Earnings Call Transcript - LTH Q1 2023

Operator, Operator

Good morning. Welcome to the Life Time Group Holdings First Quarter 2023 Earnings Conference Call. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, this conference is being recorded. I will now turn the call over to Ken Cooper with Investor Relations for Life Time.

Ken Cooper, Investor Relations

Good morning, and thank you for joining us for the Life Time first quarter of 2023 earnings conference call. With me today are Bahram Akradi, Founder, Chairman and CEO; and Bob Houghton, CFO. During this call, the company will make forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from 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. Also, the company will discuss certain non-GAAP financial measures, including adjusted EBITDA, net debt, free cash flow before growth capital expenditures and free cash flow. For purposes of this call, free cash flow is defined as net cash provided by operating activities after total capital expenditures. This information, along with the reconciliations to the most directly comparable GAAP measures where possible and without unreasonable efforts are included in the company's earnings release issued this morning, our 8-K filed with the SEC and within the Investor Relations section of our website. Our website also includes a supplemental presentation pertaining to the delevering of our business, a topic that Bahram and Bob will address this morning. I'm now pleased to turn the call over to Bob Houghton. Bob?

Robert Houghton, CFO

Thank you, Ken, and good morning to all our stakeholders on today's call. We appreciate you joining us this morning. I will briefly cover our first quarter 2023 results, the full details of which can be found in the earnings release we issued this morning. Bahram will then provide a bit more color on the quarter and how we will continue to grow our business, improve our profitability and reduce our leverage through the remainder of the year. We are off to a strong start this year. First quarter revenue increased 30% to $511 million, driven by a 31% increase in membership dues and enrollment fees and a 28% increase in in-center revenue. Center memberships increased 13% as we ended the quarter at approximately 764,000 memberships. We added 39,000 center memberships during the quarter, including one of the strongest January enrollments in our more than 30-year history. Including digital on-hold memberships, total memberships increased 9% to approximately 814,000 memberships. First quarter average center revenue per membership increased to $667, up from $640 in the fourth quarter and up 15% from $580 in the prior year quarter as we continue to benefit from higher membership dues and increased in-center activity. We generated net income for the first quarter of $27 million compared with a net loss of $38 million in the first quarter of 2022. Adjusted EBITDA increased 196% to $120 million and our adjusted EBITDA margin increased 13.1 percentage points to 23.5% versus 10.4% in the first quarter of 2022. We delivered another quarter of improving cash flow with net cash provided by operating activities of $74 million versus $9 million in the prior year quarter. As I move to an update on our adjusted EBITDA and leverage ratio, I will make reference to the new supplemental slides, which are posted to our Investor Relations website. As detailed on slide three, we reduced our net debt to adjusted EBITDA leverage in the quarter and expect further improvement in this key metric as we continue to grow our adjusted EBITDA and reduce our net debt. We are very pleased with our start to 2023. We are successfully executing our strategies to deliver significant revenue growth and improve profitability through growing memberships, increasing club usage through our expanded programming and opening new clubs that are ramping faster in great locations across the country. We are also clearly seeing the benefits from the re-wiring of the business and the strategic initiatives that we put in place last year. And we remain confident in our ability to increase cash flow and improve our balance sheet. I will now turn the call over to Bahram.

