Executive Summary / Key Takeaways

• Life Time Group Holdings (LTH) is executing a successful strategy centered on delivering a premium, holistic health and wellness experience, driving record member retention and robust revenue growth across its athletic country clubs and in-center businesses.
• The company's asset-light expansion model is accelerating, with a new baseline of 12 to 14 new club openings targeted for 2026 and beyond, primarily focusing on larger format, ground-up developments in affluent markets.
• Strategic investments in technological differentiators like L.AI.C, alongside the rapid growth of its LT Digital platform and the expansion of LTH nutritional products and MIORA longevity offerings, are poised to enhance member engagement and unlock new, asset-light revenue streams.
• LTH has significantly strengthened its balance sheet, achieving a net debt leverage ratio below 2x and securing a BB credit rating, providing substantial financial flexibility to fund future growth through operating cash flow and strategic sale-leaseback transactions.
• Despite macroeconomic uncertainties, LTH's differentiated value proposition, membership optimization strategy, and strong operational execution position it for continued revenue and Adjusted EBITDA growth, with full-year 2025 guidance raised to $2.925 billion - $2.975 billion in revenue and $780 million - $800 million in Adjusted EBITDA.

The Evolution of a Wellness Powerhouse

Life Time Group Holdings, Inc., founded in 1992, has meticulously carved out a unique position in the health, fitness, and wellness industry. Initially building its foundation on comprehensive programming for all ages, the company strategically shifted its real estate model after 2015, embracing an asset-light approach where approximately 84% of new centers are leased. This evolution culminated in a post-pandemic repositioning to focus on premium, resort-like athletic country clubs, offering an unmatched breadth of services under one roof. This strategic pivot has been instrumental in cultivating a highly engaged and loyal member base, distinguishing Life Time from traditional gyms and boutique studios alike.

The company's core business revolves around its expansive athletic country club destinations, which span over 18 million indoor square feet and 7 million outdoor square feet across 185 centers in 31 U.S. states and one Canadian province. These facilities are designed as multi-use sports, athletic, professional fitness, family recreation, and spa centers, offering everything from state-of-the-art fitness floors and group studios to indoor/outdoor pools, tennis and pickleball courts, LifeSpa, LifeCafe, and Kids Academy learning spaces. This comprehensive ecosystem is supported by over 43,000 team members, including more than 10,900 certified fitness professionals, ensuring a high-quality, personalized experience for its more than 1.6 million individual members.

Technological Edge and Future-Proofing Wellness

Life Time's commitment to innovation extends deeply into its technological infrastructure, creating a significant differentiator in the competitive wellness landscape. The company is actively developing and integrating advanced digital capabilities, most notably its generative AI-driven personal health companion, L.AI.C (Life Time AI Companion). This core technology is designed to offer personalized content and recommendations, aiming to provide a holistic view of a member's health journey, encompassing workouts, nutrition, and sleep. New features and capabilities for L.AI.C are anticipated to be released by the end of 2025, promising a robust unveiling of its potential.

The tangible benefits of L.AI.C and the broader LT Digital platform are multifaceted. For members, it promises a significantly easier and more integrated experience, offering live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support, and curated content. This omni-channel approach strengthens member relationships and extends the Life Time brand's reach beyond physical club walls. For investors, this technological moat contributes to Life Time's competitive advantage by enhancing member stickiness and providing a scalable platform for future monetization. The company recently opened an LT Digital studio in New York to generate more content, further solidifying its digital content pipeline. The strategic intent behind this R&D is to establish Life Time as the "perfect gateway for all people on health and well-being," ultimately driving long-term engagement and diversified revenue streams.

Competitive Dynamics and Market Leadership

Life Time operates in a highly competitive industry, but its "country club wellness lifestyle" model provides a distinct advantage. The company believes that no other entity in the United States delivers the same quality and breadth of health, fitness, and wellness experiences. This differentiation is crucial when compared to direct competitors such as Planet Fitness , LA Fitness, Equinox, and 24 Hour Fitness.

