Q1 2025 Life Time Group Holdings Inc Earnings Call
Greetings and welcome to Lifetime Group Holdings, Inc. First quarter 2025 earnings Conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
Contravene Burke: My pleasure to introduce your host contravene Burke.
Vice President of capital markets and Investor Relations. Please go ahead.
Speaker Change: Good morning, and thank you for joining us for the first quarter 2025 Lifetime Group Holdings Earnings Conference call with me today are <unk>, founder Chairman and CEO, and Eric <unk> Executive Vice President and CFO.
Contravene Burke: During the call we will make forward looking statements, which involve a number of risks and uncertainties.
Speaker Change: May cause actual results to differ materially from those forward looking statements made today.
Speaker Change: There was a comprehensive discussion of risk factors in the company's SEC filings, which you're encouraged to review.
Speaker Change: 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.
Speaker Change: 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-K filed with the SEC and on the Investor Relations section of our website.
Eric: With that I will turn the call over to Eric.
Eric: Thank you Connor we appreciate you joining us this morning.
Eric: Starting with our first quarter results.
Eric: Total revenue increased 18, 3%.
Eric: Two $706 million driven by a 17, 9% increase in our membership dues and enrollment fees.
Eric: And an 18, 7% increase in our in center revenue.
Eric: We continue to see strong revenue growth in our clubs opened within the last 12 months, which are outpacing their anticipated revenue plans.
Eric: In addition, we are seeing strong comparable center performance.
Eric: Parable Center revenue was 12, 9%, which increased from 11, 1% in the prior year period.
Eric: We continue to see robust comparable center revenue due to first an increase in our membership dues revenue, which is primarily a result of.
Eric: Full quarter benefit of legacy member price increases taken in the previous year.
Eric: We took virtually no legacy price increase in the first quarter and on average legacy members continue to pay approximately $30 per month below our rack rate.
Eric: And we also realized a benefit from new members joining at higher dues rates, replacing members who are paying a lower rate. For example, if we lose an existing member paying monthly dues of $178 and gain a new member at a current use rate of $208, we realized a net revenue benefit.
Eric: Second our ramping clubs continue to perform to our expectations and third we continue to see strong performance in our in center businesses, particularly in our dynamic personnel training.
Eric: With our strong first quarter, we raised our guidance for our comparable center revenue to be between eight five and nine 5% for the full year as we normalize towards our long term revenue growth targets in the following quarters.
Eric: Center memberships increased 3.0% compared to Q1 last year to end the quarter at more than 826000, and when combined with our on hold memberships total memberships ended the quarter at approximately 880000.
Eric: These membership totals are in line with our strategy as noted in our earnings release. This morning, we are focused on our member experience and adding memberships with higher revenue and visits per membership.
Eric: In addition retention continues to pace at record levels and our in center businesses are performing exceptionally well.
Eric: Average monthly dues grew 11, 8% year over year to $208. We continue to open locations in premium markets with strong demand and higher dues rates.
Eric: Average revenue per center membership was $844 an increase of 13, 3% from the prior year quarter.
Eric: Net income was $76 $1 million, an increase of 206% and.
Eric: And adjusted net income was $88 $1 million, an increase of 189% from the prior year quarter we.
Eric: We received an income tax benefit of $14 $6 million related to the onetime exercise of stock options by our CEO, which is now factored into our updated guidance.
Eric: For the remaining quarters of fiscal year 2025, we expect net income to benefit from reduced interest expense as a result of entering into the fixed interest rate swap of under 6% on our term loan b.
Eric: Adjusted EBITDA was $191 $6 million, an increase of 31, 2% and our adjusted EBIT margin of 27, 1% increased 260 basis points versus the first quarter 2024.
Eric: Net cash provided by operating activities increased approximately 103% to $184 million as compared to the first quarter 2020 for.
Eric: This increase was largely a result in income from operations as well as timing of cash interest in the first quarter 2025.
Eric: For the fourth consecutive quarter, we achieved positive free cash flow free cash flow was approximately $41 million and we had no sale leaseback proceeds in the first quarter.
Eric: We have signed a letter of intent for the sale leaseback of three properties for approximately $150 million, which we expect to complete in the second quarter.
Eric: Before I conclude my remarks, I will give a brief comments on how we look at our exposure to tariffs.
Eric: We have completed a review of key areas of our company that could be subject to tariffs, including construction equipment and retail and we currently do not expect there to be a significant impact.
Eric: Tariff policies are still evolving we are diligently monitoring monitoring the situation to assess and respond as needed.
Eric: After a strong first quarter, we have deleveraged, our balance sheet to a net debt leverage ratio of 2.0 times, we have clear visibility into our cash interest expense for the next three years, having fixed the interest rate on our entire term loan.
