What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-11 compared with 2021-11-17 · 257 added, 532 removed, 353 unchanged (69% of the section changed)

4 unchanged sentences

(In thousands, except per share data)

September 30,

2022 December 31,

1 unchanged sentence

Cash and cash equivalents $ 41,096 $ 31,637

Accounts receivable 8,326 4,805

Accounts receivable, net 9,716 6,464

Center operating supplies and inventories 41,966 41,007

8 unchanged sentences

Total assets $ 6,333,440 $ 6,256,675

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Commitments and contingencies (Note 11)

Mezzanine equity:

Series A convertible participating preferred stock, $ 0.01 par value per share;

12,000 shares authorized;

5,930 and 0 shares issued and outstanding, respectively

Stockholders’ equity:

Common stock, $ 0.01 par value per share;

200,000 and 170,000 shares authorized, respectively;

500,000 shares authorized;

193,060 shares issued and outstanding

Additional paid-in capital 2,765,503 2,743,560

Stockholder note receivable — ( 15,000 )

Retained deficit ( 346,313 ) ( 71,714 )

Accumulated deficit ( 689,049 ) ( 651,083 )

Accumulated other comprehensive loss ( 1,385 ) ( 3,016 )

Total stockholders’ equity 2,077,000 2,091,392

Total liabilities, mezzanine equity and stockholders’ equity $ 6,157,501 $ 6,017,558

Total liabilities and stockholders’ equity $ 6,333,440 $ 6,256,675

See notes to unaudited condensed consolidated financial statements.

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Center revenue $ 381,621 $ 245,094

6 unchanged sentences

Depreciation and amortization 58,107 61,206

Other operating 14,796 15,152 30,660 37,412

Other operating (income) expense ( 17,035 ) 6,934

Total operating expenses 403,170 331,542

2 unchanged sentences

Interest expense, net of interest income ( 29,943 ) ( 96,217 )

Equity in earnings of affiliate ( 28 ) 37 ( 412 ) ( 206 )

Equity in earnings (loss) of affiliate 26 ( 293 )

Total other expense ( 29,917 ) ( 96,510 )

4 unchanged sentences

Weighted-average common shares outstanding – basic and diluted 192,465 145,196

See notes to unaudited condensed consolidated financial statement s.

See notes to unaudited condensed consolidated financial statements.

LIFE TIME GROUP HOLDINGS, INC.

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 37,966 ) $ ( 152,801 )

Foreign currency translation adjustments, net of tax of $ 0

( 2,404 ) 2,436 323 ( 3,413 )

Comprehensive loss $ ( 36,335 ) $ ( 151,639 )

See notes to unaudited condensed consolidated financial statements.

LIFE TIME GROUP HOLDINGS , INC.

LIFE TIME G ROUP HOLDINGS, INC.

AND SUBSIDIARIES

2 unchanged sentences

Common Stock Additional Paid-In

Capital Stockholder Note

Receivable Retained Deficit Accumulated Other Comprehensive Loss Total

Shares Amount

Balance at July 1, 2021 145,196 $ 1,452 $ 1,564,591 $ ( 15,000 ) $ ( 300,871 ) $ ( 503 ) $ 1,249,669

Net loss — — — — ( 45,442 ) — ( 45,442 )

Other comprehensive loss — — — — — ( 2,404 ) ( 2,404 )

Share-based compensation — — 1,794 — — — 1,794

Cancellation of stockholder note receivable — — ( 11,355 ) 15,000 — — 3,645

Dividends on preferred stock — — ( 6,126 ) — — — ( 6,126 )

Balance at September 30, 2021 145,196 $ 1,452 $ 1,548,904 $ — $ ( 346,313 ) $ ( 2,907 ) $ 1,201,136

Common Stock Additional Paid-In

Capital Stockholder Note

Receivable Retained Deficit Accumulated Other Comprehensive Loss Total

Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total

Shares Amount

Balance at January 1, 2021 145,196 $ 1,452 $ 1,569,905 $ ( 15,000 ) $ ( 71,714 ) $ ( 3,230 ) $ 1,481,413

Balance at December 31, 2021 193,060 $ 1,931 $ 2,743,560 $ ( 651,083 ) $ ( 3,016 ) $ 2,091,392

Net loss — — — ( 37,966 ) — ( 37,966 )

2 unchanged sentences

Settlement of accrued compensation liabilities through the issuance of share-based compensation awards — — 505 — — 505

Cancellation of stockholder note receivable — — ( 11,355 ) 15,000 — — 3,645

Dividends on preferred stock — — ( 16,414 ) — — — ( 16,414 )

Balance at September 30, 2021 145,196 $ 1,452 $ 1,548,904 $ — $ ( 346,313 ) $ ( 2,907 ) $ 1,201,136

Common Stock Additional Paid-In

Capital Stockholder Note

Receivable Retained Earnings Accumulated Other Comprehensive Loss Total

Shares Amount

Balance at July 1, 2020 145,196 $ 1,452 $ 1,569,905 $ ( 15,000 ) $ 105,821 $ ( 10,501 ) $ 1,651,677

Net loss — — — — ( 93,647 ) — ( 93,647 )

Other comprehensive income — — — — — 2,436 2,436

Balance at September 30, 2020 145,196 $ 1,452 $ 1,569,905 $ ( 15,000 ) $ 12,174 $ ( 8,065 ) $ 1,560,466

Balance at March 31, 2022 193,060 $ 1,931 $ 2,765,503 $ ( 689,049 ) $ ( 1,385 ) $ 2,077,000

Common Stock Additional Paid-In

Capital Stockholder Note

Receivable Retained Earnings Accumulated Other Comprehensive Loss Total

Receivable Accumulated Deficit Accumulated Other Comprehensive Loss Total

Shares Amount

Balance at January 1, 2020 141,596 $ 1,416 $ 1,479,941 $ ( 15,000 ) $ 288,478 $ ( 4,652 ) $ 1,750,183

Balance at December 31, 2020 145,196 $ 1,452 $ 1,569,905 $ ( 15,000 ) $ ( 71,714 ) $ ( 3,230 ) $ 1,481,413

Net loss — — — — ( 152,801 ) — ( 152,801 )

Other comprehensive income — — — — — 1,162 1,162

Common stock issuance 3,600 36 89,964 — — — 90,000

Balance at September 30, 2020 145,196 $ 1,452 $ 1,569,905 $ ( 15,000 ) $ 12,174 $ ( 8,065 ) $ 1,560,466

Dividends on preferred stock — — ( 4,282 ) — — — ( 4,282 )

Balance at March 31, 2021 145,196 $ 1,452 $ 1,565,623 $ ( 15,000 ) $ ( 224,515 ) $ ( 2,068 ) $ 1,325,492

See notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net loss $ ( 37,966 ) $ ( 152,801 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 58,107 61,206

Deferred income taxes ( 3,885 ) ( 28,632 )

Share-based compensation 21,438 —

Non-cash rent expense 6,009 4,323

Impairment charges associated with long-lived assets 227 900

Loss (gain) on disposal of property and equipment, net 3,515 ( 2,894 )

(Gain) loss on disposal of property and equipment, net ( 28,597 ) 862

Loss on debt extinguishment — 40,993

Write-off of discounts and debt issuance costs — 18,325

Amortization of discounts and debt issuance costs 7,761 8,959

Share-based compensation 6,959 —

Amortization of debt discounts and issuance costs 1,945 2,473

Changes in operating assets and liabilities ( 5,638 ) 16,963

Other ( 2,578 ) ( 2,768 )

Net cash used in operating activities ( 15,322 ) ( 56,165 )

Net cash provided by (used in) operating activities 9,062 ( 38,156 )

Cash flows from investing activities:

Capital expenditures ( 110,754 ) ( 43,329 )

Acquisitions, net of cash acquired ( 9,139 ) —

Proceeds from sale-leaseback transactions 79,666 33,423

Proceeds from the sale of land held for sale — 22,971

Other 4,805 ( 1,167 )

5 unchanged sentences

Repayments of senior secured credit facility ( 200,000 ) ( 109,000 )

Deposit associated with a pending sale-leaseback transaction — 15,000

Repayments of finance lease liabilities ( 358 ) ( 372 )

Increase in debt discounts and issuance costs — ( 42,246 )

Proceeds from the issuance of common stock — 90,000

Other ( 476 ) —

Net cash provided by financing activities 26,619 184,182

Effect of exchange rates on cash and cash equivalents 61 18

Increase (decrease) in cash and cash equivalents 11,632 ( 7,894 )

Increase in cash and cash equivalents 9,459 134,971

Cash and cash equivalents – beginning of period 31,637 33,195

5 unchanged sentences

(Table amounts in thousands except per share data)

Nature of Business and Basis of Consolidation and Presentation

Nature of Business and Basis of Presentation

Nature of Business

1 unchanged sentence

(collectively with its direct and indirect subsidiaries, “Life Time,” “we,” “our,” or the “Company”) is a holding company incorporated in the state of Delaware.

