30% of our centers under mass mandates and or other COVID-19 restrictions. So we are very pleased that as of March 11th we expect all of our U S clubs to be free of Covid related restrictions our three Canadian clubs are the only to have remaining.
Restrictions.
There is a lot to be optimistic about as we move away from the pandemic look forward to our summer outdoor season and see the momentum start to build in many of the new initiatives. We have been investing in in 'twenty 'twenty. Two we will continue to focus on opening premium clubs and iconic dance.
Ben and suburban locations.
Strengthening our balance sheet make.
Making the right long term investments to take market share and delivering unparalleled healthy way of life experiences for our members.
With that we will turn the call back over to the operator for Q&A operator.
Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing star.
One one moment please while we poll for questions. Our first question today is coming from Simeon Siegel from BMO capital markets. Your line is now live.
Thanks, Good morning, everyone hope, you're all doing well.
A quick question, Tom how much of the digital and hold decline came from conversions back center memberships, maybe how you're thinking about that digital on hold rate of recapture and then could you just speak to the average monthly price paid for membership this quarter versus prior levels would be great to dig into a little bit more of what you guys are seeing with the price lists and what you'd expect going forward. Thanks.
Yeah, Thanks, Tim and good morning to start with you know typically we get about 75% to 80% of our digital on hold members come back to access over time that time period that people are going on hold we continue to see shorter so we're down to about the average of around four five to five months hold period.
So we continue to do a nice job of converting on hold members back to access members on the pricing Prime Brahmana ER are very happy overall with the trends, we're seeing on acquisition and the price changes. We made we continue to be pleased with it overall across the country.
We didn't have as large of an increase.
From Q3 to Q4 as we didn't open any new higher priced clubs during the fourth quarter, but we did see a slight increase as we started to take a little bit of legacy price member increase and we are very well positioned now as we think about the 12 clubs that we opened here in <unk>.
2022, they are opening up at over a 20% premium to where the existing price for those clubs in the market are so as we open up the new clubs here in 2022, as we continue to layer in legacy price increases we expect to continue to see our average dues.
As for membership growth throughout the year and in the year somewhere in that 150 to $160 range. Additionally, Simeon we've made can some additional sort of maneuver.
Maneuvers here with the expectation that.
The length of time people are in digital will shrink from.
Four and a half this is very sad right now to about three months.
That will take probably another five or six months of transformation and then will be below the average of three months, so they're going to shave another month and a half out of that.
The average dues that we are selling memberships everyday.
Is somewhere in the one.
65 to 185 range, depending on the day of the week, where there was more families joining more singles joining.
And <unk>.
Interesting thing is as you know when we went public and we shared this with you guys at the time the difference between.
People dropping off and people coming in was about $2025 of membership and right. Now we are more like 35 two for the dollar.
When you compare it and this is between coming and going to compare to.
Like the first portion of this month the membership sales are.
About 150% on average dues.
They were in 19, so same.
Same number of memberships brings us actually a 150% more.
In.
Dues revenue reoccurring dues revenue.
Going forward so.
<unk> are really really amazing there great.
That's great and then if I can have one follow up I think even since the last time, we spoke there's just the different conversations going along with connected fitness do you guys want to share your any new learnings you have with your digital but then also are you seeing people come back from from connected fitness. So just any color or your perspective, there, yes, I mean, I think there are some people.
I think it's a smaller population than the bigger population.
Contrary to the common belief, maybe a year and a half ago.
We are going to use.
Digital only.
We see every day people coming back.
Every single day and there are just so you could see the smile on their face they are happy they're thrilled to be back with the social community get their workout. They recognize the quality of the workout is never the same when it's at home having said that.
They also love the transformation of our company to the omni.
They have everything they possibly want.
All kinds of classes on demand.
No.
When we were going to continue to increase.
The number of our.
Streamed classes high quality, we have.
25 Amazing studio has developed in our own clubs and would do simultaneously teaching and doing.
These are <unk>.
Classes streamed.
All of them working with.
With the with the <unk>.
At the station with the Healthsource, what the Hell talk.
So the App is so comprehensive in terms of healthy way of life.
We basically like I mentioned before we've been working on the back the engine behind it the platform.
