Life Time Group Holdings, Inc. Q1 FY2026 Earnings Call

Greetings, and welcome to the Lifetime Group Holdings, Inc. Q1 2026 Earnings Conference Call. The operator provided instructions. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Connor Wienberg, Senior Vice President, Treasury and Investor Relations. You may begin.

Good morning. Thank you for joining us for the First Quarter 2026 Lifetime Group Holdings Earnings Conference Call. With me today are Bahram Akradi, Founder, Chairman and CEO; and Eric 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, net debt to adjusted EBITDA or what we refer to as net debt leverage ratio and free cash flow. This information, along with the reconciliations to the most directly comparable GAAP measures are included when applicable in the company's earnings release and earnings supplement issued this morning, our 8-K filed with the SEC and on the Investor Relations section of our website. With that, I will turn the call over to Eric.

Thank you, Connor, and good morning, everyone. We appreciate you joining us for our Q1 business and financial update. Please note that this morning, we posted an earnings supplement on our Investor Relations website which includes additional detail on our membership mix and comparable center revenue. Starting with our first quarter revenue. Total revenue increased 11.7% to $789 million driven by continued strength and performance across our portfolio, including higher dues revenue and strong utilization of our in-center businesses. Comparable center revenue grew 8.6%, slightly above our expectations. As outlined in the earnings supplement, components of our comparable center revenue were as follows: improved membership mix, which contributed 3.5% growth. This includes changes in membership types, the replacement of lower-dues memberships with higher-dues memberships, which we refer to as churn, and continued expansion of clubs into more affluent, higher-use markets. Price contributed 3% growth. This includes legacy membership dues increases and changes to the new-join price of clubs within the previous 12-month period. In-center businesses contributed 2.3% growth due to continued strength in utilization of our in-center businesses, particularly dynamic personal training. Volume contributed a negative 0.2% to comparable center growth. This was driven by a reduction in qualified medical memberships, which I'll discuss shortly. As expected, comparable center revenue growth continues to move towards our long-term target of 6% to 8%. Average monthly dues were $230, up approximately 10.5% year-over-year, and average revenue per center membership was $930, up 10.2% year-over-year. Growth in average dues was driven primarily by positive membership mix trends and execution of our pricing strategy, as I just described. We ended the quarter with nearly 838,000 center memberships, which reflects 1.4% growth. As we've discussed on past calls, we have been managing our membership mix. Part of our strategy has been to limit certain qualified memberships, specifically those administered by third-party medical insurance providers. We refer to these as qualified medical memberships. These memberships have significantly lower average dues. In Q1 2026, qualified medical memberships represented only 3.4% of our total dues revenue. We expect this to be approximately 3% by the end of the year and continue to represent a smaller proportion of our dues revenue over time. In the first quarter, qualified medical membership declined by approximately 15,000, down 14.9% year-over-year, while all other memberships grew by approximately 27,000, up 3.7% year-over-year in total, resulting in 11.9% growth in total dues revenue. Due to further year-over-year reductions in qualified medical memberships, we expect total center membership growth of 0.5% to 1% in the second quarter, 1% to 1.5% in the third quarter and 2% to 3% in the fourth quarter. However, we expect membership growth, excluding qualified medical memberships, of 3.5% to 3.8% in the second quarter and 4% to 5% in both the third and fourth quarter. With this strategy, we expect to deliver revenue growth of 10% to 12% for each quarter and the full year. Moving on to net income. For the quarter, net income was $88 million, an increase of 15.8% year-over-year. First quarter net income included approximately $8 million of net tax-affected items excluded from adjusted net income, primarily consisting of share-based compensation. Net income in the prior year benefited from approximately $1 million of net tax-affected items, driven primarily by $12.6 million of income tax benefits resulting from a significant exercise of stock options by our Chief Executive Officer ahead of their 2025 expiration, partially offset by share-based compensation. Adjusted net income, which excludes the tax-affected impact of these items, was $96 million, up 27.4% year-over-year. Adjusted EBITDA was $227 million, an increase of 18.3% over the prior year quarter, and our adjusted EBITDA margin improved by 160 basis points to 28.7%. The primary factors for our margin expansion included greater leverage on our center operating costs and corporate G&A, an overperformance of dues revenue and timing of sale-leasebacks. Of the 160 basis-point margin expansion, approximately 30 basis points relates to employer payroll taxes associated with the CEO's option exercises incurred in Q1 2025. As noted in our earnings release, we updated the midpoint of our full-year adjusted EBITDA margin guidance to 28%. This guide includes the impact from a majority of our clubs that are opening in the second half of 2026 and the associated preopening expenses and early operating ramp impact on margin. Net cash provided by operating activities increased to $199 million, approximately 8% higher compared to the prior year quarter. Total capital expenditures were $260 million, up 82% from the prior year, reflecting construction activity in support of our new club openings for 2026 as well as the start of construction on clubs planned for 2027. As of today, we have opened 5 of the 14 clubs scheduled for opening this year. The remaining 9 clubs and the number of the clubs scheduled for 2027 opening are under construction. In April, we closed on sale-leaseback transactions that generated approximately $200 million of sale-leaseback proceeds and expect to complete approximately $400 million for the full year, supporting our ongoing focus on generating annual positive free cash flow. With that, I will now pass the call to Bahram. Bahram?

