Q4 2025 Life Time Group Holdings Inc Earnings Call

February 24, 2026

Operator: Greetings, welcome to Life Time Group Holdings, Inc. Q4 and full year 2025 Earnings Conference Call. At this time, all participants are on a listen mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Connor Greenberg, SVP of Treasury and IR. Thank you, Connor. You may begin.

Speaker #2: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Speaker #2: Please note, this conference is being recorded. I will now turn the conference over to Connor Wienberg, SVP of Treasury and IR. Thank you, Connor.

Speaker #2: You may begin. Good morning. Thank you for joining us for the fourth quarter and full year 2025 Lifetime Group Holdings earnings conference call. With me today are Bram Akradi, founder, chairman, and CEO, and Erik Weaver, executive vice president and CFO.

Erik Weaver: Good morning. Thank you for joining us for the Q4 and full year 2025 Life Time Group Holdings earnings conference call. With me today are Bahram Akradi, Founder, Chairman, and CEO, and Erik Weaver, Executive Vice President and CFO. During the call, we will make forward-looking statements which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today. There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will also discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA, or what we refer to as net debt leverage ratio, and free cash flow.

Connor Weinberg: Good morning. Thank you for joining us for the Q4 and full year 2025 Life Time Group Holdings earnings conference call. With me today are Bahram Akradi, Founder, Chairman, and CEO, and Erik Weaver, Executive Vice President and CFO. During the call, we will make forward-looking statements which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today. There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will also discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA, or what we refer to as net debt leverage ratio, and free cash flow.

Speaker #2: During the call, we will make forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today.

Speaker #2: There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will also discuss certain non-GAAP financial measures including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA, or what we refer to as net debt leverage ratio, and free cash flow.

Speaker #2: 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 8K filed with the SEC, and on the investor relations section of our website.

Erik Weaver: 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. With that, I'll turn the call over to Erik. Thank you, Connor, and good morning, everyone. As always, we appreciate you joining us for our business and financial update. Starting with our Q4 results. Total revenue increased 12.3% to $745 million, driven by continued execution in our centers, including higher average dues and utilization of our in-center businesses.

Connor Weinberg: 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. With that, I'll turn the call over to Erik.

Speaker #2: With that, I'll turn the call over to Erik.

Speaker #3: Thank you, Connor, and good morning, everyone. As always, we appreciate you joining us for our business and financial update. Starting with our fourth quarter results.

Erik Weaver: Thank you, Connor, and good morning, everyone. As always, we appreciate you joining us for our business and financial update. Starting with our Q4 results. Total revenue increased 12.3% to $745 million, driven by continued execution in our centers, including higher average dues and utilization of our in-center businesses.

Speaker #3: Total revenue increased 12.3% to $745 million driven by continued execution in our centers, including higher average dues and utilization of our in-center businesses. Average monthly dues were $223, up approximately 10.8% from the fourth quarter of last year, and average revenue per center membership was $882, up 10.8% from the prior year quarter.

Erik Weaver: Average monthly dues were $223, up approximately 10.8% from the Q4 of last year, and Average Revenue per Center Membership was $882, up 10.8% from the prior year quarter. Comparable center revenue grew 9.9% and was in line with our expectations, reflecting strength in our membership dues and in-center business performance. We ended the year with over 822,000 center memberships. Including on-hold memberships, total memberships reached approximately 873,000. Net income for the quarter was $123 million, an increase of 231%. Q4 net income benefited from approximately $45.6 million of net tax-affected items that are excluded from adjusted net income, as they are not reflective of our ongoing operations.

Speaker #3: Comparable center revenue grew 9.9% and was in line with our expectations, reflecting strength in our membership dues and in-center business performance. We ended the year with over $822,000 center memberships, total memberships reached approximately $873,000.

Speaker #3: Net income for the quarter was $123 million, an increase of $231%. Fourth quarter net income benefited from approximately $45.6 million of net tax-affected items that are excluded from adjusted net income.

Speaker #3: As they are not reflective of our ongoing operations. These adjustments primarily included proceeds we received in partial satisfaction of legal claims and employee retention credits, as well as adjustments for net gains on sale leaseback transactions and share-based compensation.

Erik Weaver: These adjustments primarily included proceeds we received in partial satisfaction of legal claims and Employee Retention Credit, as well as adjustments for net gains on sale-leaseback transactions and share-based compensation. Adjusted net income, which excludes the tax-affected impact of these items, was $77 million, up 28.4% year-over-year. Adjusted EBITDA was $203 million, an increase of 14.5% over the prior year quarter, and our adjusted EBITDA margin improved by 50 basis points to 27.2%. Net cash provided by operating activities increased to $240 million, approximately 47% higher compared to the prior year quarter. This included $59 million of non-recurring proceeds from partial satisfaction of legal claims and Employee Retention Credit.

Speaker #3: Adjusted net income, which excludes the tax-affected impact of these items, was $77 million, up 28.4% year over year. Adjusted EBITDA was $203 million, an increase of 14.5% over the prior year quarter, and our adjusted EBITDA margin improved by 50 basis points to 27.2%.

Speaker #3: Net cash provided by operating activities increased to $240 million, approximately 47% higher compared to the prior year quarter, this included $59 million of non-recurring proceeds from partial satisfaction of legal claims and employee retention credits.

Speaker #3: For the full year 2025, total revenue increased 14.3% to $2.995 billion, driven by a 13.9% increase in membership dues and enrollment fees, and a 15.1% increase in in-center revenue.

Erik Weaver: For the full year of 2025, total revenue increased 14.3% to $2.995 billion, driven by a 13.9% increase in membership dues and enrollment fees and a 15.1% increase in in-center revenue. Comparable center revenue grew 11.1%. Relative to our initial guidance in 2025, the outperformance was driven primarily by our mature clubs, which in aggregate, reached and exceeded our expected levels of performance faster than we had anticipated. We believe this outperformance from our mature clubs is largely complete coming into 2026. In 2026, we expect full year comparable center revenue growth of approximately 6.3% to 7.3%.

Speaker #3: Comparable center revenue grew 11.1%. Relative to our initial guidance in 2025, the outperformance was driven primarily by our mature clubs, which, in aggregate, reached and exceeded our expected levels of performance faster than we had anticipated.

Speaker #3: We believe this outperformance from our mature clubs is largely complete coming into 2026. In 2026, we expect full year comparable center revenue growth of approximately $6.3 to $7.3%.

Speaker #3: We expect a continuation of the quarterly trends we saw throughout 2025, starting the year at a higher comparable center growth rate and gliding downward as the year progresses.

Erik Weaver: We expect a continuation of the quarterly trends we saw throughout 2025, starting the year at a higher comparable center growth rate and gliding downward as the year progresses. Average Revenue per Center Membership was $3,531, up 11.7% from the prior year. Net income increased 139% to $374 million, and adjusted net income increased 62.3% to $326 million. Adjusted diluted EPS increased 51.6% to $1.44, compared to $0.95 per share from the prior year. Adjusted EBITDA increased 21.9% to $825 million, and our adjusted EBITDA margin increased 170 basis points to 27.5%.

Speaker #3: Average revenue per center membership was $3,531, up 11.7% from the prior year. Net income increased $139% to $374 million, and adjusted net income increased $62.3% to $326 million.

Speaker #3: Adjusted diluted earnings per share increased 51.6% to $1.44 compared to 95 cents per share from the prior year. Adjusted EBITDA increased 21.9% to $825 million, and our adjusted EBITDA margin increased 170 basis points to 27.5%.

Speaker #3: Net cash provided by operating activities increased to $871 million, approximately 51% higher compared to the prior year. This included $94 million of non-recurring proceeds from partial satisfaction of legal claims and employee retention credits.

Erik Weaver: Net cash provided by operating activities increased to $871 million, approximately 51% higher compared to the prior year. This included $94 million of non-recurring proceeds from partial satisfaction of legal claims and Employee Retention Credits. Total capital expenditures, net of construction reimbursements, were $892 million for 2025. This included $657 million for growth capital expenditures. Looking forward to 2026, we expect to invest between $875 million to $915 million of growth capital. It is critical to underscore that over half of our growth CapEx in 2026 will be for clubs opening in 2027 and beyond, as we have been accelerating the number of new clubs versus prior years.

Speaker #3: Total capital expenditures, net of construction reimbursements, were $892 million, for 2025. This included $657 million for growth capital expenditures. Looking forward to 2026, we expect to invest between $875 million to $915 million of growth capital.

Speaker #3: It is critical to underscore that over half of our growth capex in 2026 will be for clubs opening in 2027 and beyond, as we have been accelerating the number of new clubs versus prior years.

Speaker #3: This increased investment in growth capex is driven by both the greater number of club openings this year and the next few years compared to 2025 and 2024.