Sometimes in the in the three Q, we'll be in a position to take that and invest in trying to take it to masses to different channels, but.
The business in my mind largely is omni.
It's not purely physical is not at all purely digital so we're positioned amazingly well.
Great. Thanks, So much guys best of luck for the year had thanks.
Thank you.
Thank you. Your next question today is coming from John Heimbach <unk> from Guggenheim. Your line is now live.
Hey, I wanted to start with.
In center revenue and your thoughts on the cadence of recovery, particularly personal training.
And then sort of as part of that right you talked about investments inside the center.
Is the is that are those investments greater than you thought.
You know, maybe six months ago and in particular, I think about getting right. The roster of personal trainers ramped back up to closer to where they were the 2019.
Okay.
John That's a great great question and I think the business has changed.
Changed dramatically in some fronts over the last.
24 months.
Most heaviest impacted is personal training.
And we have.
The rehab the clear strategy back being back in the clubs and myself.
To see the personal training the way it was being done.
You continue doing it exactly the same way as you were doing it.
In the past I think your numbers are going to be 50%, 60% at best.
Reinvented.
Two a path that there is a clear distinction between the personal training that you can do with it.
Hands on trainer.
And versus <unk>.
Somebody sending you a work out through the App and sales you followed this routine those have to be so different in execution.
The value of the in person physical training has to be I mean, they're not even in the same orbit is not you shouldnt be comparable.
We have made all the adaptations.
Our intent is to get our personal training revenue.
Beyond per club beyond where it was.
In 2019, we have a clear plan I'm not going to get through the details of that here at all.
We are working fast and we are growing substantially with a goal of.
Growing our PT revenue double digits.
Month over month from where it is today it has to be 10% plus growth month over month and all system is setup can it be done yes does it need to be a new.
And the new imagination of how that training has to be the answer is absolutely and we haven't all laid out we've been investing heavily.
In sort of going through creating that differentiation skewing the training right now and I see us being able to achieve that and have been in a position by end of this year. So we would be we wouldn't have to talk about any excuses going in 2023.
We would give you guys our investors and.
An amazing robust experience for the customer and amazing numbers for for you guys. The other revenue centers.
<unk> yeah.
Yes.
Our our tenants program is already above and beyond 2019.
Cafe, and Spa, which are two big ones, we will definitely surpassed 19 revenues and same with kids. So again, we played John we played a hard hard defense.
For six months, we went to defense from March of 2020 till October of 2020, then.
The executive team and myself focused on turning the company focused on how we would have to re imagine and reinvent all of those things that needed to be not to get you back to where you were in 2019, but should get you a plus 10%.
And we have been investing heavily working day and night, we've been putting these programs in place.
And ill take.
It's taken the last.
12 months literally for these things to be imagined created.
Put into the system started working them debug and then having them start paying some fruit right now we're seeing the growth in every base based on the work we've been doing playing offense for the last 12 months 14 months.
Rather than going back to defence.
And what I see right now with our expectation is that the the fruit that comes from this.
Is going to continue to.
Improve.
Month over month. So we are very very bullish on what we are going to be able to accomplish for.
Good for you guys and also deliver the most amazing experience one that is significantly and more homogeneous Lee better than the best we ever did all in the next you know all the in the next six months I mean, we see this all kind of coming together very very rapidly looking for.
20% growth quarter over quarter, there plus.
And then we really need to get this company.
To not.
Percent of 2019, we need to get this company to too.
It needs to be 110% and more Tom Yeah, just to add on a little bit John Youre, absolutely right, where we've been making investments as Brian said to go on the offensive in order to drive revenue growth and accelerate revenue growth. So part of that is we're at 2700 personal trainers today pre.
The pandemic, we were at 37% 3800, so we're investing and rebuilding our personal training business to hit those revenue growth goals.
<unk> laid out there. We've also made a big investment into class schedules that have really robust fast casual and as the membership volume grows yes, we've got that fixed cost base now establish so as we grow our dues and revenue from here will be able to start getting a lot of leverage on both our personal training base as well as our overall.
For all our club operations expense.
They want one quick follow up just in terms of your capacity right on the club opening front right. So I think the thought was maybe 10 10 or so a year after 'twenty two.