As a holding company, Life Time Group Holdings, Inc.

does not have its own independent assets or business operations, and all of our assets and business operations are through Life Time, Inc.

and its direct and indirect subsidiaries.

Life Time Group Holdings, Inc.

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effective on June 21, 2021.

We are primarily dedicated to providing premium health, fitness and wellness experiences at our athletic resort destinations and via our comprehensive digital platform and portfolio of iconic athletic events – all with the objective of inspiring healthier, happier lives.

We design, build and operate our athletic resort destinations that are distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment.

As of September 30, 2021, we operated 155 centers in 29 states and one Canadian province.

As a holding company, Life Time Group Holdings, Inc.

does not have its own independent assets or business operations, and all of our assets and business operations are through Life Time, Inc.

and its direct and indirect subsidiaries.

We are primarily dedicated to providing premium health, fitness and wellness experiences at our athletic country club destinations and via our comprehensive digital platform and portfolio of iconic athletic events – all with the objective of inspiring healthier, happier lives.

We design, build and operate our athletic country club destinations that are distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment.

As of March 31, 2022, we operated 153 centers in 29 states and one Canadian province.

COVID-19 Impact

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and recommended containment and mitigation measures worldwide.

On March 13, 2020, the United States declared a National Public Health Emergency with respect to COVID-19.

On March 16, 2020, we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding COVID-19, during which time we did not draft or collect monthly access membership dues or recurring product charges from our members.

We re-opened our first center on May 8, 2020 and continued to re-open our centers as state and local governmental authorities permitted.

All of our centers are currently open and we are collecting monthly access membership dues and recurring product charges from active members associated with all of our centers.

Whether we will need to close any of our centers, and the duration of any such future center closures that may occur, remains uncertain and is dependent on future developments that cannot be accurately predicted at this time.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, the United States declared a National Public Health Emergency and we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding COVID-19.

We re-opened our first center on May 8, 2020 and continued to re-open our centers as state and local governmental authorities permitted, in many cases subject to various operating restrictions and requirements.

All of our centers were open as of March 31, 2022.

Initial Public Offering

On October 12, 2021, Life Time Group Holdings, Inc.

consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock at a public offering price of $ 18.00 per share, resulting in total gross proceeds of $ 702.0 million, which was r educed by underwriting discounts and other offering expenses of $ 22.9 million, for net proceeds of $ 679.1 million.

The shares of the Company's common stock began trading on The New York Stock Exchange under the symbol “LTH” on October 7, 2021.

consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock at a public offering price of $ 18.00 per share, resulting in total gross proceeds of $ 702.0 million, which was r educed by underwriting discounts and other offering and issuance expenses of $ 27.7 million, for net proceeds of $ 674.3 million.

The shares of the Company’s common stock began trading on The New York Stock Exchange (the “NYSE”) under the symbol “LTH” on October 7, 2021.

A registration statement on Form S-1 relating to the offering of these securities was declared effective by the Securities and Exchange Commission (the “SEC”) on October 6, 2021.

Upon consummation of the IPO, the 5.4 million shares of Series A Preferred Stock (as defined in Note 2, Summary of Significant Accounting Policies) then outstanding automatically converted into approximately 6.7 million shares of common stock of Life Time Group Holdings, Inc.

Also upon consummation of the IPO, the 0.5 million shares of restricted Series A Preferred Stock then outstanding converted into approximately 0.6 million restricted shares of common stock of Life Time Group Holdings, Inc.

For more information regarding the Series A Preferred Stock, see Note 8, Mezzanine Equity.

Additionally, on October 12, 2021, in connection with the consummation of the IPO, we adopted an amended and restated Certificate of Incorporation under which the Company’s authorized share total was increased to 500.0 million shares of common stock, par value $ 0.01 per share, and 10.0 million shares of preferred stock, par value $ 0.01 per share, and the Series A Preferred Stock became no longer authorized.

On October 13, 2021, we used a portion of the $ 679.1 million of net proceeds we received in connection with the IPO to pay down $ 575.7 million (including a $ 5.7 million prepayment penalty) of our Term Loan Facility (as defined in Note 6, Debt).

For more information regarding our Term Loan Facility, see Note 6, Debt.

On November 1, 2021, Life Time Group Holdings, Inc.

consummated the sale of nearly 1.6 million additional shares of its common stock at the IPO price of $ 18.00 per share pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $ 28.4 million, which was reduced by underwriting discounts and other offering expenses of $ 1.3 million, for net proceeds of $ 27.1 million .

We intend to use these net proceeds, as well as the remaining portion of the net proceeds we received in connection with the IPO after the partial pay down of our Term Loan Facility, for general corporate purposes.

As of September 30, 2021, total unrecognized share-based compensation expense associated with stock options, restricted Series A Preferred Stock and restricted stock units was $ 362.5 million.

As a result of the consummation of the IPO, a significant portion of this total unrecognized share-based compensation expense amount will be recognized during the fourth quarter of 2021.

For more information regarding share-based compensation expense, see Note 8, Mezzanine Equity and Note 9, Stockholders' Equity.

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

With the exception of Note 11, Subsequent Events, the remaining notes to unaudited condensed consolidated financial statements contained herein provide applicable disclosures of events that have occurred and circumstances that existed up through and including September 30, 2021.

Accordingly, these notes have not been updated to disclose the impact, if any, of any subsequent events, including the impact associated with the IPO.

Summary of Significant Accounting Policies

We are using these net proceeds, as well as the remaining portion of the net proceeds we received in connection with the IPO after the partial pay down of $ 575.7 million (including a $ 5.7 million prepayment penalty) of our Term Loan Facility (as defined in Note 6, Debt), for general corporate purposes.

Basis of Presentation

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A summary of our significant accounting policies is included in Note 2 to our annual consolidated financial statements.

LIFE TIME GROUP HOLDINGS, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Summary of Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”) to simplify accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.

ASU 2020-06 also amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021.

We adopted ASU 2020-06 effective January 1, 2021.

The adoption of ASU 2020-06 did not have an impact on our condensed consolidated financial statements.

Segment Reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance.

The Company’s CODM is our Founder, Chairman and Chief Executive Officer (“CEO”).

Our CODM assesses financial performance and allocates resources based on the consolidated financial results at the total entity level.

Accordingly, we have determined that we have one operating segment and one reportable segment.

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2021-10, “Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance,” to increase the transparency of government assistance, including with respect to the disclosure of the types of assistance an entity receives, an entity’s method of accounting for government assistance and the effect of the assistance on an entity’s financial statements.

The amendments are to be applied either (1) prospectively to all applicable transactions that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions .

We adopted this ASU as of January 1, 2022 and applied it prospectively.

The adoption of this ASU did not have any impact on our financial position, results of operations or cash flows.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation.

The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.

In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848):

Scope,” which provides implementation guidance associated with ASU 2020-04 and clarifies certain optional expedients in Topic 848.