Erik Weaver: This increased investment in growth CapEx is driven by both the greater number of club openings this year and the next few years compared to 2025 and 2024, as well as the increased size of our clubs. We are nearly doubling the amount of square footage we are opening in 2026 as compared to 2025 and 2024. Of our 2026 clubs, we have opened 1, and the remaining 13 are under construction. As these owned clubs open and begin to ramp, we expect to recycle the invested capital through sale leasebacks over time. In addition to growth CapEx, we anticipate $140 to $150 million of maintenance capital expenditures and $130 to $140 million for modernization of existing clubs, technology, and corporate investments.

Speaker #3: As well as the increased size of our clubs. We are nearly doubling the amount of square footage we are opening in 2026 as compared to 2025 and 2024.

Speaker #3: Of our 2026 clubs, we have opened one, and the remaining 13 are under construction. As these owned clubs open and begin to ramp, we expect to recycle the invested capital through sale-leasebacks over time.

Speaker #3: In addition to growth capex, we anticipate $140 to $150 million of maintenance capital expenditures and $130 to $140 million for modernization of existing clubs, technology, and corporate investments.

Speaker #3: We anticipate funding our capex through cash from operations, sale-leaseback proceeds, and cash on hand. For 2026, we expect to do a minimum of $300 million of sale-leasebacks.

Erik Weaver: We anticipate funding our CapEx through cash from operations, sale leaseback proceeds, and cash on hand. For 2026, we expect to do a minimum of $300 million of sale leasebacks. One final note: with our increased growth capital spending, a larger portion of our interest expense will be capitalized this year as compared to 2025. For 2026, we expect to capitalize between $33 and $35 million of interest expense. With that, I will pass the call to Bram. Bram?

Speaker #3: One final note: with our increased growth capital spending, a larger portion of our interest expense will be capitalized this year as compared to 2025.

Speaker #3: For 2026, we expect to capitalize between $33 and $35 million of interest expense. With that, I will pass the call to Brom. Brom?

Speaker #2: Thank you, Eric. Good morning, everyone, and thank you for joining us. First, I want to recognize and thank all of our team members for their continued passionate execution of our strategies.

Bahram Akradi: Thank you, Erik. Good morning, everyone, and thank you for joining us. First, I want to recognize and thank all of our team members for their continued passionate execution of our strategies. 2025 was another great year of achieving our objectives and exceeding our financial goals. Many of our centers operated at or near optimal levels, with average of 12.5 monthly visits per membership for the year, 4.8% higher than in 2024, and approximately 122 million visits in aggregate, 7% higher than in 2024, with Average Revenue per Center Membership up 11.7% year-over-year. We generated substantial cash from our operations, and we exceeded our margin objectives.

Speaker #2: 2025 was another great year of achieving our objectives and exceeding our financial goals. Many of our centers operated at or near optimal levels, with average of 12.5 monthly visits per membership for the year, 4.8% higher than in 2024.

Speaker #2: And approximately 122 million visits in aggregate, 7% higher than in 2024. With revenue per center membership up 11.7% year over year. We generated substantial cash from our operations and we exceeded our margin of objectives.

Speaker #2: In 2025, we achieved a $27.5% adjusted EBITDA margin. $130 basis point above the midpoint of our initial guidance set in January of last year.

Bahram Akradi: In 2025, we achieved a 27.5% adjusted EBITDA margin, 130 basis points above the midpoint of our initial guidance set in January of last year. We also exceeded our balance sheet objectives. We ended 2025 at 1.6x net leverage, well below our 2x target. These milestones were instrumental in achieving another year of record revenue and adjusted EBITDA and a BB credit rating, which helped reduce our cost of capital. Reflecting on the current status of the company, in aggregate, our mature clubs are operating at optimal levels. Our new and ramping clubs continue to perform extremely well. Together, clubs are generating substantial cash flow from operation. The sale-leaseback market is robustly open, and we have a very strong balance sheet. As a result, we have stepped into 2026 with exceptional financial flexibility.

Speaker #2: We also exceeded our balance sheet objectives. We ended 2025 at 1.6 times net leverage, well below our two-times target. These milestones were instrumental in achieving another year of record revenue and adjusted EBITDA, and a double B credit rating, which helped reduce our cost of capital.

Speaker #2: Reflecting on the current status of the company, in aggregate, our mature clubs are operating at optimal levels. Our new and ramping clubs continue to perform extremely well.

Speaker #2: Together, clubs are generating substantial cash flow from operation. The sale leaseback market is robustly open, and we have a very strong balance sheet. As a result, we have stepped into 2026 with exceptional financial flexibility.

Speaker #2: Currently, we expect to open up to 28 clubs across 2026 and 2027, to be funded primarily through operating cash flow and a robust sale-leaseback market.

Bahram Akradi: Currently, we expect to open up to 28 clubs across 2026 and 2027, to be funded primarily through operating cash flow and a robust sale-leaseback market. Next, we are very excited to announce a $500 million share repurchase program, which has just been approved by our board of directors. We intend to utilize this program opportunistically, while diligently managing our leverage ratio to stay at or below our 2x net leverage target. This is a significant milestone for Life Time. Our repurchase program reflects our confidence in the predictability of our business model and our ability to generate cash, invest in our future growth, and drive shareholder value. Before I close my remarks, I would like to emphasize that the success of our company has been the result of unwavering focus on our member point of view.

Speaker #2: Next, we are very excited to announce a $500 million share repurchase program which has just been approved by our board of directors. We intend to utilize this program opportunistically while diligently managing our leverage ratio, to stay at or below our two times net leverage target.

Speaker #2: This is a significant milestone for Lifetime. Our repurchase program reflects our confidence in the predictability of our business model and our ability to generate cash, invest in our future growth, and drive shareholder value.

Speaker #2: Before I close my remarks, I would like to emphasize that the success of our company has been the result of unwavering focus on our member point of view.

Speaker #2: We remain committed to optimizing member experience, revenue, and EBITDA on a club-by-club basis. This is what has delivered our success to date, and what will ensure our future success.

Bahram Akradi: We remain committed to optimizing member experience, revenue, and EBITDA on a club-by-club basis. This is what has delivered our success to date and what will ensure our future success. With that, we will open the call for questions.

Speaker #2: With that, we will open the call for questions.

Speaker #3: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, 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 you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Brian Nagel with Oppenheimer. Please proceed with your questions.

Speaker #3: The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for your questions.

Speaker #3: Our first questions come from the line of Brian Nagel with Oppenheimer. Please proceed with your questions.

Speaker #4: Hi, good morning.

Brian Nagel: Good morning.

Speaker #5: Good morning.

Bahram Akradi: Good morning.

Speaker #4: Congratulations on another nice quarter, nice year.

Brian Nagel: Congratulations on another nice quarter, nice year.

Speaker #2: Thank you so much, Brian.

Bahram Akradi: Thank you so much, Brian.

Speaker #4: So the question I want to ask, as we're looking into 2026 now, there's been a lot of success with for a while now, what you're doing inside the centers with the program and such.

Brian Nagel: The, the question I want to ask, as we look into 2026 now, you know, there's been a lot of success with, you know, for a while now, in what you're doing inside the, inside the centers with programming and such. Where do you, where do you see the biggest opportunities as we go in 2026? I know we've talked in the past about, you know, some of the changes you've made in the, in the cafe or in some of the training programs, but really, what, what do you, what do you think? What's, what's the biggest opportunities here?

Speaker #4: Where do you see the biggest opportunities as we go into 2026? I know we've talked in the past about some of the changes you've made in the cafe or in some of the training programs.

Speaker #4: But really, what do you think? What's the biggest opportunities here?

Speaker #2: Yeah. So Brian, this is Brom. Our business is always evolving. The customer is the more affluent more in tune with health and wellness customer was basically a pro at utilization of this type of services.

Bahram Akradi: Brian, this is Bram. You know, our business is always evolving. The customer is the more affluent, more in tune with health and wellness customer who is basically a pro at utilization of this type of services. They're looking for the new proven methods for being healthier and engaged in the clubs, in whatever is the current way that people get involved in health and wellness. We're always focused on modernizing, updating, evolving the facilities to make sure Life Time is always the best provider of all things people are looking for at the highest level of our customer experience. We're constantly working on developing new formats, changing the floor in a way that the members are now wanting to use the facilities. Then we are working on all different aspects from our cafes to spa, personal training, and small group training.

Speaker #2: They're looking for the new proven methods for being healthier, and engage in the clubs in whatever is the current way that people get involved in health and wellness.

Speaker #2: We are always focused on modernizing, updating, evolving the facilities to make sure lifetime is always the best provider of all things people are looking for at the highest level of our customer experience.

Speaker #2: So we're constantly working on developing new formats, changing the floor in a way that the members are now wanting to use the facilities. And then we're working on all different aspects from our cafes to spa, personal training, small group training; again, the introduction and rollout of Miura. We're basically constantly adapting, and that's what it takes for any company to continue to basically build their revenue and EBITDA and continue in their journey of basically being the place that people want to go to.

Bahram Akradi: Again, the introduction and rollout of MIORA. We're basically constantly adapting, and that's what it takes for any company to continue to basically build their revenue and EBITDA and continue in their journey of basically being the place that people want to go to. We have tons of things we're working on right now, lots of opportunities to do things better. We have just launched this year, the sort of the work on the cafes to try to improve the speed and the quality of what people want. A lot of great progress early on is sort of happening, and we expect this style to continue. Personal training is doing great. Pickleball is doing great. Our new MIORA locations are launching pretty strong.