What's the gating factor I imagine as people right. If you can do sale leasebacks, it's not capital it may not be real estate anymore.
Is that is that the gating factor and can the organization do a lot more than 10, or 11, a year or you'd like to hold it to that.
Yeah looked at I I run a sort of.
Balance the expectation in here, but let me just walk you through our.
As we mentioned to you guys. This villages that we have developed lifetime living lifetime work lifestyle Athletic country club combined all in one.
We generally.
Very very generally we are not the developer of the.
Apartment building.
However, does so the results that we have from that is one some of the most disruptive.
Transformations for an industry we have.
So many conversations are going on where we basically are going to be developing these very very large urban.
Our athletic country clubs as part of these kind of live work play type.
<unk> and.
So our expectation is we're going to get at least a dozen clubs opening.
Per year.
Going forward for the foreseeable future.
And then there are other opportunities John to this is going to happen in the next.
3456 months here.
The way I think gives us potentially chance to pick away on some really good locations.
In other forms so my expectation of 12 clubs per year is basically unchanged and maybe will be more based on all the opportunities, we see but it won't be less.
Thank you.
Okay.
Thank you next question today is coming from Brian Harper from Morgan Stanley . Your line is now live.
Yeah.
Hey, guys.
Can you just maybe to follow up on that could you remind us how are some of the work co work locations and living locations factor in to your expectation for 12 this year.
Yes in that 12.
That's the 12 club count John in addition to that we'll be opening up or Brian sorry. In addition to that we'll be opening up.
Three additional lifetime work locations this year.
Actually very pleased with how the lifetime work is performing for us.
We'll also be opening up our second.
Our actually our third lifetime living location this year and Henderson Las Vegas, but the 12 that we speak about as pure athletic country Club resorts.
Okay.
The results in the living again.
We at this point the asset that we own which was the creating the concept is Henderson and it's doing amazing we'll start moving people then sometime in June hopefully by June one.
And we're looking really really forward to demonstrating the one that we have designed ground up but for the most part everything we're using that developers come to us they want to have their apartment building be branded lifetime, leaving because of the differentiation we bring into the into the format.
The higher rents and the faster.
Ramp ramp up which is a complete game changer for them and is providing all kinds of additional opportunities for us going forward.
Mostly in the fact that gets us.
He there additional income on the sites, where we have additional land and they are going to buy that land from us.
And build apartments that we get the management fee, we get additional memberships like our location in King of Prussia, or Parker, Colorado or.
It provides the opportunity to have a better economics for the clubs that were going to be building.
As a part of it.
Whole ecosystem.
Okay. Thanks, and maybe just another question on kind of membership sign up you know you talked about that nice pickups since February and next.
The expectations for <unk>.
What have you seen that kind of reinforces confidence in that.
Above you know normal seasonality drawings over the last few weeks do you think that you know in the <unk>.
Quarter of this year, it could be kind of above normal.
Seasonality I'm, just curious kind of some of the specific things that you've seen.
Sure.
I'll give you the best I can do in terms of the specifics and the answer is short answer is yes robustly yes.
Second quarter will be amazing.
We basically gain.
<unk> net memberships in every January .
Partially be the fact that we've always done promotions every two to three days. So we really are very very promotional prior to 2019 in January but we're not doing any promotions, where do letting the quality of our services and programs in our athletic country clubs kind of do the job and it's worked.
Extremely well.
But January we we have had better so we ended up.
So the under heavy heavy masking vaccine pressures.
Pretty much most of December .
All of January .
And then first I would say 10 days of February than we saw momentum shift but in February we actually did more net memberships.
Then January which has never happened.
Before in March we are starting much better than February of course that would be better than January .
And it's the numbers are extremely extremely promising the trends are very good gives us the confidence.
Two basically.
Our focus everybody on our expectation is there.
Levering no less than what we were expecting delivering in the fourth quarter. There. When we went public basically we think we will recover.
The impact of the Delta in omicron, coming together and sort of having the government closures and mandates and vaccines, which was very very disruptive we're going to make up for all of that.
By the fourth quarter there.