This guidance in ASU 2020-04 is effective for all entities as of March 12, 2020 and may be applied through December 31, 2022.

We are currently evaluating the effect the adoption of ASU 2020-04 may have on our consolidated financial statements.

Fair Value Measurements

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The carrying amounts related to cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value.

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Fair Value Measurements on a Recurring Basis.

We had no remeasurements of such assets or liabilities to fair value during either of the three or nine months ended September 30, 2021 and 2020.

We had no material remeasurements of such assets or liabilities to fair value during the three months ended March 31, 2022 and 2021.

Financial Assets and Liabilities.

At both September 30, 2021 and December 31, 2020, the gross carrying amount of our outstanding debt approximates fair value.

At March 31, 2022, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes (each of which is defined in Note 6, Debt) was approximately $ 272.3 million, $ 920.4 million and $ 472.0 million, respectively.

At December 31, 2021, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes was approximately $ 277.0 million, $ 957.4 million and $ 494.0 million, respectively.

The carrying amount of our outstanding Mortgage Notes and Construction Loan (each of which is defined in Note 6, Debt) at March 31, 2022 and December 31, 2021 approximates fair value.

The fair value of our debt is based on the amount of future cash flows discounted using rates we would currently be able to realize for similar instruments of comparable maturity.

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Fair Value Measurements on a Nonrecurring Basis.

Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to our long-lived assets, goodwill, and intangible assets, which are remeasured when the derived fair value is below carrying value on our condensed consolidated balance sheets.

Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to our long-lived assets, goodwill and intangible assets, which are remeasured when the derived fair

LIFE TIME GROUP HOLDINGS, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

value is below carrying value on our condensed consolidated balance sheets.

For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment.

If we determine that impairment has occurred, the carrying value of the asset would be reduced to fair value and the difference would be recorded as a loss within operating income in our condensed consolidated statements of operations.

During both the three and nine months ended September 30, 2021 and 2020, we determined that certain projects were no longer deemed viable for construction, and that the previously capitalized site development costs associated with these projects were impaired.

Accordingly, as it relates to these long-lived assets, we recognized impairment charges of $ 0.7 million and $ 9.9 million for the three months ended September 30, 2021 and 2020, respectively, and we recognized impairment charges of $ 2.5 million and $ 16.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Fair value remeasurements are based on significant unobservable inputs (Level 3).

Fixed asset fair values are primarily derived using a discounted cash flow (“DCF”) model to estimate the present value of net cash flows that the asset or asset group was expected to generate.

The key inputs to the DCF model generally include our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate.

During both the three months ended March 31, 2022 and 2021, we determined that certain projects were no longer deemed viable for construction and that the previously capitalized site development costs associated with these projects were impaired.

Accordingly, as it relates to these long-lived assets, we recognized impairment charges of $ 0.2 million and $ 0.9 million for the three months ended March 31, 2022 and 2021, respectively.

Supplemental Balance Sheet and Cash Flow Information

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

September 30,

2022 December 31,

Property held for sale $ — $ 49,686

Construction contract receivables $ 7,407 $ 14,949

2 unchanged sentences

Prepaid expenses and other current assets $ 47,818 $ 48,883

Deferred IPO Costs.

Prepaid expenses and other current assets at September 30, 2021 include deferred IPO costs totaling approximately $ 2.2 million.

These deferred costs primarily consist of legal, accounting, and other fees relating to the Company’s IPO.

With the consummation of the IPO in October 2021, these deferred offering costs will be netted against the related IPO proceeds and recognized during the fourth quarter as a reduction in Additional paid-in capital on our consolidated balance sheet.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

September 30,

2022 December 31,

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Corporate accruals 23,158 24,741

Dividends payable 16,414 —

Current maturities of finance lease liabilities 1,223 1,374

1 unchanged sentence

Accrued expenses and other current liabilities $ 141,175 $ 147,920

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Loss per Share

Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

The numerator in the diluted loss per share calculation is derived by adding the effect of assumed common stock conversions to loss available to common stockholders.

The denominator in the diluted loss per share calculation is derived by adding shares of common stock deemed to be potentially dilutive to the weighted average number of shares of common stock outstanding during the period.

Potentially dilutive securities that are subject to performance or market conditions are considered contingently issuable shares for purposes of calculating diluted loss per share.

Accordingly, these contingently issuable shares are excluded from the computation of diluted loss per share until the performance or market conditions have been met.

Other potentially dilutive securities that do not involve contingently issuable shares are also excluded from the computation of diluted loss per share if their effect is antidilutive.

For both the three and nine months ended September 30, 2021 and 2020, our potentially dilutive securities include stock options, all of which are subject to performance conditions that were not met as of the end of each respective period.

Accordingly, the contingently issuable shares associated with our stock options are excluded from the computation of diluted loss per share for both the three and nine months ended September 30, 2021 and 2020.

For both the three and nine months ended September 30, 2021, our potentially dilutive securities also include unvested restricted stock units, outstanding shares of Series A convertible participating preferred stock (“Series A Preferred Stock”) and unvested restricted Series A Preferred Stock.

Due to the net loss that we recognized during both the three and nine months ended September 30, 2021, the potentially dilutive shares of common stock associated with our unvested restricted stock units, outstanding shares of Series A Preferred Stock and unvested restricted Series A Preferred Stock were determined to be antidilutive and, therefore, are excluded from the computation of diluted loss per share for both the three and nine months ended September 30, 2021.

The following table sets forth the calculation of basic and diluted loss per share for both the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net loss $ ( 45,442 ) $ ( 93,647 ) $ ( 274,599 ) $ ( 276,304 )

Dividends accrued on Series A Preferred Stock ( 6,126 ) — ( 16,414 ) —

Loss available to common stockholders $ ( 51,568 ) $ ( 93,647 ) $ ( 291,013 ) $ ( 276,304 )

Weighted average common shares outstanding—basic and diluted 145,196 145,196 145,196 145,118

Loss per share—basic and diluted $ ( 0.36 ) $ ( 0.64 ) $ ( 2.00 ) $ ( 1.90 )

The following is a summary of potential shares of common stock that were excluded from the computation of diluted loss per share for both the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Stock options 24,118 21,252 24,118 21,252

Unvested restricted stock units 610 — 610 —

Outstanding shares of Series A Preferred Stock 5,430 — 5,430 —

Unvested restricted Series A Preferred Stock 500 — 500 —

Potential common shares excluded from diluted loss per share 30,658 21,252 30,658 21,252

For more information regarding our Series A Preferred Stock and unvested restricted Series A Preferred Stock, see Note 8, Mezzanine Equity and Note 9, Stockholders’ Equity.

For more information regarding our stock options and unvested restricted stock units, see Note 9, Stockholders’ Equity.

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Supplemental Cash Flow Information

Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:

Nine Months Ended

September 30,

Three Months Ended

Accounts receivable $ ( 3,335 ) $ ( 892 )

8 unchanged sentences

Changes in operating assets and liabilities $ ( 5,638 ) $ 16,963

LIFE TIME GROUP HOLDINGS, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Additional supplemental cash flow information is as follows:

Nine Months Ended

September 30,

Net cash paid for income taxes, net of refunds received (received from income tax refunds, net of taxes paid) $ 221 $ ( 32,510 )

Three Months Ended

Net cash (received from income tax refunds, net of taxes paid) paid for income taxes, net of refunds received $ ( 82 ) $ 67

Cash payments for interest, net of capitalized interest 31,948 27,915

Capitalized interest 1,862 692

See Note 7, Leases for supplemental cash flow information associated with our lease arrangements for both the three and nine months ended September 30, 2021 and 2020.

Non-cash activity:

Issuance of Series A Preferred Stock (as defined in Note 10, Loss Per Share) in connection with the extinguishment of a related party secured loan — 108,591

See Note 7, Leases, for supplemental cash flow information associated with our lease arrangements for the three months ended March 31, 2022 and 2021.