Thanks, Eric. Good morning, everyone, and thank you to our teams across the company for their outstanding work this quarter. As Eric mentioned, we continue to see strong performance across all aspects of our business. We're not seeing any impact from the broader macro environment at this time. Demand has been particularly strong for our new clubs, including four clubs we just opened in the last 30 days. They're all performing extremely well. Our real estate pipeline continues to be robust, and we expect to continue growing both revenue and adjusted EBITDA in the low double-digit range. I'm going to keep my prepared remarks very brief as the results of our business speak for themselves. But I would like to focus and provide clarity on our positive free cash flow outlook. Last week, we announced the close of $200 million of sale-leaseback and raised our full-year sale-leaseback target to $400 million, delivering positive free cash flow in 2026. We expect to deliver growing positive free cash flow each year going forward, while selling only a portion of our fee-owned real estate assets built in any given year, resulting in an increase to the value of the real estate portfolio that could be used at any time as additional liquidity. All of this puts us in a very strong position with very low leverage, robust and growing operating cash flow and a significant portfolio of real estate assets. We will continue to invest in our existing clubs, take advantage of our white space by opening new clubs and thoughtfully return capital to our shareholders. With that, we will open the call for questions.

The operator will now open the line for questions.

When we look at what we know right now, it looks like another year of substantial suburban ground-ups. How do you think about beyond '27? Do you think '28 and '29 will look a lot like '26 and '27? And what are your thoughts on takeovers? You had done a bunch, but you haven't done many in a while. I don't know if you like that use of capital. What's your thought on that type of project?

Great question, John. Great to hear from you. The market is incredibly exciting ahead. We have some amazing club openings, including some in very strong urban markets. We've been wanting to get into these with significant-sized clubs. Interestingly, right now our urban clubs are performing with incredible return on invested capital as we go into leases and put in leasehold improvements; the returns are incredible and they ramp exceptionally well. And the suburban clubs have never been better. The clubs we are opening right now in suburban and semi-suburban areas are delivering some of the best results I have ever seen. We're excited about all the sites in the pipeline, whether they're in super-hot urban markets where we are part of larger developments — we've been negotiating on some of these for five, six, seven years, they just take longer, so they're closer to the other side — and we still have a growing number of suburban prototype opportunities as demographics shift into new markets. For example, we just on Monday opened the club in Akatio. It's a second location in Gilbert, Arizona. All four clubs performed incredibly well. So we are not concerned about running out of opportunities to build urban, semi-urban or suburban clubs. That is the last thing on our list of concerns; there are just amazing opportunities, and they're all performing exceptionally well. The most important thing that I think is often misunderstood about this business is that the cash-on-cash return matters more than membership count. When we enter a lease and apply leasehold improvement dollars, we are always north of 30% in aggregate return on investment. When we do clubs and then take them to sale-leaseback, we meet or exceed that. So it really doesn't matter to me whether it's more suburban or urban. Right now, they're all doing exceptionally well. Hopefully that answers your question and others' regarding that topic.