Eric: So 6% and with over 30 years of operating experience. We believe we are well positioned to navigate any macroeconomic conditions.
Speaker Change: With that I will now pass the call over to Bryan Bryan.
Bryan: Thank you Eric.
Bryan Bryan: We had a great start to the year.
Bryan Bryan: And the business has continued to perform well.
Bryan Bryan: We have raised our revenue and adjusted EBITDA guidance, but only modestly in recognition of the uncertainty in the macroeconomic environment.
Bryan Bryan: Our focus in the near term is to maintain our very strong balance sheet position.
Bryan Bryan: And positive free cash flow as we grow the business.
Bryan Bryan: Our clubs continue to experience increased traffic.
Bryan Bryan: With many at or near optimal levels.
Bryan Bryan: Visits.
Bryan Bryan: Our comparable centers are up four 7% versus the first quarter of last year.
Bryan Bryan: And many clubs are using waitlist as a means to protect the member experience.
Bryan Bryan: The large majority of our first quarter their membership adds full dues paying customers.
Bryan Bryan: This strategy.
Bryan Bryan: As reflected in our results including.
Bryan Bryan: Our record visits per membership and retention.
Bryan Bryan: Record in center performance and revenue per membership and record total revenue and adjusted EBITDA.
Bryan Bryan: Yes.
Bryan Bryan: We have a robust pipeline of club growth and we expect to deliver 10% to 12 clubs per year, we will continue to use cash flow from business.
Bryan Bryan: As well as proceeds from sale leasebacks to pay for our growth.
Bryan Bryan: We will maintain the strength of our balance sheet and our current debt levels, while growing revenue and adjusted EBITDA.
Bryan Bryan: This aligns with our focus of achieving and maintaining a strong double b credit.
Bryan Bryan: We are well positioned to operate in any macroeconomic conditions.
Bryan Bryan: We're also pleased with the progress in our three additional growth areas.
Bryan Bryan: Including L T digital which is already over 2 million subscribers.
Bryan Bryan: L P H with that we're ready to take your questions.
Bryan Bryan: Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.
Bryan Bryan: You May press star two if he would like to remove your question from the queue.
Bryan Bryan: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: And our first question comes from the line of John <unk> with Guggenheim. Please proceed.
Bryan Bryan:
Speaker Change: How broad how many clubs have waitlists.
Bryan Bryan: Where can that go can can most of them have them.
Bryan Bryan: Yeah.
Bryan Bryan: On cases, you've charged like a joint a country club like join fee.
Bryan Bryan: How broad is that and then and then the question is.
Bryan Bryan: I know the waitlist, you're trying to limit traffic issue you've got capacity on visitation.
Bryan Bryan: Yes, there's no good way to increase capacity.
Bryan Bryan: In a club correct. It's not like you can you can do an easy remodel.
Speaker Change: And accommodate more members.
Bryan Bryan: Is there anything to be done on that front.
Speaker Change: Okay.
Speaker Change: And that's.
Speaker Change: Let's handle this.
Speaker Change: <unk> for all because I'm sure. This will be the number one question for everyone.
Speaker Change: Yeah.
Speaker Change: We are.
Speaker Change: Extremely pleased with all the statistics of the company.
Speaker Change: And everything working the way we want to yeah.
Speaker Change: We have experienced this year.
Speaker Change: A increased level of visits we still also measure number of swipes, so number of visits per clubs.
Speaker Change: The number of visits per clubs.
Speaker Change: Over a very healthy number.
Speaker Change: In the past last years.
Speaker Change: We.
Speaker Change: Have opportunistically focused on.
Speaker Change: Shutting down.
Any sort of.
Speaker Change: Membership that would come.
Speaker Change: With some any kind of a discount from a third party the payers in some clubs some of their new clubs don't have any opportunity for.
Speaker Change: Certainly the Aurora memberships.
Speaker Change: And we really have.
Speaker Change: Gained the memberships we wanted to gain as members who are just joining grid a full dues paying customers.
Speaker Change: So the focus of the business hasnt been as always nothing changed.
Speaker Change: <unk>.
Speaker Change: Managed to clubs adapt to clubs so that we deliver the ultimate experience.
Speaker Change: The clear indication that our strategy is working.
Speaker Change: Is that we are basically getting.
Speaker Change: The highest revenue.
Speaker Change: Per memberships, we're getting the highest in center revenue in our in center revenue as Eric mentioned.
Speaker Change: In the first quarter of this year outperformed the incentive revenue of last year's same quarter there.
Speaker Change: As a percentage of our revenue so I think the.
Speaker Change: The.
Speaker Change: On the strong message of that can give you guys is that we are executing this strategy we've always executed.
Speaker Change: Remember point of view first.
Speaker Change: When the clubs to feel like they're being pinched the peak hours of the clubs are.