Speaker #2: We have tons of things we're working on right now. Lots of opportunities to do things better. And we have just launched this year the sort of work on the cafes to try to improve the speed and the quality of what people want, and a lot of great progress early on is sort of happening.

Speaker #2: And we expect this all to continue. Personal training is doing great. Pickleball is doing great. Our new Miura locations are launching pretty strong. So we just have a whole host of things we're working on.

Bahram Akradi: You know, we just have a whole host of things we're working on, but in the big picture, everything is working exceptionally well. Members are using the club at the highest level we have ever seen. Clubs are packed. They're operating at near optimal levels of utilization per day or per month, or per year, as you look at the how much visits a club can take and deliver great quality. We're as happy as we can be.

Speaker #2: But the big picture, everything is working exceptionally well. Members are using the club at the highest level. We have ever seen. Clubs are packed.

Speaker #2: They're operating at near optimal levels of utilization per day or per month or per year, as you look at how much visits a club can take and deliver great quality.

Speaker #2: So we're as happy as we can be.

Speaker #4: That's very helpful, Bahram. My follow-up question, just with respect to the new center opening—so I guess I'll ask it this way. I mean, you opened a number of centers later, in '25.

Brian Nagel: That's very helpful, Bram. My follow-up question, just with respect to the new center opening. I guess I'll ask it this way. I mean, you opened a number of centers later in 2025. Maybe you can just comment upon the initial performance of those. As we're looking at these 2026 openings and realizing that I think you said one's open, you know, obviously there's still a lot more to come. Is there anything you've gleaned so far from anything you're doing with the presale activity?

Speaker #4: So maybe you can just comment upon the initial performance of those. And as we're looking at these 26 openings, I'm realizing that I think you said one's open, but obviously there's still a lot more to come.

Speaker #4: Is there anything you could glean so far from anything you're doing with the presale activity?

Speaker #2: Yeah. All I can say to you is our clubs are now opening stronger than ever and ramping faster than ever. Some clubs reach literally contribution margin positive the first full month of the club operation, which is pretty incredible.

Bahram Akradi: Yeah. All I can say to you is our clubs are now opening stronger than ever and ramping faster than ever. Some clubs reach literally Contribution Margin positive the first full month of the club operation, which is pretty incredible. We're very, very happy. As a result, you know, we are opening as many clubs as we can, as both Erik Weaver and I mentioned in our remarks and in the earlier. This year, we'll open more square footage of clubs than we opened in 2024 and 2025, and 2027 should be no different than 2026. We're really, really excited. We have an amazing pipeline of more dynamic, exciting locations that are going to come in the future years after 2027, 2028 and beyond. We couldn't be more pleased with the way things are going right now.

Speaker #2: We're very, very happy. As a result, we are opening as many clubs as we can, as both Erik and I mentioned in our remarks and in the earlier this year, we'll open more square footage of clubs that we opened in 24 and 25.

Speaker #2: And 27 should be no different than 26. So we're really, really excited. We have an amazing pipeline of more dynamic, exciting locations that are going to come in the future years after 27.

Speaker #2: 28 and beyond. So we couldn't be more pleased with the way things are going right now.

Speaker #4: I appreciate it. Congrats again. Thanks.

Brian Nagel: I appreciate it. Congrats again. Thanks.

Speaker #2: Thank you.

Bahram Akradi: Thank you.

Speaker #3: Thank you. Our next question is coming from the line of R. P., Kocharian with UBS. Please proceed with your questions.

Erik Weaver: Thank you. Our next question has come from the line of Arpine Kocharyan with UBS. Please proceed with your questions.

Speaker #6: Hi. Good morning. Thanks for taking my questions. I was hoping you could give a little bit more detail on the unit economics of the new clubs you're opening this year.

Arpine Kocharyan: Hi, good morning. Thanks for taking my questions. I was hoping you could give a little bit more detail on the unit economics of the new clubs you're opening this year. Obviously, much larger square footage with, you know, expanded amenities. As we think about revenue per member trends as well as kind of member mix as we go into the back half of the year, do you expect any changes to the typical seasonality of the business in terms of quarter-to-quarter member growth? I apologize, it seems I blended two questions in one. First, I want to ask about sort of the unit economics of the new clubs, and then, any help on the mix of members that we're looking at for the back half of the year.

Speaker #6: Obviously, much larger square footage with expanded amenities. As we think about revenue per member trends as well as kind of member mix as we go into the back half of the year, do you expect any changes to the typical seasonality of the business in terms of quarter to quarter member growth?

Speaker #6: And I apologize. It seems like blended two questions in one. But first, I want to ask about sort of the unit economics of the new clubs and then any help on the mix of members that we're looking at for the back half of the year.

Speaker #2: Yeah. What you should expect is as we are opening new clubs A, these clubs don't have them. So there is no discounted membership in them.

Bahram Akradi: Yeah. What you should expect, is as we are opening new clubs, these clubs don't have any discounted program available in them, so there is no, you know, discounted membership in them. The membership prices are higher. The model for the new clubs are significantly lower number of members using the club significantly more, and they're paying a much higher Rack Rate. This model is actually way more efficient than what we used to do in the very past, you know. We've been adjusting the older clubs gradually to match the performance of the new clubs. The memberships are expected to grow altogether because we're opening all the new clubs.

Speaker #2: The membership prices are higher. The model for the new clubs are significantly lower members number of members using the clubs significantly more, and they're paying a much higher rack rate.

Speaker #2: This model is actually way more efficient than what we used to do in the very, very past. And we've been adjusting the older clubs gradually to match the performance of the new clubs.

Speaker #2: And so the memberships are expected to grow altogether. Because we're opening all the new clubs; however, again, they're performing extremely well. And we don't see any specific ups and downs for the seasonality.

Bahram Akradi: However, again, they're performing extremely well, and we don't see any specific ups and downs for the seasonality, other than the fact that we are basically getting more members using the club more often. They are paying higher dues in average, and using the club more. It's exactly the model we're looking for. It's a super engaged membership model instead of a non-use membership model, and we are basically operating at optimal levels of that right now.

Speaker #2: Other than the fact that we are basically getting more members using the club more often, they are paying higher dues in average. And using the club more.

Speaker #2: So it's exactly the model we're looking for. It's an engaged it's a super engaged membership model. Instead of a non-use membership model. And we are basically operating at optimal levels of that right now.

Speaker #3: Yeah, the value just adds some quantitative there. When you look at our kind of existing clubs, if you just take an average membership per club, it's 4,545, 4,600.

Erik Weaver: Yeah. If I can just add some quantitative there. You know, when you look at our kind of existing clubs, you know, and if you just take a average membership per club, it's, you know, 4,500, 4,600. When you talk about our new clubs that we're, you know, we're planning those at membership levels, you know, you know, 3,700 to 4,000. You know, we are building those with fewer memberships because, again, you know, we're assuming a, a better mix there. But seasonality, to your question, no changes in expectations around seasonality.

Speaker #3: So when you talk about our new clubs that we're planning those at membership levels, 3,700 to 4,000. So we are building those with fewer memberships because, again, we're assuming a better mix there.

Speaker #3: So but seasonality, to your question, no changes in expectations around seasonality.

Arpine Kocharyan: That's super helpful. Thank you very much. Just a quick follow-up: Could you remind us the rack rates you currently have and what's running through the system, sort of what that delta looks like? Just a refresher. Thank you.

Speaker #6: That's super helpful. Thank you very much. And then just a quick follow-up. Could you remind us the rack rate you currently have and what's running through the system?

Speaker #6: Sort of what that delta looks like, just a refresher? Thank you.

Speaker #2: Well, good question again.

Bahram Akradi: What was the question again?

Erik Weaver: Yep. Can you say that again?

Speaker #3: Can you say that again?

Speaker #6: The rack rate. You have? The rack rate you have and what's running through the system and what that difference looks like today?

Arpine Kocharyan: The rack rates you have and what's running through the system and what that difference looks like today.

Speaker #3: Oh, you're talking about the delta between the rack rate? Is that your question?

Erik Weaver: Oh, you're talking about, like, the delta between the Rack Rate. Was that your question?

Speaker #6: Exactly. Yeah.

Arpine Kocharyan: Exactly. Yeah.

Speaker #2: Yeah, that's only increasing. We are—as I... What I want to—this is a good question. I want to do it for the benefit of everybody listening.

Bahram Akradi: Yeah, that's only interesting. You know, What I want to. This is a good question. I want to do it for benefit of everybody listening. Our clubs are operating at incredibly optimal levels. The parking lots are packed. People are coming in, they're using the club in every place and all parts of the club. What now we're reaching, when so many clubs are at that level, we basically want to optimize the membership so that we are making sure the customer experience, in no shape or form, deteriorates. As we do that, we are basically getting a higher realization of the membership, higher dues, and we are allowing basically fewer memberships in the club.