Goodwill and Intangibles

The goodwill balance was $ 1,233.2 million at both September 30, 2021 and December 31, 2020.

The goodwill balance was $ 1,233.2 million at both March 31, 2022 and December 31, 2021.

Intangible assets consisted of the following:

September 30, 2021

March 31, 2022

Gross Accumulated Amortization Net

Intangible Assets:

Trade name $ 163,000 $ — $ 163,000

Member relationships 62,100 ( 62,100 ) —

Other 16,327 ( 5,561 ) 10,766

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Gross Accumulated Amortization Net

Intangible Assets:

Trade name $ 163,000 $ — $ 163,000

Member relationships 62,100 ( 62,100 ) —

Other 16,327 ( 5,086 ) 11,241

Total intangible assets $ 179,327 $ ( 5,086 ) $ 174,241

Other intangible assets at March 31, 2022 and December 31, 2021 include a facility license as well as trade names and customer relationships associated with our race registration and timing businesses.

Amortization expense associated with intangible assets for the three months ended March 31, 2022 and 2021 was $ 0.5 million and $ 0.2 million, respectively.

Amortization expense associated with intangible assets is included in Depreciation and amortization in our condensed consolidated statements of operations.

There were no goodwill or intangible asset impairment charges recorded during the three months ended March 31, 2022 and 2021.

Revenue associated with our membership dues, enrollment fees, and certain services from our in-center businesses is recognized over time as earned.

Revenue associated with products and services offered in our cafes and spas, as well as through e-commerce, is recognized at a point in time.

The following is a summary of revenue, by major revenue stream, that we recognized during the three months ended March 31, 2022 and 2021:

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

During the nine months ended September 30, 2021, we acquired the assets associated with an outdoor bicycling event for approximately $ 10.2 million, of which approximately $ 1.1 million had yet to be paid as of September 30, 2021.

The transaction was accounted for as an asset acquisition and the entire purchase price was allocated to an intangible asset associated with a license to use a recreation area for the staging of the event, which expires in April 2031.

Other intangible assets at September 30, 2021 includes this facility license as well as trade names and customer relationships associated with our race registration and timing businesses.

Other intangible assets at December 31, 2020 consists solely of the trade names and customer relationships associated with our race registration and timing businesses.

Amortization expense associated with intangible assets for both the three months ended September 30, 2021 and 2020 was $ 0.2 million, and was $ 0.6 million and $ 3.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Amortization expense associated with intangible assets is included in Depreciation and amortization in our condensed consolidated statements of operations.

Revenue associated with our membership dues, enrollment fees, and certain services from our in-center businesses is recognized over time as earned.

Revenue associated with products and services offered in our cafes and spas, as well as through e-commerce, is recognized at a point in time.

The following is a summary of revenue, by major revenue stream, that we recognized during the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Membership dues and enrollment fees $ 271,915 $ 175,307

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Total revenue $ 392,254 $ 249,298

The timing associated with the revenue we recognized during the three months ended September 30, 2021 and 2020 is as follows:

Three Months Ended September 30, 2021 Three Months Ended September 30, 2020

Revenue Other

Revenue Total

Revenue Center

Revenue Other

Revenue Total

Goods and services transferred over time $ 324,350 $ 13,040 $ 337,390 $ 201,174 $ 2,681 $ 203,855

Goods and services transferred at a point in time 47,650 — 47,650 27,175 — 27,175

Total Revenue $ 372,000 $ 13,040 $ 385,040 $ 228,349 $ 2,681 $ 231,030

The timing associated with the revenue we recognized during the nine months ended September 30, 2021 and 2020 is as follows:

Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2020

The timing associated with the revenue we recognized during the three months ended March 31, 2022 and 2021 is as follows:

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Revenue Other

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Contract liabilities represent payments or consideration received in advance for goods or services that the Company has not yet transferred to the customer.

Contract liabilities consist primarily of deferred revenue as a result of fees collected in advance for membership dues, enrollment fees, personal training, and other center services offerings, as well as our media and athletic events.

Total contract liabilities at September 30, 2021 and 2020 were $ 30.8 million and $ 50.3 million, respectively.

Contract liabilities that will be recognized within one year are classified as current liabilities and are included in Deferred revenue in our condensed consolidated balance sheets, the balance of which was $ 28.2 million and $ 45.8 million at September 30, 2021 and 2020, respectively.

These balances primarily consist of prepaid membership dues, personal training and other in-center services, and enrollment fees.

The $ 17.6 million decrease in these contract liabilities was primarily driven by the usage of membership dues credits that we gave to

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

members during 2020 as a result of center closures.

Also, deferred revenue associated with enrollment fees and center services offerings decreased as a result of our center closures in 2020.

Contract liabilities that will be recognized in a future period greater than one year are classified as long-term liabilities and are included in Other liabilities in our condensed consolidated balance sheets, the balance of which was $ 2.6 million and $ 4.5 million at September 30, 2021 and 2020, respectively.

These balances primarily consist of deferred enrollment fees.

The $ 1.9 million decrease in these contract liabilities was primarily driven by our center closures during 2020.

Contract liabilities consist primarily of deferred revenue for fees collected in advance for membership dues, enrollment fees, personal training and other center services offerings, as well as our media and athletic events.

Contract liabilities at March 31, 2022 and December 31, 2021 were $ 42.6 million and $ 35.9 million, respectively.

Contract liabilities that will be recognized within one year are classified as deferred revenue in our condensed consolidated balance sheets.

Deferred revenue at March 31, 2022 and December 31, 2021 was $ 40.6 million and $ 33.9 million, respectively, and consists primarily of prepaid membership dues, personal training and other in-center services, and enrollment fees.

The $ 6.7 million increase was primarily driven by registrations received for future athletic events and kids summer camps.

Contract liabilities that will be recognized in a future period greater than one year are classified as a component of Other liabilities in our condensed consolidated balance sheets.

Long-term contract liabilities at both March 31, 2022 and December 31, 2021 were $ 2.0 million and consist primarily of deferred enrollment fees.

Debt consisted of the following:

September 30, 2021 December 31, 2020

2022 December 31, 2021

Term Loan Facility, maturing December 2024 $ 273,625 $ 273,625

Prior Term Loan Facility, retired January 2021 — 1,471,584

Prior Revolving Credit Facility, retired January 2021 — 94,000

Revolving Credit Facility, maturing December 2026 30,000 —

Secured Notes, maturing January 2026 925,000 925,000

Unsecured Notes, maturing April 2026 475,000 475,000

2023 Notes, retired February 2021 — 450,000

Secured loan—related parties, retired January 2021 — 101,503

Mortgage Notes, various maturities 139,827 145,572

151,244 167,872

Construction Loan, maturing February 2026 3,198 —

Other debt 4,122 4,122

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Less unamortized debt discounts and issuance costs ( 24,552 ) ( 25,891 )

Total debt less unamortized issuance costs 2,363,341 2,272,596

Total debt less unamortized debt discount and issuance costs 1,827,875 1,799,246

Less current maturities ( 23,793 ) ( 23,527 )

Long-term debt, less current maturities $ 1,804,082 $ 1,775,719

(1) Mortgage notes collateralized by certain related real estate and buildings, due through 2027 at a weighted average interest rate of 4.69 % and 4.68 % at September 30, 2021 and December 31, 2020, respecti vely.

Refinancing Transactions

During the nine months ended September 30, 2021, Life Time, Inc., an indirect, wholly-owned subsidiary of Life Time Group Holdings, Inc., as the borrower and issuer, as applicable, together with certain other wholly-owned subsidiaries:

(i) refinanced in full the then outstanding balances associated with our previous term loan facility (the “Prior Term Loan Facility”) and our prior revolving credit facility (the “Prior Revolving Credit Facility”) through net cash proceeds Life Time, Inc.

received from a new term loan facility (the “Term Loan Facility”) that matures in December 2024 as well as the issuance of senior secured notes (the “Secured Notes”) that mature in January 2026;

(ii) refinanced in full our previous senior unsecured notes (the “2023 Notes”) through proceeds Life Time, Inc.

received from the issuance of new senior unsecured notes (the “Unsecured Notes”) that mature in April 2026;

and (iii) converted our then existing related party secured loan into Series A Preferred Stock.

