Prepared remarks
Greetings, and welcome to the Life Time Group Holdings Inc. Q2 2026 Earnings Conference Call. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Connor Wienberg, Vice President, Capital Markets and Investor Relations. Connor, please go ahead.
Good morning. Thank you for joining us for the Second Quarter 2026 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's 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. 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 Form 8-K filed with the SEC and on the Investor Relations section of our website. With that, I will turn the call over to Erik.
Thank you, Connor, and good morning, everyone. We appreciate you joining us for our Q2 business and financial update. Please note 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 second quarter revenue. Total revenue increased 13.7% to $866 million, driven by continued strength in performance across our clubs, including higher dues revenue and strong utilization of our in-center businesses. Comparable center revenue grew 9.1%. This was above our expectations, driven by an outperformance in our membership acquisition and in-center business performance. As outlined in our earnings supplement, there are four components of our comparable center revenue growth. Improved membership mix contributed 3.1% growth. Price contributed 2.9% growth. In-center businesses contributed 2.9% growth, largely driven by double-digit year-over-year growth in dynamic personal training and Life Spa. And volume contributed 0.2% to comparable center growth. As a result of our Q2 performance, we have raised our full year comparable center revenue guidance to 7.9% to 8.3%, up from 6.9% to 7.5%. Average monthly dues were $245, up approximately 12.3% year-over-year, and average revenue per center membership was $993, up 11.8% year-over-year. Growth in average dues was driven primarily by positive membership mix trends and execution of our pricing strategy. We ended the quarter with approximately 860,000 center memberships, which reflects 1.2% year-over-year 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. This strategy continued in the second quarter. Qualified medical memberships declined by approximately 20,600, down 18.9% year-over-year. All other memberships grew by approximately 30,900, up 4.2% year-over-year. Our strategy is working as reflected in our 13.3% growth in total dues revenue year-over-year. We expect total center membership growth of 1% to 1.5% in the third quarter and 2% to 3% in the fourth quarter. Excluding qualified medical memberships, we expect center membership growth of 4% to 5% in both the third and fourth quarters. Moving on to net income. For the quarter, net income was $101.4 million, an increase of 40.6% year-over-year. Second quarter net income included approximately $8.5 million of net tax-affected items excluded from adjusted net income, primarily consisting of share-based compensation. Net income in the prior year included tax-affected net cash proceeds of $9.3 million received from employee retention credits under the CARES Act, partially offset by a tax-affected net loss of $9 million on a sale-leaseback transaction. Adjusted net income, which excludes the tax-affected impact of these items, was $109.8 million, up 30.6% year-over-year. Adjusted EBITDA was $246.5 million, an increase of 16.8% over the prior year quarter, and our adjusted EBITDA margin improved by 80 basis points to 28.5%. As noted in our earnings release, we increased our full year 2026 revenue, net income and adjusted EBITDA guidance. We also increased the midpoint of our full year adjusted EBITDA margin guidance to 28.2%. Our updated guidance includes the impact of seven clubs scheduled to open in the fourth quarter and the associated preopening expenses and early operating ramp impact on margin. Net cash provided by operating activities increased to $209.6 million, approximately 7.1% higher compared to the prior year quarter. Total capital expenditures were $263.3 million, up 18.6% from the prior year, reflecting construction activity in support of our new club openings for 2026 as well as the construction on clubs planned for 2027. As of today, we have opened seven of the 14 clubs scheduled to open this year. The remaining seven clubs are expected to open in the fourth quarter. We still expect 12 to 14 new clubs in 2027. Ten of these clubs are already under construction. In April, we closed on sale-leaseback transactions that generated approximately $200 million of sale-leaseback proceeds, and we 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.