Bahram Akradi, CEO

Thank you, Bob. I am very pleased with our first quarter results. Our team has been executing on our strategy with a great deal of passion and care. With our newly re-wired structure, we delivered Q1 records of revenue and adjusted EBITDA for Life Time. We have great confidence that we can continue to elevate our programming and experiences for our dedicated member base, while also growing our revenue and adjusted EBITDA. As Bob mentioned, memberships grew very nicely, up nearly 40,000 in the quarter. Our attrition has been coming down steadily each quarter and we project June will be the first month with attrition rates below 2019 levels. Not only is our membership growing, our in-center businesses are also improving on both top and bottom lines. These improvements are driving better margins and are reflected in our better-than-expected first quarter performance, our Q2 guidance and our updated outlook for 2023. First, we are reiterating our full year revenue guidance of $2.2 billion to $2.3 billion. At the midpoint of that range, revenue increases approximately $430 million or 23.5% from last year. This guidance includes a revenue expectation of $560 million to $570 million for the second quarter, which is a 21% to 24% growth over last year's second quarter. Second, we're increasing our full year adjusted EBITDA guidance to $470 million to $490 million from $440 million to $460 million. This includes an adjusted EBITDA expectation of $124 million to $126 million in the second quarter. We continue to be very conservative in our assumptions and are focused on deleveraging our balance sheet. As I mentioned previously, our number one focus has been to lower our net debt to adjusted EBITDA by first and most importantly growing our adjusted EBITDA. We have made good progress in this effort, as Bob mentioned. Page three of our supplemental presentation shows the improvement trend for our levages over the last four quarters and our projection for the '23 year-end, which is around 3.5 times. It's important to mention, we have approximately $400 million of our debt associated with assets under development. These assets are not yet deployed nor are they generating any revenue or adjusted EBITDA. Once these assets are brought online and mature a bit, debt to adjusted EBITDA will reduce by nearly a full turn and that's before any sale leasebacks. As I've mentioned on prior calls, our future development strategy will include building more clubs that are financed by landlords, which typically require less than $10 million of capital on average per location for Life Time. Further emphasizing this strategy would allow Life Time to generate as much as an additional $300 million of free cash flow each year that could be utilized to reduce debt. In closing, I'm very happy with the position we're in today and we're very excited for the future. With that, we will answer your questions now.

Operator, Operator

Thank you. Our first question is from John Heinbockel with Guggenheim Securities. Please go ahead.

John Heinbockel, Analyst

Hey, Bahram. Can you hear me?

Bahram Akradi, CEO

Sure, I can, John. How are you?

John Heinbockel, Analyst

I'm good. I want to start with in-center revenue seasonally for the two summer quarters. How do you think about members spending, willingness to spend? And then the sort of things that you're going to do, Bahram, when you think about specifically for those quarters in terms of getting more involvement in the kids' camp, some of the events that you run and trying to get more engagement than you've ever gotten before?

Bahram Akradi, CEO

I love it. John, we have been improving our processes and our technology where the members have started buying summer camp because the supply on that is basically limited in every club and it can only take so many summer camp kids from our memberships that we started this year by taking those reservations a few months back. And I am absolutely certain that we will outperform anything we've done in the past because already we have a view of how packed those programs will be. We are not seeing any resistance from the customers to spend at this time, even though we're extremely conservative and are baking in a pretty healthy macroeconomic headwind coming up some time in the next six to twelve months. That's what we're baking into our assumptions, but we are not seeing change. People love the programs, love the service, love all the additional changes we have made to make transactions for them easier and more robust. And all those programs are working and personal training is setting records in EBITDA on a monthly basis. Everything is working. I mean, I wish there was something that I could tell you. But right now, all things are working.

John Heinbockel, Analyst

Great. And maybe as a follow-up, the transaction you just announced, Atlanta and Tampa, taking over existing facilities. Is there much of an additional opportunity to do that given the condition some facilities or owners may be in coming out of COVID? I guess, obviously, that's attractive in terms of capital cost and member ramp as long as the facilities are good. Is there an opportunity there?

Bahram Akradi, CEO

Absolutely. When we see these things, in order for them to become a Life Time execution, they require a significant overhaul. And landlords who basically haven't been getting paid by some of these tenants, when they have an opportunity to take those assets back, they look around and they see what tenants paid rent throughout COVID without messing around, they call us and they ask us if we want it. And they're willing to make bigger concessions to have Life Time be the one going in there. So, yes, we have significant discussions on these types of facilities. And they will become a bigger percentage of our growth in the future years because we are in discussions, we're talking to them, we’ll take them many times, and we shut them down to completely overhaul them and get them back where the landlords are providing TI dollars for us to do so. They are extremely attractive from an economic standpoint. They're sometimes two, three times better on the return on invested capital than we would do otherwise.

John Heinbockel, Analyst

Okay. Thank you.

Bahram Akradi, CEO

Thanks a lot.

Operator, Operator

Our next question is from Brian Nagel with Oppenheimer. Please proceed.

Brian Nagel, Analyst

Hey, guys, good morning.

Bahram Akradi, CEO

Good morning, Brian.

Brian Nagel, Analyst

Congratulations on another nice quarter.

Bahram Akradi, CEO

Thank you.