Speaker Change: Like at the point, where.
Speaker Change: Your experience might start getting.
Speaker Change: Pinched.
Speaker Change: <unk> put the club on a wait list.
Speaker Change: And we.
Speaker Change: Definitely have the opportunity to take that wait list.
Speaker Change: Both ways, it's waste this for the people who join.
Speaker Change: And pay the full dues or a wait list for the people who joined through the third part of the insurance programs and we basically.
Speaker Change: Execute.
Speaker Change: One or the other or both and this year we.
Speaker Change: Definitively took steps to make sure.
Speaker Change: More of the memberships we gained.
Speaker Change: In the first quarter, there came from full dues paying customers rather than the third part of the customers. So that's really the only major issue and this and the major point.
Speaker Change: And in this call otherwise everything else is basically moving exactly. This is this smooth exactly the way we wanted it and so as everything else in the India business.
Speaker Change: So let me.
Speaker Change: Transition right to the club pipeline because that that also you add more clubs that takes pressure off of the existing locations.
Speaker Change: <unk> locations.
Speaker Change: So the pipelines, we're getting visibility on that.
Speaker Change: Talked about 10% to 12, what's the organizations.
Speaker Change: Capacity to do more than that right, because I think the opportunities youre going to get from landlords.
Speaker Change: Origin ground up would exceed 10% to eventually exceed 10% to 12 watts.
Speaker Change: What is your capacity to do more than that if you could.
Speaker Change: The gestation of these clubs is longer.
Speaker Change: I can tell you that 10 to 12 for 25 is just the right number.
Speaker Change: For 2006, we have the opportunity to do 10 to 12, we have the opportunity to do more.
Speaker Change: We are very very carefully studying all of the impacts.
Speaker Change: Of <unk>.
Speaker Change: The different scenarios that can happen with the economy.
Speaker Change: So you guys might have heard.
Speaker Change: Right now this is a fair.
Speaker Change: First time that some of the new homebuilders.
Speaker Change: Are having a tough time moving inventory.
Speaker Change: That type of impact is a positive impact for us.
Speaker Change: In the sense that.
Speaker Change: Once the some of the construction of units. Despite anybody is market by market some markets because of government contracts like Phoenix et cetera.
Speaker Change: Now the impact in most markets.
Speaker Change: You'll be able to do the construction significantly better.
Speaker Change: If you take the time to re bid before you haven't started construction.
Speaker Change: So we are we.
Speaker Change: We are methodically going through.
Speaker Change: Where the opportunities are.
Speaker Change: We can continue to deliver 10 to 12.
Speaker Change: And if the economy gets robust.
Speaker Change: And the Volatilities settled down that we are dealing with.
Speaker Change: We can step on the gas and do more.
Speaker Change: So otherwise my my.
Speaker Change: Our approach our approach is to focus on having.
Speaker Change: <unk> balance sheet that allows us to take advantage of the opportunities that will arise.
Speaker Change: Economy is tough.
Speaker Change: Or opportunities arise if the economy is robust it's sort of a.
Speaker Change: Mathematical hedge so if as heads up we win tails up we win and.
Speaker Change: And with that.
Speaker Change: No I think I have given you a very clear answer.
Speaker Change: Six we could deliver more clubs if we wanted to.
Speaker Change: Okay. Thank you appreciate it.
Speaker Change: Okay.
Speaker Change: The next question comes from the line of Brian Nagel with Oppenheimer. Please proceed.
Brian Nagel: Good morning, nice quarter congratulations.
Speaker Change: Thank you.
Brian Nagel: So first question I want to ask.
Speaker Change: Eric you talked to in your prepared comments, you mentioned, just the pricing and clearly as we see every quarter I mean lifetime has done a great job.
Speaker Change: Monetizing memberships. So the question I have is with regard to the actions you took in Q1, if I heard you correctly you didn't.
Speaker Change: You didn't raise dues on legacy members. So I will make sure I heard that correctly, but was that.
Speaker Change: Land.
Speaker Change: How should we think about that effort.
Speaker Change: Going going forward.
Speaker Change: Yes.
Speaker Change: Alright, we didn't take a lot of legacy pricing in Q1 that was our intention. We're obviously monitoring the macro vary.
Speaker Change: Very very closely and so a lot of what we saw was legacy price increases that were from last year and those members are lapping a full quarter right.
Speaker Change: The other important impact to understand is the churn so when somebody of trips out right.
Speaker Change: It out at a lower rate typically and so then the new member joins in at a higher rate and so that was.
Speaker Change: Really the most of the when we call it pricing benefit that we saw in Q1, so not a lot from from legacy in this quarter.
Speaker Change: We have had this schedule and when we rolled out legacy.
Speaker Change: Price increases that was not planned out for the first quarter. There was planned for second quarter. There for April May June we are doing exactly executing exactly our plan.