Thank you, Erik. Good morning, everyone, and thank you to our teams across the company for another outstanding quarter. Much like last quarter, we continue to see strong performance across all aspects of our business. Demand has been strong from our existing members as well as our new members. At the core of our performance is our intense focus on delivering exceptional experiences for our members. We plan to continue this strategy by delivering new desirable programs and services with the highest level of attention and care. For example, we have accelerated the rollout of CTR and Hybrid XT, our two newest group training formats. CTR is our large group Pilates reformer class. This class blends performance-based training with the precision and control of reformer movement. Hybrid XT combines conditioning and strength training for real-world and competition-ready performance and is paired with our LT Games hybrid athlete competition. We are seeing incredible demand from our members for these classes. Our balance sheet and cash flow also remain exceptionally strong with the sale-leasebacks completed this quarter and an additional $200 million of proceeds expected by the end of the year. We expect to deliver positive free cash flow while achieving all of our revenue and adjusted EBITDA growth targets. We are currently on track to open 14 new clubs in 2026, the high end of our initial range, and we continue to see an incredibly strong pipeline of opportunities ahead. Overall, we feel very good about where we are and the trajectory of our business. We look forward to your questions.
Questions and answers
Our first question is coming from Arpine Kocharyan from UBS.
So really solid set of results this morning. And it's not every day you look at results and you say, actually, I have very few questions. But I do have two. First, your guidance upside for the year is flowing through at a nice 55%. So you raised revenue by about $28 million, and that's raising EBITDA by $15 million. And we're now looking at 14 club openings this year from 12 to 14 before. I know it's difficult to talk about 2027 given everything that's going on in the world. But as we think about the ramp-up of these large-scale clubs as we get into next year, anything you would like to share on revenue per member dynamics to kind of help us better understand the opportunity as it relates to actual ramp and also flow-through for next year? Then I have a quick follow-up.
You're asking a great question. The impact of the certainty of the 14 clubs is actually more on next year than this year because they're opening so late into 2026 that they really don't have a material impact on our numbers for this year. But we have a pretty robust opening schedule for next year as well. We have a tremendous amount of real estate deals in the pipeline that I am more excited about than I've ever been. So we anticipate really strong growth in the foreseeable future; we don't see any reason for anything to slow down. However, we don't usually share results or guidance for the next year. But things are positive right now, and we have nothing to suggest that anything is going the wrong way.
Great. That's helpful. In-center business contribution to same-store growth came close to about 3% this quarter, which was an acceleration from something like 2% earlier this year. And I know you're doing more in CTR and Hybrid training classes and maybe on Spa and F&B. With larger club footprint ramping next year, do you see this in-center business contribution to same-store growth sustaining at that 3% level as we go into next year?
Yes. So again, when we think about sustainability of that number, you're absolutely right. That number increased from 2.3% to 2.9%. And it really comes down to us continuing to deliver on the experience. We've seen excellent engagement in our in-centers across DPT and Spa. To the extent that we continue to deliver on that experience, we expect the financial performance will follow.
We have to continue to look for places in our business where we have opportunity to do better. This year, we are seeing great growth in revenue from personal training and Spa. We are having process improvements in our F&B, so we're getting margin improvement in F&B by reorganizing certain things, menus, and processes. Then we focus on developing revenue growth strategy in F&B for 2027. Meanwhile, we're always working and developing different programs and products that our customers can purchase from us. So we expect similar results going into next year very comfortably.
Our next question is coming from John Heinbockel from Guggenheim Partners.
Bahram, I wanted to follow-up on that. Can you talk about the penetration from your members in things like DPT and Spas? Because I think the penetration is still pretty low; DPT, I think, is still in the single digits. And you can talk about awareness as well. So the penetration and then also the awareness, because I think you have not wanted to hard sell members on these services; you wanted it to happen organically. So is that awareness now picking up meaningfully?