Speaker #2: Our clubs are operating at incredibly optimal levels. The parking lots are packed. People are coming in. They're using the club in every place. And all parts of the club.

Speaker #2: So, what now—we're reaching a point where so many clubs are at that level. We basically want to optimize the membership so that we are making sure the customer experience in no shape or form deteriorates.

Speaker #2: As we do that, we are basically getting a higher utilization of the membership, higher dues, and we are allowing basically fewer memberships in the club.

Speaker #2: When you visit our when the visits to the club are basically at the saturation level, and the members you have are paying more, right?

Bahram Akradi: When the visits to the club are basically at the saturation level, and the members you have are paying more, right? You are using the club more. That makes it that you can have maybe a fewer, less members for that optimal, like, deal. Therefore, the only way you can do that is really raise the membership prices. We are doing that really to protect the customer experience. It's just where we need to do it. It's not across the whole system. It's club-by-club strategy. We are raising market by market, club by club. As we take those rack rates up, then it basically increases the amount of dollars between the legacy customer and that. As we raise the legacy customer prices, that reduces it.

Speaker #2: Then you are using the club more. That means you can have maybe a few less members for that optimal deal. Therefore, the only way you can do that is really raise the membership prices.

Speaker #2: And we are doing that really to protect the customer experience. It's just where we need to do it. It's not across the whole system.

Speaker #2: It's club-by-club strategy, and we are raising market by market, club by club. And as we take those rack rates up, then it basically increases the amount of dollars—this is between the legacy customer and that.

Speaker #2: And as we raise the legacy customer prices, that reduces it. But I think right now it's still relatively in that 17 to 20 million.

Bahram Akradi: I think right now, it's still relatively in that $17 to 20 million.

Speaker #3: Yeah, it's 19.5 million.

Erik Weaver: Yeah, it's $19 and a half million.

Speaker #2: Yeah. Exactly. And that hasn't really changed because the last few years as we have kind of done both, we've been raising the rack rates at the same time we've been getting some of the members getting some legacy price increases.

Bahram Akradi: Yeah, exactly.

Erik Weaver: Yeah.

Bahram Akradi: That hasn't really changed, because the last few years, as we have, you know, kind of done both, we've been raising the rack rates. At the same time, we've been getting some of the members, getting some legacy price increases. That number has kind of stayed between that $17 and 20 million per month.

Speaker #2: So that number has kind of stayed between that 17 and 20 million per month.

Speaker #6: Thank you very much. It's very helpful.

Arpine Kocharyan: Thank you very much. It's very helpful.

Bahram Akradi: Mm-hmm.

Speaker #3: Thank you. Our next question has come from the line of John Heibachel with Guggenheim Partners. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of John Heinbockel with Guggenheim Partners. Please proceed with your questions.

Speaker #7: Hey, Baram. I wanted to get your thought on two topics. One, one-time initiation fees. Right? Because I think you've only got those in a handful of clubs.

Connor Wienberg: Hey, Bahram, I want to get your thought on 2 topics. You know, one-time initiation fees, right? Because I think you've only got those in a handful of clubs. Do you think the experience merits that? If so, you know, how broad, could you, apply that? Secondly, you know, DPT has grown, the sessions have grown, 18% the last 2 years. How sustainable is that? Because I think the penetration rate is still very low. You know, can the rate, can the penetration improve? You know, can you keep growing, DPT almost 20%?

John Heinbockel: Hey, Bahram, I want to get your thought on 2 topics. You know, one-time initiation fees, right? Because I think you've only got those in a handful of clubs. Do you think the experience merits that? If so, you know, how broad, could you, apply that? Secondly, you know, DPT has grown, the sessions have grown, 18% the last 2 years. How sustainable is that? Because I think the penetration rate is still very low. You know, can the rate, can the penetration improve? You know, can you keep growing, DPT almost 20%?

Speaker #7: Do you think the experience merits that? And if so, how broad could you apply that? And then secondly, DPT has grown. The sessions have grown.

Speaker #7: 18% the last two years. How sustainable is that? Because I think the penetration rate is still very low. So is that can the penetration improve?

Speaker #7: Can you keep growing DPT almost 20%?

Speaker #2: Yeah. I want to give credit to our team across the corporate who leads that category as well as our folks in the clubs. We have a very, very robust plan for DPT this year as well.

Bahram Akradi: Yeah. I wanna give credit to our team across the, you know, corporate, who leads that category, as well as our folks in the clubs. We have a very, very robust plan for DPT this year as well. Their plan that they presented to us is very, very robust. Yes, we expect the DPT to continue to grow. In some clubs, the revenues are by far the biggest revenues and margins we have ever seen in the history of the company. In some other markets, we still have the opportunity to, you know, add team members, add leaders into those facilities to kind of get those going.

Speaker #2: Their plans that they presented to us is very, very robust. Yes, we expected DPT to continue to grow. And in some clubs, the revenues are by far the biggest revenues and margins we have ever seen in the history of the company.

Speaker #2: And in some other markets, we still have the opportunity to add team members at leaders into those facilities to kind of get those going.

Speaker #2: But we are super, super happy with where it's at and with its potential and the game plan that we have on hand for continuing to improve the personal training program throughout the year.

Bahram Akradi: We are super happy with where it's at and with its potential and the game plan that we have on hand for continuing to improve the personal training program throughout the year.

Speaker #7: Okay. Maybe just as a quick follow-up for either you or Erik. When you think about the openings in '27, what does the composition look like in terms of the ground-ups?

Connor Wienberg: Okay. Maybe just as a quick follow-up for either you or Erik. You know, when you think about the openings in 27, what is, what does the composition look like in terms of the Ground-Up Development? It looks like that's gonna be pretty heavy. You know, when you look at that, the CapEx budget all in, or growth, either one, is this an elevated year, or are we gonna be, you know, as we roll forward, kind of at, you know, a new higher level, but we're also gonna have $300, $400 million of sale-leasebacks a year?

John Heinbockel: Okay. Maybe just as a quick follow-up for either you or Erik. You know, when you think about the openings in 27, what is, what does the composition look like in terms of the Ground-Up Development? It looks like that's gonna be pretty heavy. You know, when you look at that, the CapEx budget all in, or growth, either one, is this an elevated year, or are we gonna be, you know, as we roll forward, kind of at, you know, a new higher level, but we're also gonna have $300, $400 million of sale-leasebacks a year?

Speaker #7: It looks like that's going to be pretty heavy. And when you look at that, the CapEx x budget, all in, or growth, either one, is this an elevated year or are we going to be as we roll forward kind of at a new higher level but we're also going to have 300, 400 million of sale leasebacks a year?

Speaker #2: All right. It's a great question. We have a significant number of ground-ups in 2026 and 2027. So those are basically we're investing substantial amounts of CapEx that is for '27 and beyond clubs.

Bahram Akradi: All right. It's a great question. We have a significant number of Ground-Up Development in 2026 and 2027. Those are basically, you know, we are investing substantial amount of CapEx that is for 2027 and beyond clubs. I am super comfortable with that because our, as always, our ground up clubs perform, I mean, so predictably above expectation that, you know, they ramp fast, and they are ready to go to the sale-leaseback market, allowing us to kind of pair the new clubs with the older clubs that they have too much. That the, you know, carried book value is really low, so the tax value is low, so we can adjust those and not pay, you know, taxes on the, on the gain and loss and try to even it out.

Speaker #2: And so but then I am super comfortable with that because our as always, our ground-up clubs perform I mean, so predictably above expectation that they ramp fast and they are ready to go to the sale leaseback market, allowing us to kind of pair the new clubs with the older clubs that they have too much that the carried book value is really low.

Speaker #2: So the tax value is low so we can adjust those and not pay taxes on the gain and loss that can try to even it out.

Speaker #2: So it allows a significant opportunity for having more sale-leasebacks, so those are all great. Now, when you look into '28 and beyond, we are working on a host—the real estate team is working on a host of super exciting facilities, but a lot of those, sort of really big facilities for the markets, the urban markets they're going into, basically are landlord paying the bulk of the way, and we are putting some leasehold improvement in there.

Bahram Akradi: It allows a significant opportunity for having more sale-leasebacks. Those are all great. Now, when you look into 2028 and beyond, the real estate team is working on a host of super exciting, you know, facilities, but a lot of those, sort of a really big facilities, for the markets, the urban markets they're going into, that basically are landlord basic, paying the bulk of the way, and we are putting some leasehold improvement in there.

Bahram Akradi: It really works itself out because we are now dramatically increasing the amount of owned assets in terms of dollars, which we can take those to sale-leaseback, and or we're doing big, beautiful clubs in high-rise buildings or, you know, sort of urban markets that they come in a lease form to begin with. I don't believe we will have any issue generating, you know, enough cash to pay for things, take it to sale-leaseback, recycle that, and then we're also having the extra capital available for share buyback as well.

