Business Context and Reporting Period
Company: Life Time Group Holdings, Inc. (NYSE: LTH)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: Life Time operates as a premier lifestyle and leisure brand offering premium health, fitness, and wellness experiences. As of December 31, 2025, the company operated 189 centers across 31 U.S. states and one Canadian province, serving nearly 1.6 million individual members (873,000 memberships). The company utilizes an asset-light real estate strategy, with approximately 71% of centers leased.
Key Financial Metrics
| Metric ($ in millions, except per share) | 2025 | 2024 |
|---|---|---|
| Total Revenue | $2,995.3 | $2,621.0 |
| Net Income | $373.7 | $156.2 |
| Net Income Margin | 12.5% | 6.0% |
| Adjusted EBITDA | $825.2 | $676.8 |
| Adjusted EBITDA Margin | 27.5% | 25.8% |
| Free Cash Flow | $206.5 | $273.6 |
| Total Debt (Outstanding) | $1,525.4 | $1,555.6 |
| Cash and Cash Equivalents | $204.8 | $10.9 |
| Revolving Credit Availability | $618.2 | $640.0 |
| Average Revenue per Membership | $3,531 | $3,160 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenue increased by $374.3 million (14.3%) year-over-year, driven by a $257.4 million increase in membership dues and enrollment fees and a $104.7 million increase in in-center revenue.
- Profitability Surge: Net income more than doubled to $373.7 million from $156.2 million. This was significantly aided by $94.2 million in "Other income," primarily consisting of $54.6 million in employee retention credits and a $39.6 million legal settlement payment from Zurich Insurance.
- Interest Expense Reduction: Net interest expense decreased by $65.8 million to $82.3 million, attributed to lower average borrowings, interest rate swaps entered in April 2025, and the absence of debt extinguishment costs recorded in 2024.
- Capital Expenditures: Total capital expenditures increased to $891.5 million from $524.5 million, reflecting accelerated new center construction and modernization efforts.
- Membership Metrics: Average revenue per center membership rose to $3,531, and total club visits exceeded 122 million.
Guidance, Outlook, and Risks
Outlook and Strategy
- Expansion Targets: The company targets opening 12 to 14 new locations annually starting in 2026, with a shift toward large-format ground-up construction builds.
- Share Repurchase: On February 19, 2026, the Board authorized a $500 million share repurchase program.
- Strategic Initiatives: Continued focus on high-growth areas including pickleball (over 800 courts), Dynamic Personal Training, and the ARORA community for members aged 55+.
Risks and Contingencies
- Legal Proceedings: The company is awaiting final resolution of its lawsuit against Zurich American Insurance Company regarding COVID-19 business interruption coverage. While a $40 million partial payment was received in November 2025, the case remains subject to uncertainty regarding the remaining occurrences.
- Macroeconomic Factors: Risks include inflation impacting construction and labor costs, interest rate volatility, and potential economic recession affecting consumer discretionary spending.
- Asset-Light Execution: Success depends on the ability to secure favorable lease terms and sale-leaseback transactions; failure to execute could negatively impact returns on invested capital.
Investor Verification Checklist
- Non-Recurring Income: Verify the sustainability of net income growth by excluding the $94.2 million in "Other income" (legal settlement and tax credits) to assess core operational profitability.
- Free Cash Flow Trend: Note the decline in Free Cash Flow from $273.6 million in 2024 to $206.5 million in 2025 due to increased capital expenditures; monitor if this trend continues as new centers ramp up.
- Debt Structure: Review the impact of the new interest rate swaps on future interest expense stability and the company's compliance with leverage covenants under the Revolving Credit Facility.
- Legal Resolution: Monitor the final outcome of the Zurich Insurance litigation to determine if additional proceeds or costs will impact future earnings.
- Share Repurchase Impact: Assess the timing and volume of the newly authorized $500 million share repurchase program and its potential effect on liquidity and leverage ratios.