Maybe as a follow-up to that, has that success — and maybe lack of competition in some respects — changed your view on what the white-space opportunity is? At points you've said 600 maybe or more than that. In your mind, has that increased? And if so, by how much do you think?

Fortunately or unfortunately, I think it's going to be way past your time and my time, John. I don't think we are concerned about running out of opportunities. We do 14 clubs a year. I don't see when we're going to get to the point where we have a hard time. We've been looking at so many opportunities in the United States that it makes us consider international demand, but the amount of opportunity here in North America is enormous. So there is really no concern. We have always said 450 or 500; I don't think we see any window that is going to be smaller than that — it will probably continue to grow.

Our next question comes from the line of Brian Nagel with Oppenheimer.

Congratulations on a very nice quarter. And also very much appreciate the press disclosure on numbers — thank you. So the first question: we've talked about this before, but in the release again today, you talked about in the inset that offering dynamic personal training has been a driver. So the question I want to ask is how do you look at the current penetration of DPT — where is the slack there? And then with regard to membership and the disclosure you gave today, as you continue to upgrade these memberships in these clubs, does that give you more opportunity in DPT assuming that these nonqualified members are more likely to uptake that?

Let me first give credit to our entire DPT team from every DPT themselves all the way to our Senior Vice President who runs that. They do an amazing job. The brand of dynamic personal training has been understood. The quality of our trainers is exceptional — we are continually seeing an increase in the number of productive, high-quality trainers. The execution is exceptional, and we continue to see more opportunities. You're correct: as we execute our new brand positioning, which we've been progressing over the last three to four years, we're positioning Lifetime as an aspirational 'country-club' type brand where desirability matters and price is less of a factor. The kind of customers coming to us are not focused on price; they're focused on the experience. Those members also engage in in-center businesses much more easily than customers who were brought in with aggressive short-term offers. Lifetime has never been in a better brand position; this is the result of the positioning changes we've made over the last four or five years.

Yes. And if I can just add to that, Brian, Bahram talked about trainers. As we look to serve the demand across the portfolio, trainers are up low double digits and new business is actually up even more. So again, that just speaks to the increased demand that Bahram discussed.

That's very helpful. And then my follow-up question on a different topic: thanks for the commentary on the cash flow dynamics here in '26. But as we look at that CapEx number, either what was closed from Q1 or guidance for '26, how should we think about that relative to the clubs that you're opening in '26? In other words, how much of that growth CapEx that you earmarked is actually associated with clubs beyond the current year?

That's a great question. Eric has covered this multiple times: it's roughly half and half. About half of the capital we launched this year is for clubs opening in 2026, and half is for clubs where we've already started construction or bought land for 2027 and some for 2028. That's always going to be the case with the way we build our business. This is an advantage of Lifetime's model — a moat that takes time and capability to develop. For us, it's routine: we're investing in 2026, 2027, 2028 and sometimes beyond at any given time. Financially, we are in an amazing position. We have very low leverage, significantly below my maximum target of 2x debt to EBITDA. That's flexibility. We have zero balance on our revolver and several hundred million dollars of cash. We build every year more than $400 million, $500 million, $600 million in fee-owned, sellable assets. If we sell $400 million of that, it's not the portion of CapEx that goes to leasehold improvements; this goes into the pool of fee-owned real estate assets that we can sell and think of as additional liquidity. Over the next four to five years, that number will continue to grow even if we keep building 14 clubs a year. To keep assumptions simple, if we build 14 clubs a year constant, we're going to generate roughly $400 million a year of sellable assets. We'll be adding to the value of our sellable assets and to free cash flow from '26 on every year. Our long-range plan shows that by roughly 2030, that free cash flow will be more than $400 million, which gives us many options. We do not have to sell our real estate to be cash-flow positive, but we can if we choose to, and that will allow us to consider different ways of returning capital to shareholders. I hope that provides clarity.

Our next question comes from the line of Arpine Kocharyan with UBS.