Speaker #2: But it really works itself out because we are now dramatically increasing the amount of owned assets in terms of dollars, which we can take those two sale leaseback and/or we're doing big, beautiful clubs in high-rise buildings or sort of the urban markets that they come in a lease form to begin with.

Speaker #2: So I don't believe we will have any issue generating enough cash to pay for things, take it to sale leaseback, recycle that, and then we also having the extra capital available for share buyback as well.

Speaker #7: All right. Thank you.

Connor Wienberg: All right. Thank you.

John Heinbockel: All right. Thank you.

Bahram Akradi: Mm-hmm.

Speaker #3: Thank you. Our next question has come from the line of Kate McShane with Goldman Sachs. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of Kate McShane with Goldman Sachs. Please proceed with your questions.

Speaker #8: Hi, good morning. Thanks for taking our question. We wanted to focus on the expense side a little bit. You've done a really great job in managing both the inflation—I think we've seen it across labor—but also with other expenses, such as healthcare costs, which we're seeing other companies struggle with a little bit here over the last couple of quarters.

Kate McShane: Hi, good morning. Thanks for taking our question. We wanted to focus on the expense side a little bit. You've done a really great job in managing both the inflation I think we've seen across labor but also with other expenses such as healthcare costs, which we're seeing other companies struggle with a little bit here over the last couple of quarters. Could you maybe talk a little bit about your expectations for 2026 when it comes to these couple of line items and how you continue to manage it?

Speaker #8: Could you maybe talk a little bit about your expectations for '26 when it comes to these couple of line items and how you continue to manage it?

Speaker #2: I'll take it and then Eric will add on to this. We are fully aware of the headwinds that it comes from payroll, increases, and supply increases and we have had those completely in mind and in our plan in a very comfortable fashion in the numbers that we put forward for the guidance of this year.

Bahram Akradi: I'll take it, then Erik will add on to this. We are fully aware of the headwinds that it comes from payroll increases and supply increases. We have had those completely in mind and in our plan in a very comfortable fashion in the, you know, numbers that we put forward for the guidance of this year.

Speaker #2: I'm going to turn it over to Eric but we are continuing to work on managing those best way we can. Yet, I want to be totally in terms of repeating myself, customer experience member experience has been the number one driver of building a brand that is completely and entirely loved by people who have been I run into people who have been a member, they move and all they say how they miss their lifetime.

Bahram Akradi: I'm going to turn it over to Erik. We are continuing to work on managing those best way we can, yet I want to be totally, in terms of like repeating myself, customer experience, member experience, has been the number one driver of building a brand that is completely and entirely loved by people. I run into people who have been a member, they move, and all they say is how they miss their Life Time, they miss their Life Time. They want to go somewhere near the Life Time. We don't want that to change. We're focused on delivering that quality, but we have thought through these challenges, and I'm going to turn it to Erik.

Speaker #2: They miss their Life Time. They want to go somewhere near the Life Time. So we don't want that to change. So we're focused on delivering that quality, but we have thought through these challenges, and I'm going to turn it over to Erik.

Speaker #3: Yeah, absolutely. On the labor side, I think we've done a nice job. We've talked about the increases we've seen, two and a half to three percent, pretty consistent.

Erik Weaver: Yeah, absolutely. you know, on the labor side, I think we've done a nice job. You know, we've talked about, you know, the increases we've seen, 2.5% to 3%, pretty consistent, you know, with what others are seeing. I think like everybody else, we've seen supplies and, you know, some of those expenses. We've seen some of those increase, but I think we've also done a nice job of, you know, working with our suppliers to mitigate and offset a lot of that. Hats off to our procurement team. you know, on the healthcare cost side, you know, we've done some nice things around managing that risk through our captive. Generally speaking, we've got a pretty healthy employee base.

Speaker #3: With what others are seeing, I think everybody else—we've seen supplies and some of those expenses, we've seen some of those increase. But I think we've also done a nice job of working with our suppliers to mitigate and offset a lot of that.

Speaker #3: So hats off to our procurement team. And then on the healthcare cost side, we've done some nice things around managing that risk through our captive and generally speaking, we've got a pretty healthy employee base.

Speaker #3: And so as we look at our healthcare costs, they've been actually very—we've managed those very well. So, all to say, we're seeing some of those same pressures, but we've done, I think, a nice job of mitigating those.

Erik Weaver: You know, as we look at as our healthcare costs, they've been, actually, we've managed those very well. All to say, you know, we're seeing some of those same pressures, but we've done, I think, a nice job of mitigating them.

Speaker #2: And again, you're seeing the numbers. We have anticipated this increase is coming so when we're establishing the budget, right, we basically put all of those at a level that we feel comfortable we can deliver.

Bahram Akradi: Again, it's in the numbers. Like we have, we have anticipated these increases coming, so when we're establishing the budget, right, we basically put all of those at a level that we feel comfortable we can deliver.

Erik Weaver: Again, it's in the numbers. Like we have, we have anticipated these increases coming, so when we're establishing the budget, right, we basically put all of those at a level that we feel comfortable we can deliver.

Speaker #8: Thank you.

Arpine Kocharyan: Thank you.

Kate McShane: Thank you.

Speaker #3: Thank you. Our next question has come from the line of Eric DeLaurier with Craig Hallam. Please proceed with your questions.

Operator: Thank you. Our next questions come from the line of Eric Des Lauriers with Craig-Hallum. Please proceed with your questions.

Speaker #7: Great. Thanks for taking my questions and congrats on another strong quarter here. I wonder first if you could expand on your comments around optimizing membership mix with levers you have to pull and how would you think about the potential impact in '26 versus some of the out years here?

Eric Des Lauriers: Great. Thanks. My questions. Congrats on another strong quarter here.

Bahram Akradi: Thank you.

Eric Des Lauriers: I wonder if first, if you could expand on your comments around optimizing membership mix, just curious what levers you have to pull and how we should think about the potential impact in 2026 versus some of the out years here?

Erik Weaver: Yeah, I mean, some opportunities we have. You know, we kind of talked about it in the beginning in our comments, just the clubs being busy and, you know, traffic. It's an opportunity for us to continue to manage the member experience, right? You know, just optimizing, especially in clubs where we have very, very high traffic. You know, we've talked about discounted memberships and continuing to optimize there. In a lot of our clubs, we continue to have the ability to do that, and so we're going to continue to run that play through 2026.

Speaker #3: Yeah. I mean, some opportunities we have on—we kind of talked about it in the beginning, in our comments—just the clubs being busy and traffic.

Speaker #3: So it's an opportunity for us to continue to manage the member experience, right? So just optimizing especially in clubs where we have very, very high traffic.

Speaker #3: We've talked about discounted memberships and continuing to optimize there. So in a lot of our clubs, we continue to have the ability to do that.

Speaker #3: And so we're going to continue to run that play through 2026.

Speaker #2: Yeah. And as you know, our expectation is the number of members on the sort of the discounted third-party pay will decrease, as we will have more direct membership activity. And we feel that that's the best way to manage the experience and make sure that we get more revenue and more EBITDA out of the clubs at the same time.

Bahram Akradi: Yeah, our expectation is the number of members on the, on the sort of a discounted, third-party pay will decrease as we will have a more direct membership activity. We feel that that's the best way to manage the experience and make sure that we get more revenue and more EBITDA out of the clubs at the same time. The three things that we juggle with is member experience, improving our revenue, improving our EBITDA, and we have a clear path on how we can continue to do that.

Speaker #2: So the three things that we juggle with is member experience, improving our revenue, improving our EBITDA, and we have a clear path on how we can continue to do that.

Speaker #7: All right. That's very helpful. And then a clarifying question for me. So you mentioned new clubs have been ramping more quickly, contributing to profitability more quickly.

Eric Des Lauriers: All right. That's very helpful. A clarifying question from me. You mentioned new clubs have been ramping more quickly, contributing to profitability more quickly. You also have, you know, a greater number of large format centers opening up in 2026. Should we think about this sort of faster ramp, as applying to large format centers as well? Is there anything to kind of call out, with respect to the ramp, with the large mix of large format centers here?

Speaker #7: You also have a greater number of large format centers opening up in '26. Should we think about this sort of faster ramp as applying to large format centers as well?

Speaker #7: Is there anything to kind of call out with respect to the ramp with the large mix of large format centers here?

Speaker #2: Look, the message there should be taken like this. Every club we're opening right now, we're seeing incredible success with those clubs. That gives us the sort of a super confidence to continue to expand on our development plan.

Bahram Akradi: Look, the message there should be taken like this: Every club we're opening right now, we're seeing incredible success with those clubs. That gives us the sort of a super confidence to continue to expand on our development plan. That's fantastic. As far as the, you know, the caution that I would give you guys on last year, I remember having this conversation, and I told you guys, Don't go beyond 25% EBITDA margin because we want to invest. We want to continue to invest in the member experience and upholding our member membership experience, as well as the brand that has been the major part of the company's success. I have no qualms about our, you know, just guiding you guys again, that the EBITDA margin we're giving you is phenomenal, in my opinion.