Brian Nagel, Analyst

So my question, as you look at the results, a nice beat on EBITDA on a modest upside in your revenue. So as you look at that kind of how the model is flexing here, we talked a lot about the re-wiring of the model and the cost controls and such. But is there a particular area as you're really getting ramping or you're seeing better than expected efficiencies that are allowing you to drive these EBITDA beats?

Bahram Akradi, CEO

Yes. So I want to be clear, we're spending roughly $40 million to $45 million more than three, four years back on an annual basis in additional programming. So we have focused on increasing, not cost-cutting, but improving the quality and programming that we offer the members as part of the signature membership. So we did go back and really looked at our infrastructure and the way the company was making decisions. We re-wired that so that the decisions are going through two to three stops at maximum rather than six or seven. We dramatically reduced the red tape in the company; there was actually no cuts in the number of people delivering services, I want to be clear. That is completely contrary to my direction to the team that I want the highest NPS, I want the highest quality ever. We basically re-wired the business. And the improvement in the percentages of the margins you guys are seeing are here and they're permanent. They are not just for a quarter or two quarters. You can expect roughly between 20% and 23% EBITDA margin, which is a couple of percent better than what we did pre-COVID. Right, before COVID. Once you add the rents back to our EBITDA, that number is about 2% to 3% better than the best numbers we had before on a steady basis. So as far as the revenue, the revenue was actually a little better than it reflects the way you guys are seeing it. We have been taking our foot off the gas on pushing the timing of the club openings. So if it takes a little more time to negotiate the bids a little longer, allow the quality to come together, not spend money on overtime for delivery of the clubs. So we have had delays in opening, so therefore, delays in revenue coming online, but the outperformance of the total clubs, opened clubs are making up for the delays and we're still kind of giving those revenues. So the revenues are strong as well as the EBITDA. It's not just the EBITDA, membership sales, we gained 39,000 to 40,000 additional net memberships in the first quarter, amazing results. So everything is working, Brian.

Robert Houghton, CFO

Yeah, Brian, it's Bob. Just to add, the PT business, as Bahram talked about in his comments, I mean, we're delivering record levels of EBITDA dollars, record levels of EBITDA margin. We're growing that business sequentially in the top-line month-over-month. So that's another business that's really working well for us.

Brian Nagel, Analyst

That's great. I appreciate all the color there. And then one quick follow-up, if I could. So Bob, you mentioned in your comments, maybe just talk about here too just the strength of that membership growth, particularly in January, which I guess is the typical New Year's resolution type season. So as we head now into the cool season, we have the guidance you gave, how should we be thinking about the membership here or the trajectory of membership? And given that this will be the first, I guess, un-COVID affected cool season for Life Time?

Bahram Akradi, CEO

Yeah, membership will be very strong here in May, June, July. We expect no negative factors coming into play at this point. We are so ready; the clubs have been upgraded, the beach clubs are looking amazing and I think there will be significant pent-up demand for that. We are also working on figuring out ways so we can make it easier for people to order food on the pool deck and that will allow us to improve the opportunity on the revenue side. So we're pretty excited about what's about to come here in the next quarter as well.

Brian Nagel, Analyst

Congratulations again. Thanks for all the color. Appreciate it. Thank you.

Bahram Akradi, CEO

Thanks a lot.

Robert Houghton, CFO

Thanks, Brian.

Operator, Operator

Our next question is from Chris Carril with RBC Capital Markets. Please proceed.

Chris Carril, Analyst

Hi. Good morning. So could you expand a bit more on your latest thinking around dues pricing strategy? What are you seeing from new and existing members in terms of reaction to pricing actions? And where do you potentially see further room for pricing?