You raised revenue for the full year by about $20 million and EBITDA is going up by about $15 million. That is a very healthy flow-through as we think about incremental revenue upside. So maybe if you could go through drivers of that. More importantly, your underlying members seem to be growing in that 4% to 5% range, which is definitely healthier than what meets the eye, right, with the qualified down double digit, the blended number. Can you expand a little bit more how you think about member growth in light of revenue optimization versus just chasing volume, sort of your updated views on that? And then I have a follow-up.

Yes, I can take the flow-through. On revenue, we're seeing extremely strong performance in our dues line, which, as you know, mostly flows through to the bottom line. We're also seeing continued strong performance in DPT, which has a lower margin than dues. So that's the relationship between dues and flow-through. What you're talking about on membership mix versus volume is exactly our strategy: instead of just chasing raw volume, it's all about the membership mix. That means more members per membership and higher LTV, which is a better outcome strategically and from a revenue standpoint.

To add another way to think about it: we are prioritizing the quality of revenue and membership, the ability to drive in-center business and retention. Those priorities result in stronger EBITDA pass-through. The mix shift you're describing is a continued quarter-after-quarter result of changing the company's positioning. We were decisive about creating a brand whose desirability attracts customers who are not price-sensitive but experience-sensitive. That's taken us four or five years, and we're still managing churn through that transition. We value all our customers, but over time we will see a transition toward more direct, higher-paying memberships that add to the mix shift I just described. Ultimately, we're focused on what a club does for revenue, contribution margin and retention, and the team's execution is delivering these results.

That's great. And a quick follow-up on buybacks: you have a $500 million authorization and you just raised the sale-leaseback target even before reporting today. Could you give your broad take on how you think about capital allocation at this point as far as buybacks go, and the potential to be opportunistic?

We are going to use our authorization as long as we see the stock below what we consider fair value. We'll take advantage of that opportunity and buy shares back at the right times. As cash flow grows, we'll analyze with the Board and our capital allocation committee how to deliver returns to shareholders. But right now, we have this vehicle in place, and we'll look at share prices and be opportunistic when appropriate.

Your next question comes from the line of Randal Konik with Jefferies LLC.

The theme I'm getting here is appreciating the continuous improvement in the quality of the product, the experience and the membership. Bram, maybe give us perspective on some of the product services and amenities you're thinking about over the next few years and some existing ones today that you can see adding more penetration into the centers for members. And Erik, have you looked at revenue per membership in different quintiles? Are there dynamics between the lowest and highest quintiles and how you can grow the mid tiers closer to the top?

Let me start: we have CTR in rollout right now — we are in about 30 to 50 locations and targeting more executions by the end of the year. We're launching hybrid XT, which is in its infancy and has tons of potential. Dynamic stretch has significant opportunity going forward. We are working on a Lifetime Health and Wellness Hub, which aggregates services like registered dietitians to help people navigate health and wellness information. We also have Lifetime-branded products and services, personal training, dynamic stretch, CTR classes and more. Some initiatives are further along and are ready for rapid rollout; others are earlier and require fine-tuning before heavy rollout. We have many ideas and are focused on executing them. Adaptation is a necessity of survival; Lifetime has demonstrated over 35 years how we adapt, and this team is poised to adapt as needed to deliver relevant customer experiences.

On the second part of your question, we are always doing things to add value to memberships across all quintiles. One of the biggest opportunities is our qualified medical segment, because our clubs are busy. Where we can most impact average dues and increase in-center utilization is exactly what we're doing with qualified medical adjustments.

Your next question comes from the line of Chris Woronka with Deutsche Bank.

I appreciate the expanded disclosure, especially around those qualified memberships — super helpful. Maybe go one step further: when you evaluate a new club and underwrite different locations, how important is a metric like members per club versus the dues you think you can get, ancillary revenue, engagement? I'm trying to determine whether members per club is the most important metric for development because I don't think it is, but I'd like your view.

It isn't. I want to be clear on that because it is often misunderstood. What I care about is the dollar investment in a facility and the return on that investment. We want a certain amount of revenue and contribution margin from a club. When I launched the company, we envisioned comprehensive delivery of many experiences under one roof, but we priced membership too cheaply, which prevented delivering the desired quality. With our updated plans over the last two to four years, we often plan for fewer members than in the past, and those clubs end up generating higher revenue, higher margin and a better experience. So we intentionally open clubs with fewer memberships to reach our desired utilization and maintain the experience. Focus on revenue, EBITDA and margin pass-through, not raw membership counts. Our results reflect that strategy.