Speaker #2: So that's fantastic. As far as the caution that I would give you guys on last year, I remember having this conversation and I told you guys, "Don't go beyond 25% EBITDA margin," because we want to invest we want to continue to invest in the member experience and upholding our membership experience as well as the brand that has been the major, major part of companies' success.

Speaker #2: I have no qualms about our just guiding you guys again that the EBITDA margin we're giving you is phenomenal in my opinion. It is not to be taken lightly that it's at this levels and we want to make sure people don't get ahead of themselves in terms of keep wanting to push that number and then expecting us to deliver more.

Bahram Akradi: It is not to be taken lightly that it's at these levels, and we want to make sure people don't get ahead of themselves in terms of keep wanting to push that number and then expecting us to deliver more. We have zero desire to disappoint you guys or the street or anybody else. Our goal is to make sure but we also don't want to disappoint our member at the expense of the shareholder or shareholder at the expense of the members. That's a balancing act that we have to do, and we are on it every day. The clubs are ramping faster, just they get to that saturation point sooner. That's all there is to it. Everything is performing extremely well.

Speaker #2: We have zero desire to disappoint you guys or the street or anybody else. So our goal is to make sure we but we also don't want to disappoint our member at the expense of shareholder or shareholder at the expense of the member.

Speaker #2: So that's a balancing act that we have to do and we are on it every day. But the clubs are ramping faster just they just get to that saturation point sooner.

Speaker #2: That's all there is to it. But everything is performing extremely well.

Speaker #7: Got it. It's very helpful. Thanks for taking my questions.

Eric Des Lauriers: Got it. It's very helpful. Thanks for taking my questions.

Bahram Akradi: Mm-hmm.

Speaker #3: Thank you. Our next question has come from the line of Molly Baum with Morgan Stanley. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of Molly Baum with Morgan Stanley. Please proceed with your questions.

Speaker #8: Hi. Thanks so much for taking my questions. I guess I have one near-term question and one longer-term question. So for the first one, the near-term question, can you speak to maybe trends you saw in January and maybe year to date from a new member churn, a member engagement perspective?

Molly Baum: Hi. Thanks so much for taking my questions. I guess I have one near-term question and one longer-term question. For the first one, the near-term question, can you speak to maybe trends you saw in January, and maybe year to date from, like, a new member churn, a member engagement perspective? Did you see any impact from weather or any nuances you'd call out from member behavior so far this year?

Speaker #8: Did you see any impact from weather or any nuances you'd call out from member behavior so far this year?

Speaker #7: You are so clever, but I am more clever than you. I told you guys don't ask middle of the quarter questions. That's just inappropriate for us to answer.

Bahram Akradi: You are so clever, but I am more clever than you. I told you guys, don't ask middle of the quarter questions. That's just inappropriate for us to answer.

Speaker #8: Understood. No problem.

Molly Baum: Understood.

Bahram Akradi: All things are.

Molly Baum: No problem at all.

Speaker #7: But all things are going really well. It's no problem.

Bahram Akradi: All things are going really good. It's no problem.

Speaker #8: All right. Thank you so much. So then maybe shifting to the longer-term question, I know last quarter you had talked about expectations to see, I think, up to 3 million digital members to start 2026.

Molly Baum: All right, thank you so much. Maybe shifting to the longer-term question. I know last quarter you had talked about expectations to see, I think, up to 3 million digital members to start 2026. I guess my question there is: Are you seeing opportunities to, you know, increase conversion of those members into full-paying members, or any other, you know, monetization opportunities from retail, you know, lifetime nutrition? Can you just comment on maybe the digital and retail landscape and what opportunities you see there in the immediate future?

Speaker #8: So I guess my question there is, are you seeing opportunities to increase conversion of those members into full-paying members or any other monetization opportunities from retail, lifetime nutrition?

Speaker #8: Can you just comment on, maybe, the digital and retail landscape, and what opportunities you see there in the—

Bahram Akradi: That's a great question. That number is roughly about 3.3 million subscribers now, so it's continually growing. We have adjusted our strategy on the LT Digital, and the focus is significantly more on using L.AI.C to enhance the actual member experience, the kind of a dues-paying member. The subscribers will now get access to the same pretty much app, less reduced than the past. They get similar, you know, experiences as the regular member gets, with the fact they just can't get into the clubs with it.

Speaker #7: That's a great question. That number is roughly about 3.3 million subscribers now, so it's continually growing. We have adjusted our strategy on the LT Digital, and the focus is significantly more on using Lacey to enhance the actual member experience—kind of a dues-paying member. The subscribers will now get access to pretty much the same app, less reduced than in the past, so they get similar experiences as the regular member gets, with the fact that they just can't get into the clubs with it.

Speaker #7: But this allows them when they want to come as a guest or something, they can see the schedule. And then it makes it easier for us just like you asked to take that membership one step closer for them to deciding to sign up.

Bahram Akradi: This allows them, when they wanna come as a guest or something, they can see the schedule, and then it makes it easier for us, just like you asked, to take that membership one step closer for them to deciding to sign up. Yes, we are seeing improvement in that strategy.

Speaker #7: And yes, we are seeing improvement in that strategy.

Speaker #8: Got it. Thank you so much.

Molly Baum: Got it. Thank you so much.

Bahram Akradi: Mm-hmm.

Speaker #3: Thank you. Our next question has come from the line of John Baumgartner with Mizuho Securities. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of John Baumgartner with Mizuho Securities. Please proceed with your questions.

Speaker #2: Good morning. Thanks for the question.

John Baumgartner: Good morning. Thanks for the question.

Speaker #7: Good morning.

Bahram Akradi: Good morning.

John Baumgartner: Brahm, first off, I wanted to ask about programming opportunities and in-center revenue. You know, I think over the past 12, 24 months, we've really seen consumer spending very resilient for kids and children. You know, based on the industry data that we've seen, club memberships for children, or I guess minors, they're also among the highest priced that are out there. I'm curious, aside from the swim programs, how underutilized do you think your model is for monetizing kids' programs, whether it's sports-specific training, intro to weightlifting? What's the opportunity to ramp that contribution as you plan your next phase of investment?

Speaker #2: Maybe Bram, first off, I wanted to ask about programming opportunities and incentive revenue. I think over the past 12, 24 months, we've really seen consumer spending very resilient for kids and children.

Speaker #2: And based on the industry data that we've seen, club memberships for children, or I guess minors, are also among the highest-priced that are out there.

Speaker #2: So I'm curious, aside from the swim programs, how underutilized do you think your model is for monetizing kids' programs? Whether it's sports-specific training, intro to weightlifting, what's the opportunity to ramp that contribution as you plan your next phase of investment?

Speaker #7: Yeah. Look, I think, having been involved in doing this for as long as we have, we have obviously tried and tested all types of things.

Bahram Akradi: Yeah. Look, I think having been involved in doing this for as long as we have, we have obviously tried and tested all types of things. We continually see opportunity to engage parents and kids into more programs, and that business has been a nice growth, you know, opportunity for us and a great engagement, great retention, sort of a program in the business. As far as the expanding into additional services, it, you know, it's we've tried, and there are pros and cons with those. A lot of times, this is basically challenge of what space you use at what time, and do you have other programs.

Speaker #7: And we continually see opportunity to engage parents and kids in more programs, and that business has been a nice growth opportunity for us—a great engagement, great retention sort of program in the business.

Speaker #7: As far as expanding into additional services, we've tried, and there are pros and cons with those a lot of times. This is basically a challenge of what space you use at what time, and do you have other programs?

Speaker #7: So, we are doing that—fine-tuning what we can do to maximize the space that we have, being used for a variety of different things as much as possible.

Bahram Akradi: We are doing that, fine-tuning what we can do to maximize the space that we have being used for a variety of different things as much as possible. It's not the only category that we can grow the in-center. We have opportunities to grow in-centers on all fronts, you know, from a spa to cafe to training, et cetera, and we're doing all of that. Including kids. We're always looking to see how we can get them more involved, more engaged, and give them real value in what they, what they perceive is what they're getting.

Speaker #7: So, it's not the only category where we can grow the incentive. We have opportunities to grow incentives on all fronts—from the spa to the café to training, etc.

Speaker #7: And we're doing all of that. And including kids. We're always looking to see how we can get them more involved, more engaged, and give them real value in what they perceive is what they're getting.

Speaker #2: Thanks for that. And just a follow-up on the EBITDA margin. The approach there is very clear. Under-promise, over-deliver. And I'm not so much curious about how high margins can go, but if we think back to the investor day in 2024, the algo was more of a kind of a low to mid-20% margin.

John Baumgartner: Thanks for that. Just a follow-up on the EBITDA margin. The approach there is very clear: underpromise, overdeliver. I'm not so much curious about how high margins can go, but, you know, if you think back to the Investor Day in 2024, the algo was more of a, you know, kind of a low to mid 20% margin. It's migrated up the last couple of years. I guess I'm more curious relative to plan, what sort of broken positively for you? Is it more modest incremental expenses? Is it upside from mix or larger utilization of the in-center offerings? Just trying to get more of a sense of your confidence in the margin floor and its sustainability there. Thank you.