Planet Fitness , with its low-cost, high-access model, targets a mass market, prioritizing volume over premium services. Life Time, in contrast, emphasizes exclusivity and comprehensive amenities, attracting an affluent member base willing to pay higher dues for a superior experience. This allows Life Time to command higher average revenue per center membership. While Planet Fitness (PLNT) excels in cost efficiency and broad market penetration, Life Time's focus on loyalty and experiential services creates a more defensible position in its target demographic.

Against LA Fitness, a broad-service chain, Life Time's resort-like facilities and integrated wellness offerings provide a more holistic value proposition. Life Time's innovation in services like Dynamic Personal Training and its digital platform likely enhance member satisfaction and adaptability. Similarly, when compared to Equinox, another premium provider, Life Time differentiates itself with a broader community and family-oriented approach, including extensive childcare and family programming, appealing to suburban families in addition to urban professionals. This contrasts with Equinox's more individual-focused, urban luxury model. Even against 24 Hour Fitness, which prioritizes convenience and extended hours, Life Time's emphasis on a complete lifestyle experience positions it as a destination rather than just a workout facility.

Life Time's competitive advantages, or "moats," include its strong brand as a premium wellness provider, the network effects generated by its community events and comprehensive offerings, and its unique distribution channels through physical centers. These factors translate into higher customer loyalty and recurring revenue. The company's strategy of "membership optimization," which involves improving the mix with more couples and families and limiting discounted memberships in high-utilization clubs, further enhances revenue per member. This approach directly counters the volume-driven strategies of some competitors by focusing on higher-value engagement.

However, Life Time faces vulnerabilities, primarily its higher operational costs due to premium amenities and its reliance on large physical locations. This could impact profitability and market share in price-sensitive areas. The company mitigates this through its asset-light expansion model and by leveraging its strong brand to justify premium pricing. Indirect competitors, such as home-based fitness solutions like Peloton (PTON) and various wellness apps, also pose a challenge by offering more flexible or accessible alternatives. Life Time addresses this by integrating its own robust digital platform and AI companion, aiming to provide a seamless omni-channel experience that blends physical and digital wellness.

Financial Strength and Operational Excellence

Life Time's financial performance underscores the efficacy of its strategic repositioning. For the three months ended September 30, 2025, total revenue increased 12.9% to $782.6 million. Net income surged 147.3% to $102.4 million, benefiting from a $5.7 million tax-effected gain on sale-leasebacks and $16.2 million in tax-adjusted proceeds from employee retention credits. Adjusted net income, excluding non-recurring items, rose 65.2% year-over-year to $93.0 million. Adjusted EBITDA reached $220.0 million, a 22.0% increase, with the Adjusted EBITDA margin improving by 210 basis points to 28.1%.

Over the nine months ended September 30, 2025, total revenue grew to $2.25 billion, up from $1.96 billion in the prior year period. Net income for this period was $250.7 million, a substantial increase from $119.1 million in the same period of 2024. This growth was primarily fueled by a $282.1 million increase in Center revenue, with membership dues and enrollment fees contributing $200 million and in-center revenue adding $82.1 million. Average revenue per center membership for the nine months ended September 30, 2025, reached $2,638, up from $2,361 in the prior year. Total visits to clubs exceeded 93 million, compared to 87 million in the prior year, with average visits per membership remaining strong at 113.

The company's liquidity position is robust, with net cash provided by operating activities increasing approximately 66% to $251 million for the third quarter of 2025. Free cash flow for the quarter was $63 million. As of September 30, 2025, Life Time had $218.9 million in cash and cash equivalents and $618.2 million available under its $650 million Revolving Credit Facility, resulting in total liquidity of $837.1 million. The company has also been active in sale-leaseback transactions, generating $34 million in net proceeds from one property in Q3 2025, and $183 million from four properties during the nine months ended September 30, 2025. These proceeds, combined with strong operating cash flow, are strategically deployed to fund new club development and other growth initiatives.