Senior Secured Credit Facility

In June 2015, Life Time, Inc.

and certain of our other wholly-owned subsidiaries entered into a senior secured credit facility with a group of lenders led by Deutsche Bank AG as the administrative agent.

On January 22, 2021, Life Time, Inc.

and certain of our other wholly-owned subsidiaries entered into an eighth amendment to the credit agreement governing our senior secured credit agreement (the “Amended Senior Secured Credit Facility”).

Pursuant to the Amended Senior Secured Credit Facility, Life Time, Inc.

and such other subsidiaries:

(i) entered into the Term Loan Facility and incurred new term loans in an aggregate principal amount of $ 850.0 million;

(ii) paid off the then outstanding balances associated with the Prior Term Loan Facility and the Prior Revolving Credit Facility;

and (iii) extended the maturity of $ 325.2 million of the $ 357.9 million Prior Revolving Credit Facility to September 2024 (the “Revolving Credit Facility”).

Upon the exercise of an accordion feature and subject to certain conditions, borrowings under the Amended Senior Secured Credit Facility may be increased up to an additional $ 400.0 million (plus additional amounts that may be added upon the satisfaction of certain financial tests) subject, in certain cases, to meeting a first lien net leverage ratio.

Our ability to increase our borrowings under the Amended Senior Secured Credit Facility using this accordion feature is restricted during the Covenant Modification Period (as defined in “—Debt

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

Covenants” below).

The Amended Senior Secured Credit Facility is secured by a first priority lien (on a pari-passu basis with the Secured Notes described below) on substantially all of our assets.

The net cash proceeds Life Time, Inc.

received under the Term Loan Facility, as well as from the Secured Notes, were used to:

(i) refinance in full the then outstanding balances associated with the Prior Term Loan Facility and the Prior Revolving Credit Facility (details of which are described under “—Term Loan Facility” and “—Revolving Credit Facility,” respectively);

(ii) pay debt issuance and original issue discount costs associated with each of these financing transactions (details of which are described in “—Debt Discounts and Issuance Costs” below);

and (iii) strengthen our balance sheet by adding to our cash position.

Senior Secured Credit Facility

In June 2015, Life Time, Inc.

and certain of our other wholly-owned subsidiaries entered into a senior secured credit facility with a group of lenders led by Deutsche Bank AG as the administrative agent.

On January 22, 2021, Life Time, Inc.

and certain of our other wholly-owned subsidiaries entered into an eighth amendment to the credit agreement governing our senior secured credit agreement (the “Credit Agreement”).

Pursuant to such eighth amendment to the Credit Agreement, Life Time, Inc.

and such other subsidiaries, among other things, (i) entered into a new term loan facility (the “Term Loan Facility”) and incurred new term loans in an aggregate principal amount of $ 850.0 million and (ii) extended the maturity on the vast majority of commitments under the revolving portion of our senior secured credit facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”) .

On December 2, 2021, Life Time, Inc.

and certain of our other wholly-owned subsidiaries entered into a ninth amendment to the Credit Agreement.

Pursuant to such ninth amendment, Life Time, Inc.

and such other subsidiaries increased the commitments under the Revolving Credit Facility to $ 475.0 million and extended the maturity of the Revolving Credit Facility to December 2, 2026, except that the maturity will be:

(a) September 22, 2024 if we have not refinanced or amended the Term Loan Facility in a manner set forth in such amendment by such date;

(b) October 16, 2025 if we have at least $ 100.0 million remaining outstanding on the senior secured notes (the “Secured Notes”) that mature in January 2026 on such date;

and (c) January 14, 2026 if we have at least $ 100.0 million remaining outstanding on the senior unsecured notes (the “Unsecured Notes”) that mature in April 2026 on such date.

Upon the exercise of an accordion feature and subject to certain conditions, borrowings under the Credit Facilities may be increased subject, in certain cases, to meeting a first lien net leverage ratio.

The Credit Facilities are secured by a first priority lien (on a pari-passu basis with the Secured Notes described below) on substantially all of our assets.

Term Loan Facility

At both December 31, 2020 and January 22, 2021 (the effective date of the refinancing), the Prior Term Loan Facility balance was $ 1,471.6 million .

Under the Term Loan Facility, Life Time, Inc.

incurred new term loans in an aggregate principal amount of $ 850.0 million , of which $ 507.6 million represents cash proceeds received and $ 342.4 million represents the cashless portion of the Prior Term Loan Facility that was rolled over into the Term Loan Facility.

On January 22, 2021, we used the net cash proceeds received from the Term Loan Facility, as well as a portion of the net proceeds received from the Secured Notes, to pay off the remaining $ 1,129.2 million Prior Term Loan Facility balance.

The $ 850.0 million Term Loan Facility amortizes at 0.25 % quarterly, resulting in mandatory quarterly principal repayments of approximately $ 2.1 million, and matures in December 2024.

At September 30, 2021, the Term Loan Facility loan balance was $ 843.6 million, with interest due at intervals ranging from 30 to 180 days at interest rates ranging from the London Interbank Offered Rate (“LIBOR”) plus 4.75 % or base rate plus 3.75 %, in either case subject to a 1.00 % rate floor.

The $ 850.0 million Term Loan Facility, which matures in December 2024, initially amortized at 0.25 % quarterly, which required us to make three mandatory quarterly principal repayments of approximately $ 2.1 million during the year ended December 31, 2021.

On October 13, 2021, we used a portion of net proceeds we received in connection with the IPO to pay down $ 575.7 million (including a $ 5.7 million prepayment penalty) of our Term Loan Facility.

As a result of the pay down, we are no longer required to make quarterly principal payments on the Term Loan Facility prior to its maturity.

At March 31, 2022, the Term Loan Facility loan balance was $ 273.6 million, with interest due at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.75 % or base rate plus 3.75 %, in either case subject to a 1.00 % rate floor.

Revolving Credit Facility

The Prior Revolving Credit Facility provided for a $ 357.9 million revolver.

At December 31, 2020 and January 22, 2021 (the effective date of the refinancing), the Revolving Credit Facility balance was $ 94.0 million and $ 109.0 million, respectively.

Under the Revolving Credit Facility, we extended the maturity of $ 325.2 million of the $ 357.9 million revolver to September 2024.

The remaining $ 32.7 million non-extended portion of our Revolving Credit Facility matures in August 2022.

On January 22, 2021, we used a portion of the net proceeds we received from the Secured Notes to pay off the then outstanding $ 109.0 million Prior Revolving Credit Facility balance.

At September 30, 2021, there were no outstanding borrowings on the Revolving Credit Facility and there were $ 40.1 million of outstanding letters of credit, resulting in total revolver availability, subject to a $ 100.0 million minimum liquidity requirement (see “—Debt Covenants” below), of $ 217.8 million, of which $ 185.1 million was available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.25 % or base rate plus 3.25 %, while interest on the remaining $ 32.7 million was available at intervals ranging from 30 to 180 days at LIBOR plus 3.00 % or base rate plus 2.00 %.

The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the nine months ended September 30, 2021 wa s 3.83 % and $ 12.1 million, respectively.

Our Revolving Credit Facility provides for a $ 475.0 million revolver and matures in December 2026, or earlier as detailed above under “—Senior Secured Credit Facility.” At March 31, 2022, there were $ 30.0 million of outstanding borrowings on the Revolving Credit Facility and there were $ 33.5 million of outstanding letters of credit, resulting in total revolver availability of $ 411.5 million, which was available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.25 % or base rate plus 3.25 %.

The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the three months ended March 31, 2022 was 4.13 % and $ 50.1 million, respectively.

The highest month-end balance during that same period was $ 83.0 million.