Thanks, Bahram. A quick follow-up: there has been talk about app monetization, advertising and other forms of revenue. Where are those initiatives? Is that still on the table?

Not in the near term. The reality is AI is advancing rapidly, and our focus has been on delivering the best experience. There are features of our app, Lacy, such as a workout generator and health and wellness Q&A that are impressive. Lacy is designed to be a navigator for the customer to help them find what they want among the many services Lifetime offers. We have millions on our interest list and are adding about 100,000 subscribers a month. At some point, we'll consider monetization, but right now our priority is building an exceptional experience and making it easier for people to join clubs and engage with our offerings.

Your next question comes from the line of Stephen Grambling with Morgan Stanley.

To avoid surprising investors, I think everyone appreciates the focus on ROIC and your confidence in new clubs hitting very healthy ROIC. As we think about KPIs over this year — members per club, in-center spend, margins as clubs ramp — any reason to believe these will be different than what we've historically seen or what's in the pipeline?

From a margin perspective, no. Given the revenue per membership growth we've seen, we expect that to continue. That is an important KPI for us. I don't see anything that suggests we'll have materially different KPIs than what we've been showing with our existing operations.

Our execution is the best ever in many aspects of the business. Systematically, results are fantastic across the system and we don't have a reason to believe they will deteriorate. We will continue to look at individual clubs for embedded additional opportunity, but overall performance is strong.

It's worth reemphasizing our approach to memberships per club. Today it's roughly 4,400 per club on average, but the trend is intentional — we open new clubs with fewer memberships to deliver our desired utilization and experience.

Your next question comes from the line of Anthony Bonadio with Wells Fargo.

Q1 EBITDA margin looks like another all-time high. Can you talk about what drove the performance you saw there?

It was a good quarter. We saw strong performance in dues, which flowed through, and improved center operating margins. There was great execution on expenses across the board, and timing of sale-leasebacks helped as well. We achieved leverage in both G&A and center operations.

I want to give credit to our team. Entering the year amid macro uncertainty, we focused on delivering the customer experience at a high level while not wasting dollars. The team executed exceptionally well. I would caution investors not to expect unbounded margin expansion at the expense of the customer or team experience. We have additional clubs opening, with some preopening expenses and potential early ramp impacts on margin, but many new clubs are contribution-margin positive in early months. Overall, I am very proud of the team and the execution.

Thanks. On the consumer, can you talk about demand? In-center spend growth remained strong in Q1 and reads on high-income consumers remain good. Are you seeing any change in appetite to spend in that cohort?

Absolutely zero negative impact so far. Demand is strong for our clubs and services. We're doing this with very little marketing spend; demand is coming naturally. In-center businesses are strong and waitlists for new clubs are substantial. Everything is working extremely well.

Your next question comes from the line of Eric Des Lauriers with Craig Hallum.

Congrats on the strong results. Can you expand on the improving membership mix? How much runway do you have before we reach a new normal balance of members, and how long do you expect this to be a tailwind to dues?

We still have roughly two-thirds of our membership paying below the rack rate. As older legacy members churn out — due to moving or other reasons — new customers often replace them at higher dues without increasing membership count. We expect this mix shift to continue for some time, though eventually it will slow down. Right now, it remains a tailwind.

We highlighted in our Q3 supplement where we began deemphasizing qualified medicals. That's why we gave guidance for the next few quarters. As we open larger clubs, qualified medical as a proportion of total membership will continue to shrink, and that dynamic underlies the membership mix trends you see.

Got it. Thanks. And as a follow-up, looking at the macro category longer term, you have a long runway. How do you view competitive dynamics in the space and your positioning to increase the size of the pie?

If someone tried to replicate Lifetime by starting a new company, they would not easily dent our position. Our scale, complexity, execution capability and brand recognition are significant barriers. Competition may come in the form of specialized boutiques, recovery spaces or niche providers, but those do not replicate what we offer. We're focused on executing our opportunities, and we are not concerned about direct competitors taking on our model at scale.