I don't believe you can say that penetration of personal training is low. It's been pretty consistent for years. Our clubs are realistically 50% training and exercise and 50% all other things — the social aspects of the business, family, kids, and sports. Personal training really applies to that 50% to 60% of our customers. So when you look at penetration over a larger window, like a yearly basis, that number is actually double what you might see in a single monthly snapshot. So while you might see 7% penetration in a particular month, over a year you will see higher numbers — 10%, 11%, 12% in many cases. The team has branded DPT masterfully over the last four or five years. We are getting productivity that this company has never seen from personal trainers. We have more successful trainers than we've ever had. The reputation is that this is the best place for them to make the most money and be in a very professional environment, so we have significant amounts of qualified applicants. I trust that our team will continue to create pathways. We also have to deliver additional programming. Part of the success of last year was dynamic stretch and dynamic nutrition still growing. These things lend to one another. We have other initiatives we're working on that would bring in another set of customers. It's constant work. Results are really, really good, and I expect the team to continue to grow that percentage.
If I could add one thing to that, John. Penetration is just one metric of the story. Penetration is up year-over-year in DPT, but it's also about trainer efficiency, revenue per trainer and how much new business they're bringing in. All of those metrics are up year-over-year. So you have to look at it holistically.
Okay. And then my follow-up, as you now get to 14 openings a year, maybe talk about gating factors on expansion. Lots of landlords and malls otherwise want you in their locations, so the real estate opportunities are there. Maybe more from a people standpoint, where do you think you're not comfortable going beyond, just in terms of executing the experience?
We have tremendous opportunity — more than I've ever seen before. There are more developers, more large projects, and more office buildings reaching out to us that want the Life Time brand, not just a fitness center, but the Life Time Athletic Country Club coupled with Life Time Living or their development. PJ and his entire team are working hard. I'm working with them as much as I can. We are looking to expand growth over the next several years. I'm not going to provide specifics beyond saying 14 clubs a year for now is the limit, but we are looking at ways to have a bigger development rollout because the opportunity is significantly larger than in the past.
Our next question is coming from Randy Konik from Jefferies.
I have a question for Erik. You have a lot of the openings weighted to the fourth quarter. There's got to be some preopening expenses impacting the numbers, even though the numbers are much better than expected. Can you give us some perspective on how much of an impact that's been? And when you think about next year, would you expect a change in cadence on when you open clubs next year versus this year? Just curious because it moves the numbers around a little bit.
There certainly is an impact on margin as you think about those clubs opening later in the year. You've got seven of them opening in Q4. So there's a little bit of an impact there as we know. But we've said for next year, we're targeting 12 to 14 as well. The timing of those are not all announced yet. You may have a bit of that in the back half of the year. As you've seen from our increase in our overall margin this year, we've been able to absorb that, but it does have a small impact as we open those in the back half of the year.
Got it. And then a follow-up: last quarter, the big unlock was reaching an inflection point in cash flow such that you could self-fund growth with optionality around sale-leasebacks. When you think about that target year, what would change to pull that year forward? These numbers keep coming in better than expected. Anything that would change to get that number or that year pulled forward a little? And remind us how you're thinking about utilizing that optionality in the next three to five years as you unlock cash flow to either do more units or buy back more stock. Give us parameters on how you're thinking long term on the business.
I'll take this. We are going to stay disciplined to deliver what we say we will. We've committed to doing $400 million of sale-leasebacks this year, and we're going to deliver that. As we get into strategies for next year, our cash flow is increasing each year nicely, and we have more optionality than we've ever had. That's how I have always wanted to lead: getting the company financially in a position where we have a significant number of options and flexibility for both good times and bad times. That requires super strong fundamentals on the balance sheet, and we are there now. We have all kinds of options in front of us. We'll be clearly focused on our WACC and our ROIC with a clear focus on taking the capital afforded to us by shareholders and debt structures and making sure we provide great returns by putting capital in the right places. We are examining all different types of options for future years. You're correct to ask the question, but I would probably expand on strategy toward the end of the year or early next year if we choose to change anything, because it could deliver a better result for shareholders. For now, we're staying on course and evaluating the options.
Our next question is coming from Molly Baum from Morgan Stanley.
Maybe shifting gears to talk about MIORA. Can you give an update on how you're thinking about the white space opportunity? And can you frame the revenue or EBITDA contribution that you're seeing from the mature locations you have open right now?