Bahram Akradi, CEO

So really, honestly, as I've mentioned this over and over, our pricing strategy has been a function of controlling the experience we want in the club. So we are where we have more than an abundant opportunity in a certain club to gain a couple of thousand more memberships, we are not pressing the price point in that club. Where we have members in a club feeling like it's being overly crowded and we're trying to limit the membership coming into that club and control the experience then we just raise the price. So it really speaks for itself. The customer clearly demonstrates that they like the new strategy. Our result shows that all across; our NPS shows it, the NPS is higher, revenue is higher, EBITDA is higher. The customer who wants the Life Time athletic club experience isn't comparing the Life Time athletic country club experience to anything else. They just want to be in Life Time. And we have limited supply in every club before the experience gets tarnished. So managing that experience naturally guides us for where the price needs to be. And that has allowed prices to go to where they really need to be established. They're working right now. We don't have huge plans to add additional new rack rates, except if nothing gets done. Just Chris, nothing gets done systematically. We don't have a price increase ever across the entire country or something like that. It is literally location by location, member by member. And it's based on what makes the most sense overall. So the way that I would tell you for you guys to think about and work with Bob and Ken is you really need to look at the average dues for all subscriptions. Right now, the full subscription, including the digital on-hold and all access membership is about, as we mentioned, 814,000, 810,000 plus. That number times the average dues for the full subscription, which is roughly about 152 or something. If you back out the 40,000 members that are on-hold and you go to the 764 memberships, I would look at that number and say, the average dues on this is about 162 at whatever. What you should expect that without doing anything at all, naturally that number, that 162 that 152 is going to grow a little bit each quarter because there is some churn and the churn will naturally push that up. And then there is basically some modest, modest legacy member dues increases. So this is very methodical. We go through it systematically. They will always be paying. They have been with us for five years, six years, seven years and more likely they're going to pay less than rack rate for a very, very long time because we give them the benefit of the fact that they've been a member for a long time, and that also reduces their desire to want to drop out because if they drop out, they've been a long-term member, they want to be a member, they drop out, they come back, they got to pay the new rack rate. So the whole system is working. Does that help you?

Chris Carril, Analyst

Yeah, no, super clear. And then just for my follow-up here, just circling back to the incentive revenue going forward. Could you update us on demand and trends around dynamic personal training? I know Bahram, that's been a big focus area for you this year. Thanks.

Bahram Akradi, CEO

Yeah. So I'm really happy with our team. I just got to say, the execution of our team has been phenomenal. I believe we set the record EBITDA number in March for that business. It's really awesome to see our newly invented dynamic personal training model and the re-wiring of that business has been so successful. We significantly and I mean significantly reduced the overhead that was outside of the clubs to the corporate office by literally like 300%. It's 1/3 of what it used to be that overhead. And I am personally involved weekly with our personal training leads across the country. And it's the best momentum, the best model that we have ever had and the results are coming. We're getting people who had left Life Time because they didn't like certain things and the COVID kind of pushed them away. Weekly, we're getting some of those people knocking back on the door and wanting to come back and work on the new culture, new system. And then we are completely equipping the clubs with additional equipment so the clubs have the best environment, the best setup, the best equipment for a trainer to train their customers. You couldn't find a better opportunity with equipment and spacing to train your customers. So that also attracts the best trainers coming in. So it's all positive momentum. I expect this year on a monthly basis we'll also break personal training revenue records, not just EBITDA records. It's all moving in the right direction.

Chris Carril, Analyst

Awesome. Thanks so much.

Operator, Operator

Our next question is from Brian Harbour with Morgan Stanley. Please proceed.

Brian Harbour, Analyst

Yeah, thank you. Good morning, guys.

Bahram Akradi, CEO

Hello, Brian.

Robert Houghton, CFO

Good morning, Brian.

Brian Harbour, Analyst

Your comments on the cost side I think were clear. I think one question I had was just as we see at the kind of center operating expense is basically back to where it was kind of pre-COVID, actually a little bit better as a percent of revenue. Should we expect that to continue? I know that there's some seasonality to that, but how should we think about that line?

Bahram Akradi, CEO

As I mentioned, we have fine-tuned the model of the way the clubs run with their management system converted to a leadership concept; everybody is leading the way rather than bossing other people around. So the GMs, the structure, they're called Lead Generals and they have a very, very clear approach on how they have lots of authority and they're responsible. It is completely matched. So pretty much all the waste has been taken out of the clubs and the way they're running right now is the correct way. Where we're going to see potential margin improvement still is going to be on the revenue that is still there to increase. And as the dues revenue increase in the clubs, the cost isn't going to grow proportionally to that. So there is room for that to improve. But at this point, I would basically model what I told you guys is between assuming the rent will be between 12% and 13%, that's really the number that I think is going to fall in, and so it could be a little lumpy. When we do a big sale leaseback, we can get closer to 13%. Prior to that, this is going to be closer to 12% of our revenue. So if you think about that, then our EBITDA margin you can kind of plan between 20% to 23% is where it is right now. Can it improve? Yes. Will I commit to that improvement? Should you put it in your model? Not right now.