Your next question comes from the line of Logan Reich with RBC Capital Markets.

Congrats on the solid results. First, how were visits per member and retention trending in the quarter? I know it's been an area of strength.

Visits per member are up and retention is strong. The more members use the club, the less likely they are to drop — these metrics are working in our favor.

Helpful. On put-on-hold memberships, that number declined year-over-year for the first time down to 23% — any color on what drove that decline?

There's nothing meaningful to signal a trend. That number moved down only a few thousand and fluctuates as members go on and off hold. I wouldn't read into it as a structural change.

Your next question comes from the line of Owen Rickert with Northland Capital Markets.

Congrats on another strong quarter. Can you talk about the vision behind the new Lifetime Innovation Hub and how you see it influencing future member experiences, ancillary revenue opportunities and broader long-term growth?

If you don't have an innovation hub, you're missing the point — you must be thinking about innovation. Our company is directing teams to explore new products and services members want and to create an engine to deliver them. We are rolling out dynamic stretch and hybrid XT, and working on the Lifetime Health and Wellness Hub. We're always exploring ways to transform clubs so people want to be there for entertainment, work, dining, socializing and health services. The opportunities to innovate inside the club are endless.

Got it. On MIORA, how many locations are you currently in and is the long-term vision still about one to three per region?

We're in a phase of refining the customer journey for MIORA to ensure an exceptional experience. I believe MIORA can become a mainstream offering and eventually be present in most clubs, similar to personal training. Because of HIPAA and medical compliance complexity, we're taking a crawl-walk-run approach, but we expect to accelerate rollout in the next 12 to 24 months. We're very excited about MIORA's potential.

Your next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets.

Looking at the building blocks for the comp, conceptually two to three years out, is it fair to think the membership volume piece reverses as a headwind because qualified memberships continue to churn off, but membership mix and price become the drivers? Any thoughts around membership price and in-center business over the next couple of years?

On price, we've given our long-term algorithm at roughly 2% to 3%, which we think is sustainable. As we work through dynamics around qualified memberships, those things generally flatten as the portfolio matures and growth comes from ramping new clubs. Directionally, that's a fair expectation.

Got it. One more on GLP-1s: any updated thoughts on that being a tailwind to the industry, benefits to new adds and retention?

GLP-1s will be a home-run for exercise facilities. They help people lose weight, which will encourage many to come to clubs. There is a risk of muscle mass loss and bone density issues if not combined with proper weight-bearing exercise, so it's critical that providers educate patients to combine GLP-1 use with exercise. We see this as a net positive for health clubs. At MIORA, for example, combining GLP therapy with appropriate exercise and nutrition leads to better outcomes. The net outcome for health clubs should be highly positive.

Your next question comes from the line of John Baumgartner with Mizuho Securities.

Eric, on your outlook for membership growth — putting qualified medical memberships aside — can you speak to mix across that bucket of all other memberships? Also, what are you seeing broadly in families versus singles and the influence of programs like pickleball on driving membership growth?

Directionally, the percent of couples and families in our mix continues to increase, which raises members per membership. That's part of the improved mix story. We're also opening clubs in locations with higher average dues, and those trends continue.

Okay. In terms of programming, post-COVID a lot of investments focused on class offerings that compete with boutique studios. Now CTR and hybrid XT seem more specific to Lifetime and your ecosystem. Is this a new angle to lead more visibly with classes that are different than what's outside Lifetime and that you can leverage to drive new members?

We evaluate the use of space, services members receive and the longevity of programs before rolling out new ones. There's a lot of complexity in reconfiguring space and deciding which programs to expand. We have many options for programs and channels to accelerate growth, and we're excited about how well programs like CTR and hybrid XT are being accepted. Our goal is to maximize visits and spread usage throughout the day to provide steady utilization without creating crowding. We're not out of ideas; we're focused on thoughtful rollout and execution.

There are no further questions at this time. I'll turn it back to management for closing remarks.

Thank you, operator, and thank you, everyone, for joining us this morning. We look forward to having you on the next quarter call.

This concludes today's conference. You may disconnect your lines. Thank you for your participation.