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On January 22, 2021, Life Time, Inc.

issued Secured Notes in an aggregate principal amount of $ 925.0 million.

issued the Secured Notes in an aggregate principal amount of $ 925.0 million.

These notes mature in January 2026 and interest only payments are due semi-annually in arrears at 5.75 %.

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The Secured Notes and the related guarantees are our senior secured obligations and are secured on a first-priority basis by security interests in substantially all of our assets.

As of September 30, 2021, $ 925.0 million remained outstanding on the Secured Notes.

Unsecured Notes

In June 2015, Life Time, Inc.

issued the 2023 Notes in the original principal amount of $ 450.0 million, which were scheduled to mature in June 2023.

At both December 31, 2020 and February 5, 2021, $ 450.0 million remained outstanding on the notes.

On February 5, 2021, Life Time, Inc.

refinanced the 2023 Notes through the issuance by Life Time, Inc.

of the Unsecured Notes in the original principal amount of $ 475.0 million.

The Unsecured Notes mature in April 2026 and interest only payments are due semi-annually in arrears at 8.00 %.

The proceeds from the Unsecured Notes were used to:

(i) redeem in full the then outstanding 2023 Notes balance of $ 450.0 million and satisfy and discharge our obligations thereunder;

(ii) pay debt issuance costs associated with the issuance of the Unsecured Notes (details of which are described in “—Debt Discounts and Issuance Costs” below);

and (iii) strengthen our balance sheet by adding to our cash position.

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

Unsecured Notes

On February 5, 2021, Life Time, Inc.

issued the Unsecured Notes in the original principal amount of $ 475.0 million.

The Unsecured Notes mature in April 2026 and interest only payments are due semi-annually in arrears at 8.00 %.

Life Time, Inc.

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The Unsecured Notes and the related guarantees are our general senior unsecured obligations and will rank equally in right of payment with all of our existing and future senior indebtedness without giving effect to collateral arrangements.

As of September 30, 2021, $ 475.0 million remained outstanding on the Unsecured Notes.

Secured Loan—Related Parties

On June 24, 2020, we closed on an approximate $ 101.5 million secured loan (the “Related Party Secured Loan”) from an investor group that was comprised solely of our stockholders or their affiliates.

The Related Party Secured Loan was scheduled to mature in June 2021.

During the nine months ended September 30, 2021, interest expense of approximately $ 0.7 million was recognized on this secured loan.

On January 11, 2021, Life Time Group Holdings, Inc.

and certain of its subsidiaries and the investor group associated with the Related Party Secured Loan (or their assignees) entered into a contribution agreement (the “Contribution Agreement”) pursuant to which we converted the total amount of outstanding principal and accrued interest (up though and including January 22, 2021) under the Related Party Secured Loan into Series A Preferred Stock.

Effective January 22, 2021, the total outstanding principal and accrued interest balance of approximately $ 108.6 million was conveyed by the investor group to us and we issued, on a dollar-for-dollar basis, to the investor group approximately 5.4 million shares of Series A Preferred Stock with an estimated fair value of $ 149.6 million.

For accounting purposes, because the fair value of the Series A Preferred Stock that was issued exceeded the carrying value of the outstanding principal and accrued interest balance associated with the Related Party Secured Loan that was extinguished, we recognized a $ 41.0 million debt extinguishment loss, which is included in Interest expense, net of interest income in our condensed consolidated statement of operations for the nine months ended September 30, 2021.

For more information regarding the Series A Preferred Stock that was issued in connection with this transaction, see Note 8, Mezzanine Equity.

Mortgage Notes

Certain of our subsidiaries have entered into mortgage facilities with various financial institutions (collectively, the “Mortgage Notes”), which are collateralized by certain of our related real estate and buildings, including one of our corporate headquarters properties.

The Mortgage Notes have varying maturity dates from March 2023 through August 2027 and carried a weighted average interest rate of 4.70 % and 4.70 % at March 31, 2022 and December 31, 2021, respectively.

Payments of principal and interest on each of the Mortgage Notes are payable monthly on the first business day of each month.

The Mortgage Notes contain customary affirmative covenants, including but not limited to, payment of property taxes, granting of lender access to inspect the properties, maintenance of the properties, providing financial statements, providing estoppel certificates and lender consent to leases.

The Mortgage Notes also contain various customary negative covenants, including, but not limited to, restrictions on transferring the property, change in control of the borrower and changing the borrower’s business or principal place of business.

As of March 31, 2022, we were either in compliance in all material respects with the covenants associated with the Mortgage Notes or the covenants were not applicable.

Construction Loan

On January 22, 2021, we closed on a construction loan (the “Construction Loan”) providing up to $ 28.0 million to partially finance the construction of a Life Time Living location that remains under construction as of March 31, 2022.

The Construction Loan has a maturity date of February 15, 2026 and is collateralized by the property.

Borrowings under the Construction Loan bear interest at a variable annual rate of no less than 4.80 %.

Interest only payments will be due monthly beginning April 15, 2022 and continuing through February 15, 2024.

Beginning March 15, 2024, based on the principal balance due as of February 15, 2024, monthly principal and interest installment payments will be due in an amount sufficient to fully amortize the principal balance at maturity.

At March 31, 2022, there were $ 3.2 million of outstanding borrowings on the Construction Loan.

There were no outstanding borrowings as of December 31, 2021.

Debt Discounts and Issuance Costs

In connection with the Term Loan Facility, Secured Notes and Unsecured Notes, we incurred debt discounts and issuance costs totaling approximately $ 44.4 million during the nine months ended September 30, 2021.

In our condensed consolidated balance sheets, we recognize, and present unamortized debt discounts and issuance costs associated with non-revolving debt as a deduction from the face amount of related indebtedness.

Accordingly, as it relates to these debt instruments, unamortized debt discounts and issuance costs of $ 37.8 million are included in Long-term debt, net of current portion on our September 30, 2021 condensed consolidated balance sheet.

In connection with the Prior Term Loan Facility, the 2023 Notes and the Related Party Secured Loan, we had incurred debt discounts and issuance costs totaling $ 78.6 million.

At December 31, 2020, unamortized debt discounts and issuance costs of $ 19.1 million are included in Long-term debt, net of current portion on our December 31, 2020 condensed consolidated balance sheet.

In connection with the extinguishment of these debt instruments during the nine months ended September 30, 2021, previously unamortized debt discounts and issuance costs were written off.

Accordingly, as it relates to these extinguished debt instruments, we recognized $ 18.3 million of debt discount and issuance cost write-offs during the nine months ended September 30, 2021, which are included in Interest expense, net of interest income in our condensed consolidated statement of operations for the nine months ended September 30, 2021.

In connection with both the Revolving Credit Facility and the Prior Revolving Credit Facility, we have incurred total debt issuance costs of $ 7.4 million, of which $ 0.8 million were incurred during the nine months ended September 30, 2021.

As of the January 22, 2021 effective date associated with the Amended Senior Secured Credit Facility, the borrowing capacity (i.e., the product of the remaining term and the maximum available credit) associated with the Revolving Credit Facility was greater than the borrowing capacity associated with the Prior Revolving Credit Facility.

Accordingly, the debt issuance costs incurred in connection with the Revolving Credit Facility, as well as the unamortized portion of the debt issuance costs associated with the Prior Revolving Credit Facility, will be amortized over the term of the Revolving Credit Facility.

We recognize and present unamortized issuance costs associated with revolving debt arrangements as an asset.

Accordingly, unamortized revolver-related debt issuance costs of $ 1.7 million and $ 1.3 million, respectively, are included in Other assets on our condensed consolidated balance sheets at September 30, 2021 and December 31, 2020, respectively.

Unamortized debt discounts and issuance costs associated with the Term Loan Facility, Secured Notes, Unsecured Notes and Construction Loan of $ 24.6 million and $ 25.9 million are included in Long-term debt, net of current portion on our condensed consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively.