Yes, Brian I would just add we had we had 44 clubs 44 45 clubs under mass mandates in the fourth quarter and into January and parts of February as we saw those in February is starting to get peeled back we saw a really nice increase in club usage on our swipe activity and even last week.
Weak we saw about a 4% increase week over week and club usage. So we are clearly in the back half of February and first two weeks of March here seen a really great momentum in the usage of our clubs and you know just to give you. Some examples in Chicago the mass mandates came off on February 28.
Since then the first two weeks of March here, Chicago, leading the pack here on us on membership recovery.
So we can just see as all of these mass mandates and vaccine passports and restrictions.
February was better than January March is starting off to be better than February and that gives us a lot of confidence that in the second quarter of this year will actually outperform on net membership gains compared to the first quarter as well as I expect the second quarter membership change to exceed.
What it did in 2019 as well.
I.
Want to make sure. This is understood. This is no whining no complaining I just want to state the facts.
I have basically repeatedly told people if it was just.
<unk>.
Maybe the impact of the virus on us would have been about 10%.
And the remainder 50%, 60% a drop in our revenues and it was basically all government interventions as the closures vaccines masks all the different pressures they put restrictions that they put on our on our type of business.
It's interesting when you look at our day to day week by week data.
Across the country States that did not do any change in their policies I E, Let's say, Texas.
During the height of delta ramping into kind of putting into omicron those traffic drops maybe 8%.
7%, 9%.
As a result of the virus itself.
And now they've recovered.
The clubs that were government invention the municipality.
Mentioned with it.
Very hard closures and Matt and those could have been as much as 20, 30%.
The image to the to the swipes in traffic with this last week now we are seeing the highest swipe activity. The most traffic we have had since the beginning of this pandemic and we are seeing improved trends day by day.
Do we expect to be at 100% of traffic.
By the summer months absolutely.
And we're going to have that traffic is much higher dose.
Great. Thank you guys.
Thank you. Your next question is coming from Brian Nagel from Oppenheimer. Your line is now live.
Hi, good morning.
Good morning, Brian .
So what my question is a bit of a follow up to some of the prior questions, but no barometer.
Merge them together too.
As Youre seeing members now returned the clubs.
It's particularly as these COVID-19 pressures or mandates are abating is there anything different.
So I think noticeably different how people returning.
How they're utilizing the club or is it is it basically getting back to what it was pre pandemic.
I see the happiest spaces, we have ever seen.
Don't recognize how their lives has changed and not sort of the better while they're being smart polluted.
And I mentioned to you guys again, there is no match.
As you would possibly imagine some of the best equipment and space in my home for workout.
Never the same my work out at home isn't nothing close to my workout in the club number one number two the reason I go with the club is that what we have been focusing on Brian just go it brings something that makes me want to take the time to explain this.
We have been working as we've told you guys over and over to try to create this athletic country club experience.
And when you come to the club and you see the social fabric of what's happening in our clubs as athletic country Club I know that there is no. Other lifetime has nearly 30 to 35 million square feet of indoor and outdoor tennis and pickle ball and pools.
You cannot see it cannot have.
An experienced like lifetime by any other path and nobody can do that we give the people the ability to travel around the country.
Go to the Beach club I was this weekend in coral gables, the remembers from Syosset.
East coast coming to coral gables Havana nights.
Our total experience.
Is so robust that the people have been store the gardens, so afraid of Covid. They just.
Stayed home their routines change when they come back they are just thrilled. Meanwhile.
We did not let this crisis go to waste.
I want to say this again, so that we have very candid conversation COVID-19 .
It is the only thing ever in the history of this company.
Coupled with all the government decisions to take us from every year, adding revenue and EBITDAR to the company. It was the only time, we went the other way, but when there are crises you do not sit in your Bud and say Oh, My God look how bad. It is you think about what's the opportunity.
Ah procured here.
For us to really examine it.
In this path of taking these clubs from really large 100000 square feet.
Category Killer, what I would say big Big multi purpose gyms to transfer to complete our transformation to this national Athletic country Club.
That gives us something that no other country club can you can play pickle ball anywhere in the country can play tennis anywhere in the country. You can go to a beach club anywhere in the country. So what's happening right now our members come and tell us that experience is amazing.