Speaker #2: It's migrated up the last couple of years. I guess I'm more curious relative to plan. What sort of broke positively for you? Is it more modest, incremental expenses?

Speaker #2: Is it upside for mix or larger utilization of the incentive offerings? Just trying to get more of a sense of your confidence in the margin floor and its sustainability there.

Speaker #2: Thank you.

Speaker #7: All right. So you're correct. We suggest that '23 and a half to '24 and a half, if my memory is correct, on the investor day, and then I told you guys don't go beyond '25.

Bahram Akradi: ... so you're correct. We suggested 23.5 to 24.5, if my memory is correct, on the investor day. Then I told you guys, Don't go beyond 25. We have outperformed. The clubs matured faster. Remember, at the time, we had a lot of our clubs in a re-ramp stage, similar to ramping. Today, majority of the clubs are fully re-ramped. I mean, in aggregate, I say, consider it fully re-ramped. Now we have new clubs opening, and those new clubs have to ramp. They're ramping nicely, they're ramping better than our expectation. All in all, I think there is a limit to how much you wanna push the margin. Now, it may...

Speaker #7: And we have outperformed the clubs' matured faster so remember, at the time, we had a lot of our clubs in a reramp stage, similar to ramping.

Speaker #7: Today, majority of the clubs are fully, fully reramped. I don't I mean, in aggregate, I'd say consider it fully reramped. So now we have new clubs opening.

Speaker #7: And those new clubs have to ramp. They're ramping nicely. They're ramping better than our expectation. But all in all, I think there is a limit to how much you want to push the margin.

Speaker #7: Now, it may—and here's what I want to say—it may be a quarter we give you more than 27 and a half. I just don't want that to become the standard or the model, because I do not want to have the pressure on this company to do things that will damage the company in the long term.

Bahram Akradi: Here's what I wanna say: It may be a quarter we give you more than 27.5%. I just don't want that to become the standard or the model, because I do not wanna have the pressure on this company to do things that will damage the company on the long term. We wanna guide you guys conservatively, and we wanna make sure we guide to something we don't disappoint. I think 27.5% EBITDA margin is an incredible margin, and I would build as many clubs as I possibly could build when I have a model that produces that. Do I wanna take a risk of, you know, damaging our experience with the customer? The answer is no.

Speaker #7: So, we want to guide you guys conservatively, and we want to make sure we guide to something we don't disappoint. I think a 27.5% EBITDA margin is an incredible margin.

Speaker #7: And I would build as many clubs as I possibly could build when I have a model that produces that. So, do I want to take a risk of damaging our experience with the customer?

Speaker #7: The answer is no.

Speaker #2: Thanks, Bram.

Erik Weaver: Thanks, Bram.

John Baumgartner: Thanks, Bram.

Bahram Akradi: Mm-hmm.

Speaker #3: Thank you. Our next question comes from the line of Owen Rickert with Northland Capital Markets. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of Owen Rickert with Northland Capital Markets. Please proceed with your questions.

Speaker #5: Hey, Bram here. Congrats on another great quarter and year. Can you update us maybe on how—what you're thinking about how Miora's performing? How many clubs are you currently operating in?

Owen Rickert: Hey, Bram. Hey, Eric. Congrats on another-.

Bahram Akradi: Hey

Owen Rickert: ... great quarter and year.

Bahram Akradi: Thank you.

Owen Rickert: Can you update us maybe on how, what you're thinking about, how MIORA is performing? How many clubs are you currently operating in, member adoption, visits, anything you could update with us there, and maybe the ramp throughout 2026 and 2027?

Speaker #5: Member adoption visits? Anything you could update with us there and maybe the ramp throughout '26 and '27?

Bahram Akradi: Okay, go ahead.

Speaker #7: Okay. Go ahead.

Bahram Akradi: Okay, go ahead.

Speaker #5: Yeah, I was going to say, yeah, Mi’ora, last year we had two locations open. We've got now seven or eight locations open. And so, again, for us, just rolling those out this year, we wanted to make sure that we had really kind of nailed that operating model, and so we've opened those new locations in great markets.

Erik Weaver: Yeah, I was gonna say, yeah, MIORA, you know, last year we had 2 site, 2 locations open. We've got now, 7 or 8 locations open. Again, for us, just rolling those out this year, we wanted to make sure that we had really, kinda nailed that operating model. We've opened those new locations in great markets. We're super excited about them, and they are ramping at our expectations.

Speaker #5: We're super excited about them, and they are ramping at our expectations.

Speaker #7: Yeah. And to be fair on that, we have had, obviously, some challenges with some of those openings—with some knickknack things left over on construction or permits or something like that.

Bahram Akradi: Yeah, we are. Well, to be fair on that, we've had, obviously, some challenges with some of those openings, with some knick-knack things left over on construction or permits or something like that. The ones that they have opened fully with no hiccups of, as such, they are ramping faster than our original models. The rest of them will catch up. As we are designing spaces for the future clubs, we are always kind of planning the place we're gonna execute MIORA in, which basically is the, you know, the cue that this is the one program that we have tested, and I believe it's gonna work extremely well.

Speaker #7: But the ones that they have opened fully with no hiccups of such, they are ramping faster than our original models. And the rest of them will catch up.

Speaker #7: As we are designing spaces for the future clubs, we are always kind of planning the place we're going to execute Miora in, which basically is the cue that this is the one program that we have tested.

Speaker #7: And I believe it's going to work extremely well. And it's expected to be in every single market, not necessarily every single club, but accessible to every single customer within a club that they're in or a club or something else we close enough to them.

Bahram Akradi: It's expected to be in every single market, you know, not necessarily every single club, but accessible to every single customer within a club that they're in or a club or something else close enough to them. It is a very, very well performing versus the plan business that we're rolling out. I'm confident it's here to stay, as long as it's done correctly, and we're working on all aspects of that.

Speaker #7: It is a very, very well-performing, versus-the-plan business that we're rolling out. I'm confident it's here to stay, as long as it's done correctly.

Speaker #7: And we're working on all aspects of that.

Speaker #5: Awesome. Thanks for the color there. And then maybe secondly for me, how is LT Health performing, the supplement business across both in-club and digital channels?

Owen Rickert: Awesome. Thanks for the color there. Then maybe secondly, for me, how is LT Health performing, the supplement business, across both in-club and digital channels? Maybe what should we be monitoring there for 2026?

Speaker #5: And maybe, what should we be monitoring there for 2026?

Speaker #7: Yeah. For 2026, I think the growth strategy is in clubs mostly. We are rolling out more robust plan on how to make sure our club members have better visibility to the LTH than the superiority of the quality of that product versus other products being marketed and sold.

Bahram Akradi: Yeah. For 2026, I think the growth strategy is in clubs mostly. We are rolling out a more robust plan on how to make sure our club members have better visibility to the LTH and the superiority of the quality of that product versus other products being marketed and sold, and then use that as a platform to take it outside of the Life Time walls in 2027 and beyond. Right now, it's working extremely well against the strategy we are currently driving. As far as the digital space, it's mediocre. It's so.

Speaker #7: And then use that as a platform to take it outside of the Life Time walls in '27 and beyond. So right now, it's working extremely well against the strategy we are currently driving.

Speaker #7: As far as the digital space, it's mediocre. It's so-so. It's not—it requires more education for people, more direct education, understanding why LTH products are more superior. Because, once again, we're not cutting any corners.

Bahram Akradi: It requires more education for people, more direct education, understanding why LTH products are more superior, because once again, we're not cutting any corners on what needs to be put together, the testing, and everything that needs to go into a product you can trust and actually works. It takes a little more work in terms of educating the customer, and that's why, done through our professionals in the club, the PTs, the group fitness people, and cafe folks, we're getting great success out of growing that very nicely year-over-year.

Speaker #7: What needs to be put together, the testing, everything that needs to go into a product, you can trust and actually works. And so it's it takes a little more work in terms of educating the customer and that's why done through our professionals in the club, the PTs and the group fitness people, café folks, we're getting great success out of growing that very nicely year on year.

Speaker #5: Got it. Thanks, Bahram. Thanks, Erik. Appreciate it.

Chris Woronka: Got it. Thanks, Bahram. Thanks, Eric. Appreciate it.

Owen Rickert: Got it. Thanks, Bahram. Thanks, Eric. Appreciate it.

Speaker #7: Thank you.

Bahram Akradi: Thank you.

Speaker #3: Thank you. Our next question has come from the line of Logan Reich with RBC Capital Markets. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of Logan Reich with RBC Capital Markets. Please proceed with your questions.

Speaker #8: Hey, good morning. Thanks for taking my questions. I just had two. The first one is on the rack rate versus the average member dues.

Logan Reich: Hey, good morning. Thanks for taking my questions. I just had 2. The first one is on the Rack Rate versus the average member dues. I know you guys are talking about that. Delta has been relatively consistent. Just strategically and longer term, is there a level for that delta you have in mind that the business should run at, or should that delta converge over time? Second question is just on the 2026 guidance on the same-store sales. Can you just help us think about how the composition of member growth versus pricing versus in-center growth contemplates into the guidance? Thank you.