Great question, but not a great answer for you right now. MIORA is in incubation; we have six or seven locations we are working. I have been adamant with the team that we are not going to add additional locations until we deliver what I would consider a perfect customer journey experience. We have some challenges with technology and some processes, so we are working through those. Our intention is to roll out MIORA extremely robustly, but we need to perfect the model and then roll out very fast and aggressively once we have a model that works. Our clubs, when we open them, open with a waitlist and become contribution margin positive in the second or third month because we've mastered the execution of a club opening. We have some work to do with MIORA, but I am convinced it will be a massive growth opportunity. We can grow really fast as soon as we fine-tune the final touch points that need correction. Right now, the numbers on MIORA from the six or seven locations are not material. It's really about working on the customer journey.
Got it. That makes a lot of sense. One other question: as we think about these qualified medical memberships, I think you've spoken in the past that you have some contract renewals coming up at the end of 2026. How are you evaluating what might happen with these memberships, which relationships to renew, and which you might be able to convert into a standard membership? Can you give more color there?
We're working on it. We have great partners — massive Fortune 50 companies we have strong relationships with. There is a significant benefit for a portion of the population to love this program. We are working on the details of whether or how to continue. Our partners want to continue; we want to be good partners and do some, but we have to build flexibilities so we can control the experiences in the clubs and ensure the number of certain membership types doesn't overtake others. Some clubs cannot afford to have that programming. We're rolling out a strategy and the discussions are going extremely well. We don't expect anything negative to happen; rather, the percentage of our membership that is qualified will gradually decline as a percentage of total membership and become less significant over time. It will become less meaningful to discuss as it diminishes. We do value the population in our clubs where it makes sense to provide the program when we have capacity and when it doesn't interfere with the larger opportunity in the club.
And I think that's key. If you remember, these memberships have restricted hours. So in some clubs, it's a great way to fill some off-peak time.
In some locations we simply don't have the ability to provide them. None of the new clubs are opening with them. In some open clubs, there is no direct medical program available unless the member chooses to upgrade. So we will manage this, and it won't be a significant piece that will drive the business up or down.
Next question is coming from Anthony Bonadio from Wells Fargo.
I wanted to start on the comp, the 9% comparable center revenue. Can you talk a little more about the cadence of that growth as you move through the quarter? Back-half guidance implies some deceleration, which I know isn't new, but that's clearly gone the other way this quarter. Can you talk about assumptions there and how your thinking has evolved?
Absolutely. We did see an acceleration this quarter, which goes back to what we're doing in DPT and Spa. You mentioned normal seasonality and some slight deceleration as seasonality kicks in. The big thing to keep in mind is a lot of this is in-center business growth. When projecting the year, if you look at the midpoint of our updated guidance, that's still 8.1%, above what we've been communicating in terms of our long-term algorithm. So it's primarily prudence as we're thinking about summer activity and projecting the rest of the year.
Got it. And on the events: you announced the expansion of the LT Games and also the acquisition of the Phoenix 10-K in the quarter. Given the growing popularity of events and competitions, and other offers gaining traction, can you talk about the opportunity set and what growth prospects could look like? Any thoughts on how margins and returns compare to the rest of your business?
Great question. LT Games and Hybrid XT are yin and yang. Hybrid XT today is a current big driver of people wanting that hybrid training. Our clubs were designed from day one to have the flexibility to adapt to programs customers seek. LT Games is a very defined experience and very measurable. I have a big vision for what LT Games can do for the company on its own: bringing athletes who want that athletic training into Life Time for Hybrid XT. Ultimately, LT Games has the potential to be a spectator competition. It's not tomorrow or next year; it will take years to achieve that, but that's the vision. CTR is rolling out as fast as we can; every class we put on ends up being waitlisted. We're spending more money and investing growth capital into these initiatives because they are working extremely well. That's where we're deploying additional capital to capture growth opportunities.
Our next question is coming from Ben Chaiken from Mizuho Securities.
We're wondering if you could clarify your churn expectations for qualified medical memberships in 2027 and the opportunities to convert. Maybe share some data points on churn year-to-date and any conversion into standard membership?