<unk> and they're making sure the route of their traffic if they're driving from Midwest.
Midwest to Florida, they're going buy a lifetime locations and having the specific hotels.
Picked up so we have taken this as an opportunity.
Absolutely homogenized every experience to the highest level of athletic country club more like a four season execution, we have remember concierge and the club instead of salespeople things have really improved our members are thrilled we have continued to invest in.
In the clubs.
Not only physically but programmability as well so we have different programs, we have more options and so far.
Every every reaction is they are either floored that.
And people will come to US and said were still amazed the way you guys have handled this we are more grateful we're more thankful. So it's really amazing all I can say to you I don't see any negative trends all I see is positive trends.
I appreciate the color congrats thank you. Thank.
Thank you.
Thank you. Our next question today is coming from Robbie Holmes from Bank of America. Your line is now live.
Oh, good morning, guys. Thanks, so much for all the callers really helpful. I have just a few follow ups just.
One of them maybe.
<unk> would just be as soon as you are recovering people how how much of that is totally new members to.
Lifetime when you see these new members coming in where are they coming from.
Then also just one other follow up related to this so it sounds incredible that youre seeing the seasonality kind of shift after you kind of had the missed a window normal because omicron argue as you move through the year are you thinking of some new marketing initiatives.
The sort of.
Offset the fact that the Army corps and kind of ruined the normal window in January .
Both good questions. So typically prior to Covid.
We would basically have 21% to 24, 25% of our membership being people who had dropped out.
And then they come back as past members they wanted to rejoin.
Right now that number is more 35% of our membership is natural because there are people who are been sitting out for a period of time and then they just get up and come at some point.
<unk> brings them in.
And then to your question.
Do I feel like we.
We need to do marketing to get there.
When we do need it.
We will put it in because we're not going to fail our own objectives and goals that we have for the year.
But at this point all of our energy has been to create that.
The best reasons for people to fill the need having to get up and come to a lifetime and those are at least a half dozen.
Very very specific initiatives that we have rolled out in the last several months and were focusing on progress programs classes routines, making things easier, giving the most amazing experiences, creating the more social programs.
Programs and all of this all of the money rather than spending it on.
Advertising, we're actually spending less money.
In advertising or marketing than ever before.
And we are getting more results more memberships and more average dues and for instance, simply we are seeing no complaints no mention of the price changes people are coming back to a club that was $89 now, they're paying $119 $129 and there isn't a single.
Question why is as much it's literally just rolling right in.
All of the churn the churn is going to benefit lifetime, because we were so so so under priced.
We still have tremendous pricing power, even we've been from where we are.
The rack rates right now we have tremendous pricing power from here forward.
Based on the fact that once you go to the direction.
Of customer coming into Europe , because of the experience the price just doesn't matter. When you are focusing on price and promotion and the price doesn't matter, but right now all of our strategies are working robustly, they're not just working they're working robustly.
That sounds great. Thank you.
Uh huh.
Thank you. Your next question today is coming from Dan <unk> from Wells Fargo. Your line is now live.
Hey, good morning, Brian and Tom Thanks for taking my questions.
Just wanted to hit on.
Some of your recently opening centers, if you could talk about the ramp and ramp there maybe any data points or color you can provide.
Especially the ones in the higher cost of living areas, such as coral gables or no.
And also similarly, or similarly, do you still expect kind of a four year ramp there to reach a normalized revenue or do you think that there could be maybe some upside.
I think they will I think they will ramp in three years or less we used to give I remember from the time Robinson and Ics are here to talk about diverse we've talked about clubs getting to 90% of their membership capacity within four years right now I think we get to the 90% membership capacity definitely short of 36.
<unk>.
Our systems are so much more robust in.
Creating the wait list for our club prior to we had 9000 people in a wait list for our Frisco club with just open.
That club will reach $1 million of dues faster than.
Anytime in the past that's $1 million of Doosan.
Given months.
So we are we are seeing amazing amazing results in our other club. We just opened in river North in Chicago, If you guys ever get the chance to go to any of these clubs I strongly recommend you guys take the time you will see the level of this sort of a high end athletic country Club field.