Strategic Initiatives and Forward Outlook

Life Time is poised for accelerated growth, with a clear roadmap for expansion and diversification. The company has set a new baseline for new club openings, targeting 12 to 14 clubs annually starting in 2026 and beyond. This represents a significant increase from the 10 to 12 clubs planned for 2025. Notably, 11 of the 2026 clubs will be large format, with an average size of 94,000-95,000 square feet, compared to 66,000 square feet in 2025, and 13 of these are already under construction, providing strong visibility for future openings. This expansion is supported by a robust real estate pipeline, consistently holding 85 to 100 deals.

The company's financial guidance reflects this positive momentum. Full-year 2025 revenue is projected to be between $2.925 billion and $2.975 billion, with Adjusted EBITDA expected to range from $780 million to $800 million. The full-year comparable center revenue guidance has been raised to between 10.8% and 11.0%. Life Time aims to maintain its current debt levels of approximately $1.5 billion, which, combined with projected EBITDA growth, implies a net debt leverage ratio of less than two times by the end of 2025. This strong balance sheet is a strategic asset, enabling the company to fund growth through operating cash flow and an anticipated $250 million to $350 million in sale-leaseback transactions for 2025. The company also expects to achieve a double B credit rating from at least one more agency in 2025.

Beyond physical club expansion, Life Time is aggressively pursuing several asset-light growth accelerators. The LT Digital platform, with 2.75 million non-club member accounts as of Q3 2025, is expected to exceed 3 million by early 2026. This platform, integrated with L.AI.C, is envisioned as a "gateway to healthy living, healthy aging" for millions, with monetization expected to occur naturally as the ecosystem grows. The LTH nutritional products line is experiencing strong growth, with revenues up 31% year-over-year in Q2 2025 and February 2025 sales 25% higher than February 2024. Management anticipates "explosive growth" for LTH, projecting it to become a "billion-dollar revenue business in the years to come." Furthermore, the MIORA performance and longevity health offering, currently in two locations, is performing to expectations, with plans to add 4 to 5 new locations by early 2026 and an aggressive rollout thereafter. This segment is projected to incrementally generate at least 50% of the personal training business's revenue in clubs long-term.

Risks and Considerations

While Life Time's outlook is compelling, investors should consider several risks. Macroeconomic uncertainties, including inflation, interest rates, and a potential economic recession, could impact consumer spending on discretionary services. However, Life Time's premium positioning and highly engaged member base have historically demonstrated resilience during economic downturns. The company actively monitors these factors and has strategies in place to adapt.

Legal proceedings, such as the ongoing case against Zurich American Insurance Company (ZURVY) regarding COVID-19 business interruption claims, introduce an element of uncertainty, though the company believes the outcome will not materially impact its financial position. Additionally, while tariffs have not materially impacted the business to date, new or elevated tariffs could increase expenses and capital expenditures. Life Time's diversified sourcing and value engineering efforts aim to mitigate these potential impacts.

Conclusion

Life Time Group Holdings is not merely a fitness chain; it is a meticulously crafted ecosystem for healthy living, strategically positioned at the premium end of the wellness spectrum. The company's unwavering focus on delivering an unparalleled member experience, coupled with its innovative technological advancements and disciplined asset-light expansion, forms a powerful investment thesis. Record retention, robust in-center revenue growth, and a strong balance sheet provide a solid foundation for accelerating new club development and scaling new ventures like LTH Nutrition and MIORA.

Life Time's ability to consistently grow average revenue per center membership, optimize its membership mix, and leverage its digital platform with AI capabilities sets it apart from competitors. The company's proactive approach to capital allocation, utilizing operating cash flow and sale-leaseback proceeds to fund growth while maintaining a conservative debt profile, underscores its financial prudence. As Life Time continues to execute on its strategic initiatives and expand its comprehensive offerings, its leadership in the premium wellness market appears well-secured, promising sustained value creation for discerning investors.