We don't look at it in that fashion. We're looking at our expectations for average dues per membership growth, regular membership count growth and the blend. As that percentage of qualified medical memberships goes down, average dues per membership goes up — there's a direct correlation. The impact will not be significant. The numbers we're guiding to will make this less than 2% of our dues revenue in future years.
By the end of the year, it's 3%. It's a little early to talk about next year, but it will drop down. The large decreases we're seeing this year reflect the deemphasis of that program in the prior year; we're lapping those dynamics. Again, as we get into 2027, we'll provide more information, but it will be less than 3% of our total.
If we ever change anything, dues will go up, but again, it's not going to be significant. We need to focus on the big drivers of the business.
Our next question is coming from Eric Des Lauriers from Craig-Hallum.
Congrats again on another impressive quarter. As you look at new club opportunities in '27 and beyond, how should we be thinking about larger versus smaller footprint, greenfield versus retrofit and urban versus suburban? Can you give a sense of changing opportunities or evolving priorities?
I wouldn't want to tell you exact mixes like how many of each type. The pipeline is driven by both sites we acquire to buy parcels of land and by developer opportunities. Right now, we're in a position to buy parcels earlier to create a land bank for ground-up opportunities. There's a lot of froth in the market, so I can't give a precise breakdown of types. Definitely more urban locations are coming as a percentage of our portfolio with big markets like New York and Miami offering large pipelines. The question is what year they land in; large projects take longer to develop. We're in a very good position to deliver the total square footage growth we want per year. It doesn't matter much if it's one type or another because returns after sale-leaseback or rentals remain attractive, typically in the 30-plus IRR range.
That's very helpful. Historically some of your clubs have been offered attractive rent rates as developers look to bring you in as an anchor tenant. Is this dynamic still at play? And broadly, as you look out a number of years, do you think rent rates will generally improve, or are these one-offs we shouldn't extrapolate?
We always position our clubs at attractive rent per square foot, either through the way we build and do sale-leasebacks — the rent per square foot is significantly below market — or when we go into development, we put in more for leasehold improvements to protect lower rent over time. We will continue to negotiate strong rates. Real estate goes through cycles: sometimes landlords are eager to negotiate; other times markets are tighter. Our rent percentages should stay consistent with what Erik has mapped out around that 12%...
Our next question is coming from Chris Woronka from Deutsche Bank.
Brian — Bahram — maybe we could spend a minute talking about the broader supplement space. There have been headlines around peptides potentially getting more broadly approved by the FDA and other things. Can you give a perspective on where you are on that and if the opportunities are perhaps increasing to monetize that?
Yes. We're all over it. We're studying, working on it, and testing it every single day. I was on the phone last night for two hours working on half a dozen different peptides: where they're at, what they do, who makes them, and pros and cons. It's definitely a space that will continue to grow substantially. We'll play a big role in it within our facilities through MIORA and other channels. We must be cautious because it's a wild west with compounding pharmacies. The science is in many cases well documented; in other cases, it's less clear. There isn't always widespread human research yet, but some of the science is solid. We are on the cutting edge of studying it. We have Jim LaValle, our Chief Science Officer, leading this — he's a major voice in the category. We're following the science and administering some of these things right now in our current MIORA locations. It is going to be a massive growth space because the science on some peptides is solid.
Very helpful. As a follow-up, on app monetization, is there anything new to report — product, service, or advertising revenue? Anything you're working on in the near term?
It's not where our head is at. Our technology focus needs to be fully directed on delivering consistent, extraordinary experiences in our clubs. We have a long way to go to keep up with the evolution in technology and AI so the customer can achieve what they want and buy what they want as fast and as easily as possible. I launched the Life Time digital platform a couple of years back to explore that opportunity. We studied and talked to experts and concluded that digital subscriptions have a significant attrition rate that makes them less attractive as a core focus. We didn't invest heavily in customer acquisition for digital, but we also didn't find customers returning regularly. So instead of dividing the technology team's focus, we decided months ago to put all focus on delivering the in-club customer experience. The number of people on the digital platform is still growing naturally; customers can sign up on the Life Time app and get features, but we're not pursuing two separate versions.