Social fabric.
The distinction of all the amazing programs they come to life in a way that they do.
Just naturally work they don't need anybody to sell it they don't need any marketing forum that is coming but the ramps are going to be.
Closer to the edge to the 90% of the capacity of the club I think will happen all insurance of three years.
Got it thanks, and just for my follow up in terms of your guidance. I know you guys gave a lot of helpful color, we're coming out to somewhere around EBITDA in the mid 500 range based on your commentary.
Is that just obviously a little bit just from from a little bit softer first quarter, but can you just talk about maybe the puts and takes of that versus maybe your prior guide and when you were kind of going through the process of going public.
Yeah, I'll start it's really just the temporary delay due to delta and omicron pushing the recovery back.
One to two quarters, so from a strategy standpoint from an execution standpoint, everything we're trying to do Dan we're still working extremely hard and as Brian said our goal is to drive this to get the revenue levels back in the second half of the year. So we can get back on track of where we thought we would be pre pandemic. So.
To me, it's really just that really Delta omicron impact no change in strategy no change in execution and all the new initiatives that we've been investing in that will start to take hold here in the second quarter as we really see an acceleration of memberships and then hold on to them throughout the rest of the year and the most critical.
A number that I am driving.
The most critical focus number.
Is where the jumping off is from 'twenty to 'twenty two to 'twenty three.
So.
I will not sit still until I know, we're going to beat.
The the numbers, we had in our projections for December of 2022.
Four.
We had when we went to met with all of you guys were going to do everything pretty confident with execution of our plans.
We'll beat those numbers for December of 2022, now why that's important because as you guys note two thirds of our revenue is subscription and if you have that subscription robustly ahead of where you wanted it to be that will repeat itself going forward into the 20 into the following year.
Month after month, so all of the strategy here is focusing on as I mentioned earlier in the call to get the revenue of the company to 100 and 110% then 120% of 2019 revenue are now part of that is we need to have.
Big every revenue and we will on every single club than we used to have because costs are higher obviously and utilities are higher payrolls higher so you'd really have to have a bigger revenue to make up for those we have a solid plan to get there.
Then you also have the additional clubs that are opening up so hitting 2019 revenue is no.
Nothing to brag about we're going to we're going to get there we're going to go past that but the most important thing for everybody is to focus on the fourth quarter there.
Because the fourth quarter is when we have to and Tom and I and the rest of the management team.
It's been to other shape to make sure we will recover.
Every impact.
What happened in the first two to three months of the year.
December and January February .
We recover for that and make sure almost as if it didn't exist by the time, we get to the fourth quarter results.
And Dan just to close it up yes, what gives us really a lot of confidence as those parts of the country, where we have seen last restrictions in mass mandates such as Texas. The Heartland Mountain region, Yes were recovered in that 90% to 100% in February type of ranges. So that gives us the confidence as the New York and Chicago.
And the other in parts of the coast have eased up now here in February that we're going to recover those clubs to that same percentage as rapidly.
We will expect to have at least a dozen clubs.
To be surpassing 2019 those numbers.
By end of March and those are just like Tom said those are the markets that they were the least restrictive to us.
So the as.
As you go back the markets have been more restrictive it doesn't it doesn't mean, they don't come back it just going to take longer but.
But hopefully now through this summer with much steeper recovery on those markets and we're seeing some of that trend as well by the way.
Yeah.
Understood. Thanks, so much I appreciate it.
Sure.
Thank you. Your next question is coming from John Baumgartner from Mizuho Securities. Your line is now live.
Good morning, Thanks for the question.
I guess first off I'm curious just any more specific.
Our installations and patented business the margin what are you seeing in terms of labor availability and wage pressures I mean, how is that tracking relative to your views maybe you back in October and then second just given the acceleration of a broader inflation here around the economy.
Or is it or is it I guess evolving your views on pricing power relative to what you were thinking last summer I mean, it sounds like Brian It sounds as though right now you're not seeing much elasticity, but how are you thinking about an incrementally stronger pricing power sustaining at this point.
I have no I have no concern about pricing power and pricing power for us we have always sort of.
Underpriced too many things from membership to some of the in centers and food et cetera in our in our clubs.