Brian Harbour, Analyst

Okay. Thank you. Could you also just comment on kind of the sale leasebacks, the pacing of what's still to be done and perhaps kind of the cap rates on those today relative to what you'd seen in the past?

Bahram Akradi, CEO

Yeah, the cap rates we have done for the first $135 million are in the same range at the mid-6s that we told you guys. And we are not anticipating that there is going to be much higher rates. I think, again, I emphasize, these assets when people are buying these, they're buying them. It's a 20, 25-year lease with 25 years of options with fixed bumps in it. So it's not tied into the two-year mortgage, it's two-year T-Bills or three-year. It's just a headwind temporarily. So I think our expectation is we're going to get them done in the same range that we've done before. And I'm pretty certain that it's all going to come together. That's all I can share with you right now.

Brian Harbour, Analyst

Okay. Thank you.

Operator, Operator

Our next question is from Robbie Ohmes with Bank of America. Please proceed.

Robert Ohmes, Analyst

Good morning, Bahram. Congratulations on a great quarter. I have two questions. First, could you provide some insights on how the new clubs are performing? Are they ramping up at a faster rate than usual or about as expected? Additionally, when assessing the ramp-up of new clubs, what factors do you believe are contributing to the outperformance of some compared to others?

Bahram Akradi, CEO

That's a great question. The new clubs are performing exceptionally well. They are ramping up more quickly in terms of dues and margin contribution compared to our previous processes. The new model is effective. Overall, these clubs are achieving positive contribution margins within 60 to 90 days of opening. Everything is looking more favorable than in the past.

Robert Ohmes, Analyst

Got you. That's helpful. For Bob, the revenue guidance remains unchanged, but the EBITDA guidance has increased by approximately $30 million. Could you provide more details on how we should interpret this $30 million increase compared to the previous guidance? While some of it is due to today's performance, that clarification would be beneficial.

Robert Houghton, CFO

Yeah. So Robbie, starting with the top-line, as Bahram alluded to, the timing of opening new clubs is the driver. We've shifted those out a bit later than what was assumed in our original guide for the year. So that's one element. As Bahram said, we feel great about our revenue growth. All the investments we're making in the clubs are working in terms of higher activity within the club; swipes or badge scans are up, memberships are higher. So all of that’s working. It's just really the timing of shifting those clubs. And then in terms of the EBITDA guide, we've taken it up $30 million. We still have significant macroeconomic headwinds assumed in that guide. So that's a little bit of context from a margin perspective in the back half of the year.

Robert Ohmes, Analyst

Great. Thanks so much.

Robert Houghton, CFO

Thanks, Robbie.

Operator, Operator

Our next question is from Dan Politzer with Wells Fargo. Please proceed.

Daniel Politzer, Analyst

Hey, good morning, everyone and hope you are all doing well.

Bahram Akradi, CEO

Good morning, Dan.

Daniel Politzer, Analyst

I had a question, I wanted to unpack those margin comments a little bit more. I mean, the last couple of quarters, your EBITDA margins have been 36.5%. And I'm trying to kind of bifurcate or isolate for what the factors are that would change last two quarters or with the next three quarters. I mean, is this a function of in-center versus dues mix? Is it something seasonality where employment costs maybe go up or is it also some inherent conservatism, which it does sound like that is a component as well?

Bahram Akradi, CEO

We are focused on providing guidance that is realistic, taking into account potential macroeconomic challenges, including the possibility of a recession. While there is a chance for better outcomes, we prefer not to set expectations too high and risk disappointing. Additionally, during the summer, we anticipate a significant rise in both revenue and expenses, due to the need to hire more lifeguards and the high operational costs of beach clubs. Therefore, we are modeling conservatively for the remainder of the year. I hope to maintain the 36.5% margin, and I believe there is a way to achieve that throughout the year. However, I suggest adopting a more cautious approach. Is that clear?