Speaker Change: We as.
Speaker Change: As I've mentioned to you is extremely sophisticated programming.
Speaker Change: AI driven.
Speaker Change: On how we do this where that's not something we're going to get into the details of that for with anybody but we.
Speaker Change: We are still experiencing.
Speaker Change: Best retention rates than we have ever experienced in the history of the company.
Speaker Change: We're still having better retention than last year and second quarter, there from second quarter of last year forward.
Speaker Change: We had our very very best retention and we're still doing better than that at this moment in time.
Speaker Change: So all indication.
Speaker Change: The micro adjustments, we are making on day today, it's all working Brian.
Mike: That's very helpful. Mike.
Mike: My second question.
Speaker Change: Recognizing you don't you don't provide quarterly guidance and where we obviously have the updated annual guidance, but so you reported results through March we went to the I guess the.
Mike: We're into the kind of the pool season.
Speaker Change: Any any comment on how you are seeing.
Speaker Change: Member sign ups or member activity as the pools get ready to go for the season.
Speaker Change: I think it's too early to.
Speaker Change: Making make any indications on that at this moment in time.
Speaker Change: The.
Speaker Change: The overall.
Speaker Change: The in centers are performing extremely well at this moment.
Speaker Change: And the date.
Speaker Change: Days of the week and timing of the week. So it's too early to actually get into the.
Speaker Change: How how that's moving but.
Speaker Change: It's it's just pretty much right in line with what it has been.
Speaker Change: Alright, guys. Thanks, a lot I appreciate it.
Speaker Change: The next question comes from the line of Alex Perry with Bank of America. Please proceed.
Alex Perry: Hi, Thanks for taking my questions here and congrats on a strong quarter.
Alex Perry: I just wanted to talk about the guidance a little bit so how much of the sort of same store center raise was one queue flow through versus.
Alex Perry: Higher expectations and <unk> <unk> I think the guide implies a slowdown in comps.
Alex Perry: And sort of the remainder of the year whats. The driver here is that just an element of conservatism.
Alex Perry: And then have you seen any impact to your business to joins our cancels as we've seen consumer confidence.
Alex Perry: Soften a bit here as of late thanks.
Alex Perry: Yeah, I think the.
Alex Perry: What we are seeing right now is the stronger or intention.
Alex Perry: And as strong in centers spend that means the customer who is inside of lifetime.
Alex Perry: Is extremely happy.
Alex Perry: They are having more visits into the club they are using the clubs more they're doing they're in center purchases.
Alex Perry: They are staying with us longer okay.
Alex Perry: That's all positive news.
Alex Perry: The.
Alex Perry: Memberships coming in.
Alex Perry: Or sort of the which is extremely small piece of our business.
Alex Perry: When you think about one month's worth of new membership sales versus last month's versus versus the versus the overall revenue impact it's very very very small.
Alex Perry: We are seeing.
Alex Perry: We are seeing a.
Alex Perry: Sort of it.
Alex Perry: Customer who is a little more thoughtful about the timing of when they join maybe they wait a little longer.
Alex Perry: Before they start we are seeing some of that conservative in that but that is such a small piece of our business.
Alex Perry: I don't think it has an immediate impact on our numbers.
Alex Perry: But but I think that if that type of a situation continues would you have.
Alex Perry: Customer holding back for the next 12 months in a row, then youre going to see.
Alex Perry: A little more impact.
Alex Perry: Impact on the business. Therefore, what are our guidance is guarded.
Alex Perry: Sure.
Alex Perry: This.
Alex Perry: Potential.
Alex Perry: <unk> cannot make volatility customer sensitivity.
Alex Perry: Sustaining for long periods of time.
Alex Perry: That answer your question.
Alex Perry: That's perfect.
Alex Perry: And then just my follow up is just on tariffs I guess like Eh.
Alex Perry: The net exposure here is it is it like zero arc, our construction equipment costs not going up for you do you source any of the fitness equipment out of China or any of the tariff regions. Right. Now are you seeing price increases on on any of that you guys. It sounds minimal but could you just maybe walk.
Alex Perry: With that thanks.
Alex Perry: There is there are for the most part on the big purchases. We are not seeing I mean, it's I kept 0.5%, 4% and then a big purchases as the overall impact it doesn't have a huge impact.
Alex Perry: <unk>.
Alex Perry: T shirts are we.
Speaker Change: We buy for our athletic events, which is I mean, it's just these are de minimis numbers in terms of their lifetimes total revenue EBITDA you are seeing some things.
Speaker Change: Coming in like 30 of the 40% higher but those things don't just don't matter to us and we're talking about buying.
Speaker Change: $60000 $200000 worth of T shirts.
Speaker Change: That would be useful.
Speaker Change: So it's just not.