But now that we are focused 100% of the Super high end delivery.
Mentioned homogeneous knee.
We continually test we don't do it.
No decision you make is going to be like sending his shoulder the moon.
If youre wrong, what happens nothing happens if you price something $2 more than you should if it doesn't work you bring it back down to $1.
A dynamic pricing strategy here.
We test and see where we find we don't want to make the customer feel like where nickel and diming them. We don't want to make the customer feel like we're taking advantage of them, but the customer completely understand.
Where the cost of.
All the.
Every cost of the food has gone up and the payroll has gone up they don't care, they don't care as long as you're giving them the right.
Product and the right service as far as our advantage.
Our brand is.
So loved by our team members.
<unk> members.
We have the least issues with staffing than here.
Here from any other business owner people want to work for a lifetime.
A 16 year old 17 year olds, they for $5 less an hour they would much rather work for a lifetime than they would work with Mcdonald's or somebody else. So we have the least amount of problems. We have some issue, but its not monumental there is not over it's not something we cannot overcome.
<unk>.
Because of the quality of our brand, but we expect to see.
Probably 10 to $15000 a month.
Per club. Additionally, due to the payroll increase cost in the hourly staff. However, we did these transformations like I mentioned, we mentioned to you transforming the membership sales member services desk and the front desk all into this member concierge.
With that in our credit card fees.
It's kind of a policy that we have put in place. We basically are looking at clubs that theyre now catching up.
Two.
Two where.
Produce was before between the puts between the what you we've taken out versus what we have to spend more in.
By the time, we have the P T.
In the right.
Just kind of a matching revenues and margins, we're going to be able to produce the same kind of margin. Despite all the challenges in the.
In the labor cost of goods et cetera, So we feel really really good.
Well, thanks for that and just along those lines in terms of your meeting consumers' needs I'm curious in light of your announcement regarding the Aurora program for the for the active adults.
Prior demographic efforts have been concentrated on programs for younger cohorts kids and teens, but can you discuss this program a little bit more what are you seeing from that demographic that drive the initiatives to what extent do you think it can enhance membership growth relative to just sort of I guess being a tack on offering at the margin for existing members and when you think about your programming across <unk>.
<unk>.
Where do you see the largest opportunities for growth in the largest paybacks moving forward. Thank you.
That's a great question.
So this is activity that was taking place in our clubs.
The Episodically, we have some relationships with a bunch of these companies who pay for this active age group.
The 55 plus.
And sort of the community, but there is the.
Programs that the companies insurance companies are paying for.
65 year and older like a silver and fit et cetera, our silversneakers.
We were doing those but we werent doing them.
In a sort of a holistic approach with a branded programming and bringing a sort of a picture so the Aurora club.
Is an opportunity to double and triple that population program them specifically.
In the hours of the club, where we have the best opportunity to bring those people in where the club as being the most underutilized, but how were doing it is by really building this 234 or five hours of programming social and.
Different kinds of activities from pickle ball to swimming to this to that with bringing all of those coupled with social our social coffee.
That's the deal and then fully branded.
So we've been working on it for half a dozen months formulated as a brand.
The went out to this market survey research talk to all these people see what they like what they don't like how we can and then we work the program. So it does not.
Interfere with other programs, we want to deliver in the club, but basically uses the opportunities we have to increase the traffic and the revenue sort of sudden traffic. So everything we're driving here.
As <unk> subscription revenue subscription and revenue.
This is one of the six programs we are running.
To kind of make sure we achieve the.
The objectives, we have.
So far it's going fantastic.
Great. Thanks, Brian Thanks, Tom Thanks for your time.
Thank you.
Thank you we've reached the end of our question and answer session I'd like to turn the floor back over to management for any further or closing comments.
Well, we're grateful to all of you guys the attention the focus.
We're excited to take the.
Remainder of this year and as I mentioned the focus is not on revenue recovery focuses on steep.
Revenue growth.
Both to recover and then get way past beyond we appreciate the support and we're looking forward to see you guys on the next call, which I think the results will be significantly.
In line with the kind of growth expectations. We have so thank you Tom.
Thanks, everybody have a great day and talk to you soon.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.