Unamortized revolver-related debt issuance costs of $ 3.7 million and $ 4.0 million are included in Other assets on our condensed consolidated balance sheets at March 31, 2022 and December 31, 2021, respectively.

Debt Covenants

We are required to comply with certain affirmative and restrictive covenants under our Amended Senior Secured Credit Facility, Secured Notes and Unsecured Notes.

We are also required to comply with a first lien net leverage ratio covenant under the revolving portion of our Amended Senior Secured Credit Facility.

However, our Amended Senior Secured Credit Facility includes a covenant modification period (the “Covenant Modification Period”) ending on the earlier of (i) January 1, 2022 or (ii) the date we provide notice of our intention to terminate the Covenant Modification Period.

During the Covenant Modification Period, we are not obligated to comply with the first lien net leverage ratio covenant;

however, we are required to maintain a minimum liquidity balance of $ 100.0 million, which is tested monthly.

Effective as of the end of the first fiscal quarter following the Covenant Modification Period and continuing throughout the remaining term of our Amended Senior Secured Credit Facility, we will be required to maintain a first lien net leverage ratio, if 30 % or more of the

We are required to comply with certain affirmative and restrictive covenants under our Credit Facilities, Secured Notes and Unsecured Notes.

We are also required to comply with a first lien net leverage ratio covenant under the Revolving Credit Facility, which requires us to maintain a first lien net leverage ratio, if 30.00 % or more of the Revolving Credit Facility commitments are outstanding shortly after the end of any fiscal quarter (excluding all cash collateralized undrawn letters of credit and other undrawn letters of credit up to $ 20.0 million).

During the first three quarterly test periods of 2022, certain financial measures used in the calculation of the first lien net leverage ratio will be calculated on a pro forma basis by annualizing the respective financial measures recognized during those test periods.

As of March 31, 2022, we were either in compliance in all material respects with the covenants under the Credit Facilities, or the covenants were not applicable.

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

Revolving Credit Facility commitments are outstanding shortly after the end of any fiscal quarter (excluding all cash collateralized undrawn letters of credit and other undrawn letters of credit up to $ 20.0 million).

During the first three quarterly test periods following the Covenant Modification Period, certain financial measures used in the calculation of the first lien net leverage ratio will be calculated on a pro forma basis by annualizing the respective financial measures recognized during those test periods.

Future Maturities of Long-Term Debt

Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at September 30, 2021 were as follows:

October 2021 through September 2022 $ 31,841

October 2022 through September 2023 28,252

October 2023 through September 2024 72,682

October 2024 through September 2025 830,825

October 2025 through September 2026 1,413,281

Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at March 31, 2022 were as follows:

April 2022 through March 2023 $ 23,793

April 2023 through March 2024 65,585

April 2024 through March 2025 285,869

April 2025 through March 2026 940,971

April 2026 through March 2027 515,823

Thereafter 18,731

Total future maturities of long-term debt $ 1,850,772

Lease cost included in our condensed consolidated statements of operations for the three months ended September 30, 2021 and 2020 consisted of the following:

Lease cost included in our condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 consisted of the following:

Three Months Ended

September 30, Classification in Condensed

Consolidated Statements of Operations

Operating lease cost 50,987 46,644 Rent

Short-term lease cost 281 338 Rent

Variable lease cost 1,245 557 Rent

Finance lease cost:

Amortization of right-of-use assets 380 652 Depreciation and amortization

Interest on lease liabilities 42 43 Interest expense, net of interest income

Total lease cost $ 52,935 $ 48,234

Lease cost included in our condensed consolidated statements of operations for the nine months ended September 30, 2021 and 2020 consisted of the following:

Nine Months Ended

September 30, Classification in Condensed

March 31, Classification in Condensed

Consolidated Statements of Operations

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Total lease cost $ 56,351 $ 50,931

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Operating and Finance Lease Right-of-Use Assets and Lease Liabilities

Operating and finance lease right-of-use assets and lease liabilities were as follows:

September 30, 2021 December 31, 2020 Classification on Condensed

March 31, 2022 December 31, 2021 Classification on Condensed

Consolidated Balance Sheet

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Total lease liabilities $ 2,020,195 $ 1,958,329

(1) Finance lease right-of-use assets were reported net of accumulated amortization of $ 2.1 million and $ 1.2 million at September 30, 2021 and December 31, 2020, respectively.

Operating Lease Right-of-Use Assets and Liabilities Associated with Unrelated Third Party Leases

In connection with leases with unrelated third parties that commenced during the nine months ended September 30, 2021, we recognized operating lease right-of-use assets and lease liabilities of $ 203.7 million and $ 194.0 million, respectively, on our condensed consolidated balance sheet.

In connection with modified leases that were remeasured during the nine months ended September 30, 2021, we recognized a net decrease in operating lease right-of-use assets and lease liabilities, each of which totaled $ 5.4 million, on our condensed consolidated balance sheet.

Finance Lease Right-of-Use Assets and Liabilities Associated with Unrelated Third Party Leases

In connection with leases with unrelated third parties that commenced during the nine months ended September 30, 2021, we recognized finance lease right-of-use assets and lease liabilities, each of which totaled $ 1.2 million, on our condensed consolidated balance sheet.

(1) Finance lease right-of-use assets were reported net of accumulated amortization of $ 2.4 million and $ 2.4 million at March 31, 2022 and December 31, 2021, respectively.

LIFE TIME GROUP HOLDINGS, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Operating Lease Right-of-Use Assets and Liabilities

In connection with leases that commenced during the three months ended March 31, 2022, we recognized operating lease right-of-use assets and lease liabilities of $ 84.0 million and $ 67.9 million, respectively, on our condensed consolidated balance sheet.

In connection with modified leases that were remeasured during the three months ended March 31, 2022, we recognized a net increase in both operating lease right-of-use assets and lease liabilities of $ 2.9 million on our condensed consolidated balance sheet.

Remaining Lease Terms and Discount Rates

The weighted-average remaining lease terms and discount rates associated with our operating and finance lease liabilities at September 30, 2021 were as follows:

September 30, 2021

The weighted-average remaining lease terms and discount rates associated with our operating and finance lease liabilities at March 31, 2022 were as follows:

March 31, 2022

Weighted-average remaining lease term (1)

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Rather, the weighted-average remaining lease term only includes periods covered by an option to extend a lease if we are reasonably certain to exercise that option.

Sale-Leaseback Transactions

On March 8, 2022, the Company entered into two definitive agreements with an unrelated third party, each of which was for the sale-leaseback of two properties, for an aggregate sales price of approximately $ 175 million.

The closing on two of these properties was completed on March 25, 2022, and the closing on the remaining two properties is expected to be completed on or about May 13, 2022.

Under the transaction that was completed, we sold two properties with a combined net book value of $ 66.9 million for $ 80.0 million, which was reduced by transaction costs of $ 0.3 million, for net cash proceeds of $ 79.7 million.

The estimated fair value of the properties sold was $ 95.6 million.

Accordingly, the aggregate sales price associated with this arrangement was increased by $ 15.6 million, which resulted in the recognition of a gain of $ 28.4 million on this transaction.

This gain is included in Other operating (income) expense in our condensed consolidated statement of operations for the three months ended March 31, 2022.

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

Sale-Leaseback Transactions

Sale-Leaseback Transactions with Unrelated Third Parties

Duri ng the nine months ended September 30, 2021, we entered into two sale-leaseback transactions, involving two properties, with unrelated third parties.

Under these transactions, we sold property with a net book value of $ 86.1 million for $ 76.0 million, which was reduced by transaction costs of $ 2.0 million, for net cash proceeds of $ 74.0 million.

The estimated fair value of the properties sold was $ 85.5 million.

Sale-leaseback transactions with unrelated third parties are accounted for at fair value.

Accordingly, the aggregate sales price associated with these arrangements was increased, for accounting purposes, by a total of $ 9.5 million, which resulted in the recognition of an aggregate loss of $ 2.6 million on these transactions.