Speaker Change: We are we are now their company.
Speaker Change: It's heavily impacted directly by these.
Speaker Change: Events.
Speaker Change: And there are.
Speaker Change: All the type of things that we're doing on continuation of value engineering.
Speaker Change: How are we designing our new.
Speaker Change: Prototypes that we have a dozen of them that we basically choose which one works works in what market.
Speaker Change: We're continually working on having flexibility to be their use of steel or concrete when we build those.
Speaker Change: We have both types of plans I mean, we are working.
Speaker Change: To make sure we.
Speaker Change: Many gauge.
Speaker Change: Any of those impact and at this point I can tell you we are super comfortable that we can bring in the new boxes in.
Speaker Change: At or better prices than last year, despite changes in that Furthermore.
Speaker Change: It's two way street, if the economy does actually.
Speaker Change: Get a little more headwind you hit recession housing slows down the contractors, who basically before this is the price taking their leave it.
Speaker Change: I'd have to many jobs that are basically just started begging for work and then you can basically get them to do the work for 5% overhead on profit instead of 20% overhead and profit so.
Speaker Change: So we can manage that.
Speaker Change: I don't believe we are.
Speaker Change: In a position to worry about those type of things.
Speaker Change: Just we're going to we're going to continue to work on how to we basically medi gauge any of those impact and as Eric said and I said.
Speaker Change: We have been anticipating for two years.
Speaker Change: We've been wrong.
Speaker Change: About.
Speaker Change: The headwind, sometimes we're going to switch from tailwind to a headwind.
Speaker Change: And we have been preparing and preparing and preparing and preparing for what if we switched from sort of a tailwind economy.
Speaker Change: When the economy.
Speaker Change: Our strategy is to win in either kind.
Speaker Change: Okay.
Speaker Change: So based on our strong balance sheet.
Speaker Change: We just mentioned $150 million of sale leaseback definite.
Speaker Change: Agreements to basically close by this year.
Speaker Change: This second cohort in the second quarter there.
Speaker Change: Debt levels.
Speaker Change: Five.
Speaker Change: With all that cash coming in so our growth is going to be funded.
Speaker Change: Pretty much entirely with either proceeds.
Speaker Change: Taking the taking the money from sale leaseback and putting it right back into an.
Speaker Change: New bills or.
Speaker Change: We or will you just basically from the substantial free cash flow of the company is generating on its own.
Speaker Change: So we feel like being in a super Super strong financial position allows us to basically negotiate better get more deals get better deals.
Speaker Change: Be the game changer for the residential buildings. So we do we feel like.
Speaker Change: We are we are stacked correctly for any kind of a wind head or tail.
Alex Perry: Hey, Alex I know you mentioned equip.
Speaker Change: Equipment.
Speaker Change: Question, specifically, so we don't source that from China, most of our equipment comes from Italy, and Sweden, and so given the size of what we do with those vendors.
Speaker Change: They have not passed on and we do not expect any any tariff impact there. So.
Speaker Change: Perfect. That's incredibly helpful best of luck going forward.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: The next question comes from the line of Megan Alexander with Morgan Stanley. Please proceed.
Megan Alexander: Hey, good morning.
Speaker Change: I wanted to start with a question on the balance sheet and then I do have a quick follow up just wanted to Alex's questions.
Speaker Change: You took your leverage target down you're not talking about under two times versus 2.25 last quarter Youre going to get some sale leaseback proceeds here in the second quarter. So.
Speaker Change: And leverage is already at two times, so it should be pretty easy for you to stay under there.
Brian Nagel: And Brian you talked about wanting to have a strong balance sheet to give you some flexibility, but I guess theoretically, let's just say the macro remains volatile and maybe it doesn't make sense to accelerate club opens how does the strategy around capital allocation evolve and you start to think about other uses of cash like something like buyback.
Brian Nagel: Oxford or would you rather just sit on higher cash balances and lower to leverage and build some ammo for when things settle down.
Brian Nagel: Yeah.
Brian Nagel: Definitely the ladder.
Brian Nagel: Don.
Brian Nagel: We don't we're not.
Brian Nagel: Yeah.
Brian Nagel: We are not going to.
Brian Nagel: We're not.
Brian Nagel: We're not Amazon, we're not Apple we're not.
Speaker Change: J P Morgan.
Speaker Change: We're a very strong good size mid cap company, we need to be thoughtful about our balance sheet and make sure that works to our strength.
Speaker Change: So we're going to have we're going to.
Speaker Change:
Speaker Change: Have the ability.
Speaker Change: At least would have Sudbury development, which is the ground up.
Speaker Change: To start a couple of months later, if we wanted to we have the ability to start that we would have started faster because we have the permits.
Speaker Change: So we want to have the full flexibility to basically navigate through how the world shapes up in here.