Daniel Politzer, Analyst

Yeah, yeah. That's helpful. For my follow-up, the enrollment fees, you guys have talked about that I think a little bit last quarter. Is that still something you guys are considering rolling out or have you kind of pushed pause a little bit there?

Bahram Akradi, CEO

No, it's already rolled out. We need to implement a pool pass to manage the pool experience, ensuring that it doesn't get overcrowded with new customers joining for the summer, which could overwhelm loyal members who have been with us for three, four, or five years. This is not a new approach; it's consistent with what we've done every year, and we are just fine-tuning it based on our learnings. We have already launched it in certain clubs, but it varies by location depending on how busy each club is. We control the number of pool passes issued based on the club's capacity. This began one or two weeks ago, and I want to emphasize that it's not a significant revenue generator; the focus is solely on managing the customer experience and flow within the club.

Daniel Politzer, Analyst

Understood. Thanks for all the color.

Bahram Akradi, CEO

Thank you.

Operator, Operator

Our next question is from Chris Woronka with Deutsche Bank. Please proceed.

Chris Woronka, Analyst

Hey, guys. Good morning. Thanks for all the color so far. First question was just kind of on ancillary build and ultimate long-term potential in these new centers. Is there any way to kind of compare and contrast what that ancillary picture might look like at a club you've opened in the last couple of years versus kind of the older clubs in the system?

Bahram Akradi, CEO

So I want to understand your question better. You're talking about is the in-center different in the new clubs versus old clubs?

Chris Woronka, Analyst

Yeah, kind of in terms of ancillary spend on top of the dues.

Bahram Akradi, CEO

It's a great question. There is no way for anyone to accurately model that due to inconsistencies. When we open a smaller club in an urban market, it may lack amenities like a full bistro, pool, or summer camp, focusing more on personal training and dues, maybe with a small juice bar. In contrast, a large club in a suburban area features extensive amenities like a big beach club, a full-size café, and summer camps. The biggest revenue source for Life Time historically, after dues, has been personal training. We are implementing effective strategies with personal training, which relies on launching the club with the right model. Clubs operating under the Dynamic Personal Training model tend to have a better start. For example, we currently have a club in pre-sell in Miami Falls, and they are successfully selling personal training alongside new memberships, which is an improved method of execution compared to what we have done in the past.

Chris Woronka, Analyst

Thank you, Bahram. As a follow-up, you've mentioned the re-openings and conversions in Atlanta and Tampa. There's been news about several large retail stores, potentially similar in size to your clubs, closing in 2023. Have you considered the possibility of repurposing some of those locations? While some might not be in desirable markets, there could be opportunities in others. Is this something you're exploring?

Bahram Akradi, CEO

I’ll answer your question this way. Our opportunities are stronger than ever. With Life Time's execution and the relationships we've formed, we see our landlords as partners. We treat them like partners, just as we treat our employees. This is part of Life Time's culture. I can assure you that there is significant potential for more capital-light growth ahead, and we are strategically positioned to take advantage of it.

Chris Woronka, Analyst

Okay. Very good. Thanks, guys.

Bahram Akradi, CEO

Thank you.

Robert Houghton, CFO

Thanks, Chris.

Operator, Operator

Our next question is from Simeon Siegel with BMO Capital Markets. Please proceed.

Simeon Siegel, Analyst

Thanks. Hey, guys. Good morning. Hope you are all doing well.

Bahram Akradi, CEO

Good morning, buddy. How are you?

Simeon Siegel, Analyst

Not bad. Looking forward to the summer and getting out there. We're almost there. Great job on the improved profitability. It's nice to see. You've mentioned the center OpEx efficiency, and the G&A was significantly down, even excluding share-based compensation. Can you provide insights into what drove the savings and what you expect G&A to look like in the second quarter and for the full year? Also, Bahram, I'm curious about this. Despite the success in converting the digital on-hold memberships back to center memberships, the digital on-hold memberships have remained lower than pre-COVID for the past several quarters. What are your thoughts on that? Do you think there’s a post-COVID normalization occurring, and should we expect those numbers to return to historical levels, or do you believe there’s a more structural reason for fewer people going on-hold?