Speaker #8: I know you guys are talking about that. Delta has been relatively consistent just strategically in longer term. Is there a level for that Delta you have in mind that the business should run at or should that Delta converge over time?

Speaker #8: And then second question is just on the '26 guidance on the same store sales. Can you just help us think about how the composition of member growth versus pricing versus in-center growth contemplates into the guidance?

Speaker #8: Thank you.

Speaker #7: All right. Let's start with your latter part of your question. We want to go with the rack rate. Look, for right now, we are basically analyzing on a club-by-club basis where we need to set the price in that club and then consequently in that market.

Bahram Akradi: All right. Let's start with your latter part of your question.

Logan Reich: Rack Rate.

Bahram Akradi: We want to go with the Rack Rate. Look, for right now, we are basically analyzing on a club-by-club basis, where we need to set the price in that club, and then consequently, in that market, in order to maximize the experience and make sure the brand stays in the exact position, which is top brand in the market. When we're doing that, you know, sometimes you just basically almost are forced to take the price up $10, $20, whatever you have to. That's what exercise we're going through. When does that end? I don't know. It's not ending right now. We're still reaching those type of clubs where we have to, you know, raise that rate.

Speaker #7: In order to maximize the experience and make sure the brand stays in the exact position, which is top brand in the market. When we're doing that, sometimes you just basically almost are forced to take the price up $10, $20, whatever you have to.

Speaker #7: And that's what we're exercise we're going through. When does that end? I don't know. It's not ending right now. We're still reaching those type of clubs where we have to raise that rate.

Speaker #7: When we raise that rate, we'll get the gap. And then when we like I said, when we do the legacy price increase, then that gap gets closer.

Bahram Akradi: When we raise that rate, we'll get the gap, and then when we like I said, when we do the legacy price increase, then that gap gets closer. My expectation is sometime in the future, that number will shrink. It should shrink, because, you know, it's not our expectation that the rack rates will continue to go up at the level they have been going. Right now, we're not seeing any immediate change in those numbers. On the second question, I'm gonna turn it over to Erik, and then I'll add on to it.

Speaker #7: My expectation is, sometime in the future, that number will shrink. It should shrink, because it's not our expectation that the rack rates will continue to go up at the level they have been going.

Speaker #7: But right now, we're not seeing any immediate change in those numbers. On the second question, I'm going to turn it over to Eric, and then I'll add on to it.

Speaker #5: Yeah. I mean, you kind of touched on it in terms of the Delta and what that ultimately—when it closes, it's really a tough question to answer because it really depended on the pace you increase your rack rate.

Erik Weaver: Yeah, I mean, you kind of touched on it in terms of, you know, the delta and what that ultimately, when it closes. It's really a tough question to answer because it's really dependent on the pace you know, you increase your Rack Rate. You have to remember, you know, when we lump things or call things pricing, part of it is, you know, when a member turns out at a lower rate, you're getting the benefit of that arbitrage. It's not like necessarily a direct pricing increase, if you will. When you think about that, you have to kind of break it up into those two pieces. Legacy will continue to be part of our pricing strategy as we go forward.

Speaker #5: But you have to remember, part of when we lump things or call things pricing, part of it is when a member churns out at a lower rate, you're getting the benefit of that arbitrage.

Speaker #5: So it's not like a necessarily a direct pricing increase, if you will. So when you think about that, you have to kind of break it up into those two pieces.

Speaker #5: Legacy will continue to be part of our pricing strategy as we go forward. It's just hard to definitively say when that gap closes. I don't see a world where it's ever closed.

Erik Weaver: It's just hard to definitively say when that gap closes. I don't see a world where it's ever closed. I mean, that's part of the, you know, the kind of the retention play, having members pay under the rack rate. That will continue. Does that help?

Speaker #5: I mean, that's part of the kind of the retention play, having members pay under the rack rate. And so that will continue. Does that help?

Speaker #8: Super helpful. Thanks, guys. And then just on the '26 guide, just how to think about the composition of comp between member growth, pricing, how you guys define it, and then in-center growth.

Logan Reich: Super helpful. Thanks, guys. Then, just on the 26 guide, just how to think about composition of comp between member growth, pricing, however, you know, how you guys define it, and then in center growth.

Speaker #7: Yeah, so the revenue per membership is going to increase. That's part of that growth. The membership count, we've guided to roughly.

Bahram Akradi: The revenue per membership is going to increase. That's part of that growth. The membership count, we've guided to.

Erik Weaver: Yeah, membership growth, we haven't given a membership guide.

Speaker #5: Yeah. The membership growth, we haven't given a membership guide, but we will see growth that exceeds 2025. Again, we're not guiding directly to it.

Bahram Akradi: Ah.

Erik Weaver: We will see growth that exceeds 2025.

Bahram Akradi: Yeah.

Erik Weaver: Again, we're not guiding directly to it.

Speaker #7: Directly. But we're going to see an increase in that number from '25. And then the rest of it will become part of the in-center growth—the increase in revenue per member broken into dues, as well as in-centers.

Bahram Akradi: Directly, we're gonna see an increase in that number from 25. The rest of it will become part of the in-center growth, the rack, the increase in revenue per member, broken into dues as well as in-centers. Again, we are continually focusing on optimizing the revenue and EBITDA of the club, which comes through optimizing the membership experience.

Speaker #7: So again, we are continually focusing on optimizing the revenue and EBITDA of the club, which comes through optimizing the membership experience.

Speaker #8: Got it. Super helpful. I really appreciate the clarification.

Logan Reich: Got it. Super helpful. I really appreciate the clarification.

Speaker #3: Thank you. Our next question has come from the line of Chris Waranka with Deutsche Bank. Please proceed with your questions.

Operator: Thank you. Our next question has come from the line of Chris Woronka with Deutsche Bank. Please proceed with your questions.

Speaker #9: Hey, guys. Good morning. Thanks for taking questions. Congratulations on the year.

Chris Woronka: Hey, guys. Good morning. Thanks for taking the question. Congratulations on the year.

Speaker #7: Thank you.

Bahram Akradi: Thank you.

Chris Woronka: Just one question for me today. Bahram, you know, there's been a lot of focus, I think, in the industry around, you know, you guys having a higher end consumer, higher end product, service offering. There's been, you know, some issues at the lower end. My question is: do you think about potentially leaning into even the higher end of the market? You know, we've heard that high-end consumers are still looking to spend their money. Is there any thought or any plans for kind of a, any kind of white glove type service? I don't know if that, you know, what that might include in terms of transportation or special things. Is there any thought to try to tap into even the highest end of your customer? Thanks.

Speaker #9: Just one question for me today. Bahram, there's been a lot of focus, I think, in the industry around you guys having a higher-end consumer, higher-end product and service offering.

Speaker #9: There's been some issues at the lower end. So my question is, do you think about potentially leaning into even the higher end of the market?

Speaker #9: And we've heard that high-end consumers are still looking to spend their money. So is there any thought or any plans for kind of any kind of white glove type service?

Speaker #9: And I don't know what that might even include in terms of transportation or special things. Is there any thought to try to tap into even the highest end of your customer?

Speaker #9: Thanks.

Speaker #8: Absolutely. Yes. We have been working on bundling more programming yet just sort of more to come on that. But yes, we have been seeing that there is a certain number of member ships that they are wanting to spend more.

Bahram Akradi: Absolutely, yes. You know, we have been working on, you know, bundling more programming, yet, you know, just sort of more to come on that. Yes, we have been seeing that there is a certain number of memberships that they are wanting to spend more at a more, to your point, white glove service, more bundled approach, easier for them to transact. That's correct.

Speaker #8: And a more to your point, white glove service, more bundled approach, easier for them to transact. That's correct.

Speaker #9: Okay. Super helpful. That's it. Thanks.

Brian Nagel: Okay, super helpful. That's it. Thanks.

Chris Woronka: Okay, super helpful. That's it. Thanks.

Speaker #8: Thank you.

Bahram Akradi: Thank you.

Speaker #3: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Ladies and gentlemen, thank you.

Operator: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Ladies and gentlemen, thank you. This does now conclude our question and answer session. With that, I would like to turn the call back over to Connor Wienberg for closing comments.

Speaker #3: This does now conclude our question and answer session. And with that, I would like to turn the call back over to Connor Wienberg for closing comments.

Speaker #10: Yeah. Thank you, everyone. Thank you, operator, for joining us this morning. We look forward to speaking with you all again next quarter.

Connor Wienberg: Yeah, thank you, everyone. Thank you, operator, for joining us this morning. We look forward to speaking with you all again next quarter.

Connor Weinberg: Yeah, thank you, everyone. Thank you, operator, for joining us this morning. We look forward to speaking with you all again next quarter.

Operator: Thank you for your participation. This does conclude today's teleconference. Please disconnect your lines at this time and enjoy the rest of your day.

Q4 2025 Life Time Group Holdings Inc Earnings Call

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