Speaker Change: So I feel super strong, but I'm, just telling you I feel really really really strong.
Speaker Change: How we are positioned right now we basically have put the company in <unk>.
Speaker Change: Situations, where we have every option.
Speaker Change: Okay.
Speaker Change: We don't need we don't need to.
Speaker Change: We don't need to start with as many.
Speaker Change: And we have the ability not to so if you have something just.
Speaker Change: Just massively.
Speaker Change: Wrong.
Speaker Change: We're still going to the road revenue, we're still going to like 2009, we still going to grow EBITDA, we still going to grow EPS.
Speaker Change: And we can be an extremely well tucked in defensive position.
Speaker Change: <unk> got a robust then we can step on it.
Speaker Change: And go faster on development and build out and I don't I don't know what else I could tell you guys other than based on <unk>.
Speaker Change: Our.
Speaker Change: Feel of what the straight ahead.
Speaker Change: We want to be in.
Speaker Change: Full control of how we manage our balance sheet.
Speaker Change: Hi.
Speaker Change: Absolutely want to.
Speaker Change: Achieve a double b from from the next one from either S&P or.
Speaker Change: Our our Moody's to get the company into that double B status.
Speaker Change: That's super important to spend and spend my next big objective and we're putting the company in a position where we can get that.
Speaker Change: And stay in that position as we go forward.
Speaker Change: Okay, great awesome.
Speaker Change: And then just a follow up on the <unk>.
Speaker Change: In response to Alex's first question for Amit.
Speaker Change: Youre seeing a customer I think you said thats more thoughtful on when Theyre joined maybe waiting a bit longer can you just expand a little bit maybe on on when you started to see that clearly there was a lot of there's been a lot of volatility over the last couple of months is that something you started to see with some of the stock market volatility. We saw in the March April timeframe and are there.
Megan Alexander: Or any markets in particular, where youre seeing it more than others, just hoping you could expand a bit more on that comment it's a dynamic situation Megan.
Speaker Change: We have clubs that they're underway list.
Megan Alexander: And even.
Megan Alexander: The.
Megan Alexander: And there are operating at such a maximum level of output from.
Megan Alexander: Visits to incentive revenue.
Megan Alexander: EBITDA margins everything and so there are some natural limitations on how many more people you can take and so they are on a waiting list. So we're managing that the best way, we can there are clubs.
Megan Alexander: I've always said you know there was some clubs that they have the extra capacity.
Megan Alexander: So when we're looking at the macro picture, we see that.
Megan Alexander: April and May.
Megan Alexander: That new members sign up which is again a de Minimis de Minimis number four our total picture.
Megan Alexander: Is slightly slightly softer than.
Megan Alexander: It has been the last couple of years, so, but that's partially because clubs are more full.
Megan Alexander: Our retention is higher we're not losing as many people people when you don't lose as many people you don't have as many opportunity for rejoins.
Megan Alexander: So at this point, it's not a it's not something to have a huge concern about but we got to shake this out through <unk>.
Megan Alexander: Really memorial day June to see how that shakes up so for right now I think everything is just fine.
Speaker Change: Okay, great. Thanks, I'll pass it on.
Megan Alexander: Okay.
Speaker Change: The next question comes from the line of Kate Mcshane from Goldman Sachs. Please proceed.
Kate Mcshane: Hi, Good morning. Thanks for taking my question you mentioned a few times that people are using the clubs more and there's higher in center spend and so we were wondering if theres a way to tell if you're just capturing more share of wallet and more share of time till is there a way do you think that it's coming from other health and wellness activities or do you see.
Kate Mcshane: This behavior is incremental and then you called out the dynamic personal training them as one of the higher growth areas of the in center revenues, but wondered if you could speak to the growth and other offerings.
Kate Mcshane: Yes.
Kate Mcshane: Spar and cafes are doing better than they were doing last year theyre not theyre not doing as good as I want them, we haven't still implemented.
Kate Mcshane: All of our strategies and all of the clubs were just basically going and location by location trying to improve.
Kate Mcshane: The offering.
Kate Mcshane: Personal training.
Kate Mcshane: Dynamic personal training dynamic stretch is one of the first things that we implemented three.
Speaker Change: Three years ago to transform how that business is done because as I mentioned during IPO.
Speaker Change: We didn't believe that business as it was before.
Speaker Change: It would actually.
Speaker Change: <unk> have the ability to kind of get its legs back under it. So we we changed it to a programmer truly truly has any incremental values. So and we have been we've been working and amazing execution of strategy.
Speaker Change: <unk>.
Speaker Change: And I believe that the win on the personal training, which is substantial is really just due to the function of <unk>.
Speaker Change: All of the things that we have been putting in place and we're getting the benefits the fruits of our.