Bahram Akradi, CEO

You're asking a bunch of really good questions. Let's talk about the G&A. I just be the first one to say when things are not great, they're under my dime; they're my fault, they're nobody else's fault. Our G&A was broken. I complained about it, but I wasn't forceful enough about it for years and years and years. And our G&A was growing pretty much linearly in a dollar-for-dollar for top-line growth, which makes no sense whatsoever. So as we re-wired the business the last eight, nine months, it's a franchisor-franchisee model, which basically means our corporate office G&A for all of the in-centers and all those things should not grow proportionally as the club. As we build another $1 billion worth of revenue coming out of centers, the corporate office shouldn't grow 50%. It should grow 10% from where it is today. It will be very, very modest versus the new expansion of our revenue. And I would feel embarrassed if I wasn't able to give our investors that margin expansion that would come from scaling the company correctly. It's all in place. I don't have any reason to believe it's going to change. The field loves it. The area directors, VPs and the lead generals, they love the new system. They have clearer lines of authority. And so that's working extremely well. The other question you had was about the fundamental redesign of the on-hold digital. Yes, we changed that over time gradually. It used to be you could go on-hold and stay on-hold forever. We basically gradually took that down to like nine months, then six months, and now it's four months. You can go on-hold for four months, but you can't go on-hold forever. You automatically have to come back. And so it just happens on autopilot. So my anticipation is that the percentage of on-hold to total membership really shouldn't fluctuate from here dramatically. Is that helpful?

Simeon Siegel, Analyst

That is perfect. Best of luck for the rest of the year, guys. Nicely done.

Bahram Akradi, CEO

Thank you so much.

Robert Houghton, CFO

Thanks, Simeon.

Operator, Operator

Our final question is from John Baumgartner with Mizuho Securities. Please proceed.

John Baumgartner, Analyst

Good morning. Thanks for the question.

Bahram Akradi, CEO

Thank you.

John Baumgartner, Analyst

Just one for me. I wanted to come back to the growth in memberships. Do you have a sense, Bahram, from where those members are being sourced? Is it from other premium or specialty gyms? Is it from the at-home Peloton crowd? Is it folks trading up from lower-priced clubs? And then demographically, are there any themes you're seeing, whether it's newer, younger versus older, families versus singles? And I'm curious, when you think about that composition of members coming in, is it informing or requiring any sort of changes in how you're thinking about re-investing at the margin, whether it's in programming or anything else? Thank you.

Bahram Akradi, CEO

That's a great question. When we assessed the situation post-COVID, I didn't expect all the members who had left to return. I estimated that about 80% to 85% would come back. So we rethought our approach and revamped our small group training program to make it more appealing. We created a simplified membership model, allowing people to purchase a signature membership without needing to buy multiple options. Additionally, we significantly increased the number of classes offered, resulting in an annual increase of about $45 million in programming. Over a 14-month period, we saw the number of unique participants rise from 16,000 to 56,000. We're also seeing customer interest in Dynamic Personal Training. Pickleball has attracted at least 100,000 new players at Life Time. By providing more reasons for people to visit Life Time, we observe that around every 10 or 11 visits translates to one membership. We see members coming from boutique gyms, as well as those who were exercising at home and are now looking for a different experience. There was a time when many thought gyms would struggle permanently, but we believed otherwise. Our focus has been on delivering great experiences. Life Time serves as a social hub where members can engage in various activities like recovery treatments and wellness therapies. We constantly strive to meet the needs of health and wellness customers, offering all necessary amenities under one roof at the highest quality. As a result, we've achieved the highest satisfaction ratings in our history. Members of all ages are visiting, and clubs have exceeded previous swipe records. The various programs we've launched are proving to be effective and are currently yielding positive results.

John Baumgartner, Analyst

Great. Thanks, Bahram.

Bahram Akradi, CEO

Thank you so much.

Operator, Operator

We have reached the end of our question and answer session. I would like to turn the conference back over to Bahram for closing comments.

Bahram Akradi, CEO

We're thankful to all of you, all of our investors and our members and our amazing, amazing team members who have really passionately put their heart and soul underlying to make sure Life Time prevails and gets back and goes beyond where we were pre-COVID. We're excited for the future. We are very, very confident that we can deliver what we are promising you. And hopefully, we can improve that as time goes on. And so with that, we just look forward to seeing, hearing you guys back on our next call in July, August. Thanks so much.

Operator, Operator

Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.