Our next question is coming from Owen Rickert from Northland Capital Markets.
On CTR and Hybrid XT, what's the current penetration across the center base as of right now? And how much more room is there to add them to additional clubs?
They're at different stages. Hybrid XT is extremely new and just rolling out; it's being executed to some level but not at the level we want for branded programming yet. CTR is further along: maybe under 20 clubs for Hybrid XT and our goal is to get CTR into about 60 locations by the end of the year. Ultimately, CTR will be in just about every club; 80% to 90% of clubs have the space to deliver CTR at some point. We're allocating growth capital to CTR rollout this year and rolling them out as fast as we can, but we're not yet halfway there.
CTR also has the highest fill rate across our programming and a strong waitlist, so it's a very popular program.
Got it. And then secondly, you had some repurchase activity during the quarter at a compelling price relative to where we are today. Given the stock move since then, how are you thinking about the pace and prioritization of the remaining capacity?
That's a great question. I'm not going to give you any answers.
Next question is coming from Logan Reich from RBC Capital Markets.
Congrats on the solid results. My question is on the in-center acceleration. It had been decelerating a few quarters and you posted impressive numbers in Q2. What is the key driver of that acceleration? You called out dynamic personal training, but anything else to highlight — the café, spa? Within membership in-center spending, is that coming from newer members or existing members? Is it higher frequency or higher penetration? Any color on what's driving that acceleration quarter-over-quarter would be appreciated.
It's coming from both new and ramping members. When you ask what's driving in-center, it goes back to delivering on our brand and experience. The big drivers include DPT and Spa. The strategy is around engagement and experience; we're casting the right number of trainers and technicians and hiring appropriately. Our expectation is that having the right staff delivering the experience is driving the performance.
Got it. And to confirm, CTR and Hybrid XT are included in membership, not an additional in-center a la carte business, correct?
That's correct. Those programs are part of the offering designed to bring in members, keep them engaged and build dues revenue.
So is that a pricing opportunity for you? Do you view that as an additional component of the pricing calculation — a pricing opportunity — or is it more of a member growth opportunity as well?
We have transitioned the company over the last five years so new clubs come in at a much higher rack rate and are designed for fewer memberships (3,000 to 4,000 units) at much higher dues with robust experiences. Those models are working well. For older clubs, we transition from older price points to newer price points and add programming market by market. In some clubs, programming is part of an upgrade signature buy. All new clubs have these programs bundled in. Compared to buying services a la carte elsewhere, the value proposition at Life Time is compelling, which is why larger format new clubs with these bundled programs are hugely successful.
Our next question is coming from Andrew Chasanoff from Oppenheimer.
Congrats on the quarter. Beyond DPT, you've discussed momentum building in CTR with waitlists forming quickly. Can you give a sense of the pathway from CTR into the broader Pilates business, which historically has been more private or semi-private and higher ticket? And as other in-center offerings like café, spa, MIORA scale, how should we think about margin profiles? Are any structurally higher or lower as they scale?
CTR absolutely can feed into traditional Pilates. Many people would not sign up for private Pilates directly but will attend CTR; a certain percentage will then transition into Pilates. We plan and think through how that transition can be enhanced. That strategy has helped Pilates in certain clubs. Regarding margins and in-center offerings, our targeted overall company EBITDA margin is the appropriate way to think about club-level revenue and contribution. Fluctuations in café and spa margins have been de minimis to overall company numbers. Our focus for decades has been that spa and café complete the athletic country club experience, and there are significant revenue growth opportunities in both categories. We're focused on fine-tuning processes to capture revenue and ensure appropriate margins. There is very good opportunity ahead to grow in-center revenue and margins.
We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.
Thank you, operator, and thank you, everyone, for joining us this morning. We look forward to having you on the next quarter's call.
Thank you. That does conclude today's teleconference. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.