Speaker Change: The groundwork that we've been putting in the last two or three years. Okay. We still have opportunity to continue to improve in cafes, and spas quite significantly I don't I'm not I'm not.
Speaker Change: By any means.
Speaker Change: Hey, Mike.
Speaker Change: Thrilled with what we are even though they are better than last year I want to be clear there is significant more opportunity for us to execute rather that's within our control.
Speaker Change: And that but that has nothing to do with the macroeconomic and we got to work on that.
Speaker Change: <unk>.
Speaker Change: The customer who comes to lifetime.
Speaker Change: Wants to interact with us they wanted to do more things with US all we have to do is deliver to them the type of things they want.
Speaker Change: In a high level and they they don't spend the money and we.
Speaker Change: And they love the brand so it's a constant repetition of they love the brand they travel around lifetime and when the economy gets a little as I've gone through this with all of you guys. When you get through a recessionary period.
Speaker Change: Hugh.
Speaker Change: Customers start pulling back on spending on big spends right. So they have more time as they have more time, they view as the stuff they own more they are going to spend more time in the clubs, they're going to they're going to utilize that membership rather and that extra utilization means.
Speaker Change: Better retention for us and so we are well positioned for.
Speaker Change: Economy that is growing or a economy that might be in a recession for two or three quarters.
Speaker Change: Thank you.
Speaker Change: Hum.
Speaker Change: The next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed.
Speaker Change: Good morning, Thanks for the question.
Speaker Change: Youre welcome.
Speaker Change: First of all.
Speaker Change: Our programming.
Speaker Change: 17 of the consumer situation. Similarly, Colgate way you take advantage of sort of accelerated programming here throttle back a little bit given the uncertainty and in terms of the.
Speaker Change: The program are you offering any any highlights you can offer in terms of anything new rolling out over the next 12 months, whether its recovery cold plunge whatever it maybe.
Speaker Change: Yeah. So.
Speaker Change: We have been on a steady execution.
Speaker Change: Just talking to our regional VP for Texas.
Speaker Change: Thanks.
Speaker Change: So far in that market 30, plus clubs.
Speaker Change: Seven clubs have come back.
Speaker Change: Too cold plunge.
Speaker Change: We have we are putting our recovery and we're putting in work launches. So we have a steady.
Speaker Change: Planned in our budget.
Speaker Change: Sort of.
Speaker Change: The modernization and Capex and we're executing on those.
Speaker Change: Those are really really great.
Speaker Change: <unk> to our business.
Speaker Change: As far as the.
Speaker Change: Other question you had regarding.
Speaker Change: Programming.
Speaker Change: We are.
Speaker Change: Obviously always working on what are the programs that naturally are losing steam.
Speaker Change: And people arent participating naturally.
Speaker Change: And as big of a format.
Speaker Change: And then and then there are other ones that people that are sort of kind of go and leaning into as I've always told you guys.
Speaker Change: Modality of exercise how you achieve your fitness wellness your health that is more like a fad people will.
Speaker Change: We will do everybody goes crazy about spinning and you can teach enough spin classes, then all of a sudden changes goes to some other form and spinning starts kind of getting weighed down.
Speaker Change: We have always designed and adapted the clubs to move.
Speaker Change: And adjust those fads.
Speaker Change: And then lifetime is a big part of People's lifestyle, we position lifetime. So as part of your life, you're using it 10 times a month 12 times a month 14 times a month. It is how you live and then within that we keep adapting what inside of there we need to add.
Speaker Change: <unk> to keep our customer with us for as we have customers who've been with US for 30 years 20 years 10 years and that is the the approach that we take on running the business. So its constant adjustments.
Speaker Change: And constant adaptation.
Speaker Change: Okay.
Speaker Change: Okay, if I think about how that ties into the P&L on the center operations expense. This quarter. There was some nice leverage I think that's the lowest it's been seasonally for a number of years now and I know, it's a line that you want to give yourself flex to reinvest back in terms of guidance was there any timing benefit this quarter or are we starting to see some sort of a rollover where.
Speaker Change: While incremental investment is better relative to history, how do we think about that line in the context of the broader guide, especially given I think the EBITDA margins implied for the rest of the year are pretty solid relative to Q1.
Speaker Change: Yes, I think full year I think our guidance implies on say, 27%. So yes I think.
Speaker Change: A couple of things we are seeing the flow through from the additional membership revenue.
Speaker Change: And also our some of our ancillary businesses, particularly our PT.
Speaker Change: As that continues to grow that that also has a flow through margin. So.
Speaker Change: Theres nothing to your to answer your question directly there is nothing in terms of timing or anything like that it really is kind of the strength of the model we built in that additional flow through.
Brian Nagel: Great. Thanks, Eric Thanks, Brian.
Speaker Change: Hum.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: And the next question comes from the line of Owen Richard with Northland Securities. Please proceed.
Owen Richard: Hey, Bob and Eric Thank you for taking my question here.
Owen Richard: Can you guys just talk a bit more about how LTE health or LTE Asia is performing.
Owen Richard: Over the past couple of months there were a decent chunk of press releases during the quarter and thats growth initiatives.
Owen Richard: Maybe just provide us a bit more color, there and kind of what youre seeing going forward.
Owen Richard: Yeah. So.
Owen Richard: The strategy there is to grow L T H.
Owen Richard: Two the most trusted nutritional brand.
Owen Richard: That exist.
Owen Richard: So we are <unk>.
Working on building the product lineup and make sure. It is absolutely the best.
Owen Richard: One of the things about nutritional products is that there isn't any sort of a <unk>.
Owen Richard: <unk> vigorous testing for them, we have always for 20 years tested our products to make sure. They have the right ingredients the right efficacy.
Owen Richard: So I as I think I just took my for the.
Owen Richard: Plus supplements, though right now normally taken the morning, while we were having a call.
Owen Richard: And we want to make sure what's in there they.
Owen Richard: They are the best and that's the right product.
Owen Richard: We.
Owen Richard: Had a significant growth like a 40% plus month over month.
Owen Richard: And in March we expect to see L th grow substantially over the years.
Owen Richard: And then we.
Owen Richard: We are.
Owen Richard: Diligently working on LTE digital and Lacey.
Owen Richard: Our AI companion.
Owen Richard: And that is moving.
Owen Richard: Exactly on our <unk>.
Owen Richard: Timetable right now we're not behind.
Owen Richard: We expect to deliver.
Speaker Change: A an AI option for health and wellness not for just building a work out not just for meditation not just for taking classes I mean, the entire ecosystem that lifetime offers.
Owen Richard: Physically will it be offers digitally.
Speaker Change: And we're continuing to work with open are.
Owen Richard: LTE digital studio this week.
Speaker Change: First week.
Speaker Change: In New York to be able to generate more amazing content there.
Speaker Change: So in all ties in together between that and the L T H and meal era.
Speaker Change: Mirror.
Speaker Change: <unk> is right on schedule in terms of the execution the growth of the.
Speaker Change: A few places that we have open.
Speaker Change: We have a scheduled openings for at.
Speaker Change: At least half a dozen more throughout the rest of the year and then we will expand and started speeding up so we were still looking for.
Speaker Change: Basically the rollout of additional revenue opportunities that they are asset light.
Speaker Change: And those are all in the works and we look forward to them.
Speaker Change: Great Super helpful. And then just quickly guys.
Speaker Change: The LTE health products have any tariff exposure.
Speaker Change: The LTE Hal.
Speaker Change: So, yes, I mean look there.
Speaker Change: There are obviously with some of the ingredients. There there are some potential risks there again, we don't think its anything thats going to be material.
Speaker Change: But we continue to monitor.
Speaker Change: And we are.
Speaker Change: Based on.
Speaker Change: That we have done there is at least going to be half a dozen months.
Speaker Change: Before we get to the point, where we might have to feel an exposure from that.
Speaker Change: So between now and then.
Speaker Change: Our strong belief is that something will be worked out.
Speaker Change: As I've said before.
Speaker Change: Not in disagreement with <unk>.
Speaker Change: Alright administration the government.
Speaker Change: The U S needs to be treated with more respect and a more fair trade.
Speaker Change: However.
Speaker Change: I think having tariffs.
Speaker Change: Is basically nothing short of just hey.
Speaker Change: Good.
Speaker Change: Additional friction for the growth of the economy worldwide.
Speaker Change: So.
Speaker Change: I'm not an expert on which way it's going to go all I can say to you is that.
Speaker Change:
Speaker Change: Our expectation is that it will level off and we are as well insulated.
Speaker Change: For our core business and for these type of things.
Speaker Change: All we have to do is execute better than other people that's it.
Speaker Change: Awesome. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Greenberg: Ladies and gentlemen, there are no further questions at this time I'd like to turn the call back to kind of think Greenberg for closing remarks.
Greenberg: Yes, Thank you operator, and thank everyone for the good questions. We're looking forward to next quarter.
Greenberg: Okay.
Greenberg: This concludes today's conference you may disconnect your lines at this time. Thank you.
Greenberg: You for your participation.
Greenberg: Okay.
Greenberg: Yeah.
Greenberg: [music].
Greenberg: Okay.
Greenberg: Yes.
Greenberg: [music].
Greenberg: Yeah.
Greenberg: [music].
Greenberg: Yes.
Greenberg: [music].
Greenberg: Okay.
Greenberg: Yes.
Greenberg: [music].
Greenberg: Yes.
Greenberg: Yeah.