This net loss is included in Other operating in our condensed consolidated statement of operations for the nine months ended September 30, 2021.

The leases, each of which has been classified as an operating lease, each has an initial term of 25 years and includes six renewal options of five years each.

The $ 9.5 million increase in the aggregate sales price associated with these sale-leaseback transactions was accounted for as prepaid rent, which was recognized as a non-cash increase in the aggregate operating lease right-of-use asset balance associated with these properties.

Supplemental Cash Flow Information

Supplemental cash flow information associated with our operating and finance leases is as follows:

Nine Months Ended

September 30,

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

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Maturities of Operating and Finance Lease Liabilities

The maturities associated with our operating and finance lease liabilities at September 30, 2021 are as follows:

The maturities associated with our operating and finance lease liabilities at March 31, 2022 are as follows:

Operating Leases Finance Leases Total

October 2021 through September 2022 $ 184,947 1,493 186,440

October 2022 through September 2023 195,386 874 196,260

October 2023 through September 2024 203,040 167 203,207

October 2024 through September 2025 205,024 — 205,024

October 2025 through September 2026 208,241 — 208,241

April 2022 through March 2023 $ 193,172 $ 1,294 $ 194,466

April 2023 through March 2024 208,274 522 208,796

April 2024 through March 2025 211,911 42 211,953

April 2025 through March 2026 215,731 — 215,731

April 2026 through March 2027 216,458 — 216,458

Thereafter 2,856,818 — 2,856,818

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Present value of lease liabilities $ 2,018,422 $ 1,773 $ 2,020,195

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Mezzanine Equity

Mezzanine equity consists of Series A Preferred Stock.

The following table summarizes the changes in mezzanine equity for the nine months ended September 30, 2021:

Preferred Stock

Shares Amount

Balance at January 1, 2021 — $ —

Issuance of Series A Preferred Stock 5,430 149,585

Issuance of restricted Series A Preferred Stock (1)

Share-based compensation associated with restricted Series A Preferred Stock (1)

Balance at September 30, 2021 5,930 $ 153,620

(1) During the nine months ended September 30, 2021, the Company granted 0.5 million shares of restricted Series A Preferred Stock to our CEO.

At September 30, 2021, th e 0.5 million shares of restricted Series A Preferred Stock associated with this award were issued and outstanding however, all of the shares remained unvested.

Share-based compensation expense associated with this restricted Series A Preferred Stock award is included in General, administrative and marketing in our condensed consolidated statements of operations.

Share-based compensation expense associated with this award is recognized over the vesting period based on the grant date fair value per share.

For more information regarding this restricted Series A Preferred Stock award, see “—Restricted Series A Preferred Stock” below.

Series A Preferred Stock

Authorization and Designation

On January 11, 2021, our board of directors adopted and approved an amendment to the Certificate of Incorporation for Life Time Group Holdings, Inc., which (i) increased the amount of authorized shares of common stock, $ 0.01 par value per share, from 170.0 million to 200.0 million;

and (ii) authorized 25.0 million shares of preferred stock, $ 0.01 par value per share.

Also on January 11, 2021, our board of directors authorized 12.0 million shares of Series A Preferred Stock of Life Time Group Holdings, Inc., $ 0.01 par value per share.

The rights, preferences, privileges, qualifications, restrictions and limitations relating to the Series A Preferred Stock were set forth in the Certificate of Designations (“COD”), which the Company filed with the Secretary of State of the State of Delaware on January 22, 2021.

Voting Rights

Holders of Series A Preferred Stock were only entitled to vote on matters specifically related to the Series A Preferred Stock.

Dividend Rights

From and after the issue date, on each anniversary of the issue date, each share of Series A Preferred Stock was to accrue additional shares of Series A Preferred Stock as a paid-in-kind (“PIK”) dividend on the Liquidation Preference (defined in “—Liquidation Rights” below) in effect at the anniversary date at rate of 15.0 % per annum.

The PIK dividends were cumulative and compounded annually to the extent that they had not been paid by the Company.

Accrued PIK dividends were payable, at the option of the Company, in either cash from any source of funds legally available or additional shares of Series A Preferred Stock.

The holders of Series A Preferred Stock were entitled to participate in any dividends or distributions on our common stock or other junior stock of the Company on an as-if-converted basis (assuming full conversion of all outstanding shares of Series A Preferred Stock).

Liquidation Rights

The Series A Preferred Stock ranked senior to the Company’s common stock or other junior capital stock, with respect to dividend rights and rights on the distribution of assets, in the event of a change of control (“COC”) or any liquidation, winding up of dissolution of the business of the Company, whether voluntary or involuntary (a “Deemed Liquidation Event”).

Upon the occurrence of a Deemed Liquidation Event, each holder of shares of Series A Preferred Stock was entitled to receive, for each share, out of assets of the Company legally available for distribution to stockholders or, in the case of a COC, out of the consideration payable to stockholders or the Company in such COC, a preferential amount equal to the greater of (i) the $ 20.00 per share issue price plus the amount of any accrued dividends (including accrued PIK shares) on such shares of Series A Preferred Stock (“Liquidation Preference”) and (ii) the per share amount of all cash, securities or other property to be distributed in respect of the common stock of the Company that such holder of Series A Preferred Stock would have been entitled to receive had the holder converted such Series A Preferred Stock into shares of common stock of the Company (“Deemed Conversion”), subject to certain adjustments set forth in the COD (details of which are described in “—Conversion Price Adjustments” below).

All preferential amounts to be paid to the holders of Series A Preferred Stock in connection with a Deemed

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Liquidation Event would be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of the Company’s common stock or any other junior stock.

Conversion Rights

Upon the (i) consummation of an initial public offering, (ii) consummation of a Qualifying Private Sale (“QPS”) or (iii) election of holders of at least 75 % of the then outstanding shares of Series A Preferred Stock, each of the outstanding shares of Series A Preferred was to automatically convert (“Automatic Conversion”) into a number of shares of common stock of the Company equal to the Liquidation Preference, subject to certain adjustments set forth in the COD (details of which are described in “—Liquidation Preference Adjustments” below), divided by the $ 20.00 issue price, subject to certain adjustments set forth in the COD (“Conversion Price”) (details of which are described in “—Conversion Price Adjustments” below).

Liquidation Preference Adjustments

In the event of an Automatic Conversion or a Deemed Conversion of shares of Series A Preferred Stock into common shares of the Company, the accrued dividends on such shares of Series A Preferred Stock were to be (a) reduced to zero, in the event that the fair value of each share of the Company’s common stock into which such share of Series A Preferred Stock is convertible would equal or exceed the sum of (i) the Liquidation Preference (assuming, for this purpose, that the accrued dividends included in this amount shall not have been reduced to zero) and (ii) any cash dividends paid in respect of such share of Series A Preferred Stock, or (b) reduced to such amount as would provide each holder of such shares of Series A Preferred Stock the 15.0 % annual dividend rate from the issue date to the conversion date, in the event that the fair value of each share of the Company’s common stock into which such share of Series A Preferred Stock is convertible exceeds the $ 20.00 initial price per share but is less than the sum of (i) the Liquidation Preference (assuming, for this purpose, that the accrued dividends included in this amount shall not have been reduced) and (ii) any cash dividends paid in respect of such share of Series A Preferred Stock.

Conversion Price Adjustments

The Conversion Price, as defined in the COD, means the $ 20.00 issue price, subject to anti-dilution adjustments;

provided, however, that (i) with respect to any shares of Series A Preferred Stock that are converted into the Company’s common stock upon the consummation of an initial public offering, the Conversion Price shall equal the lesser of (a) the $ 20.00 issue price and (b) the initial public offering price, as applicable, and (ii) with respect to any shares of Series A Preferred Stock that are converted into the Company’s common stock upon the consummation of a QPS, the Conversion Price share equal the lesser of (a) the $ 20.00 issue price and (b) the price per share paid by the third party purchased in such transaction, as applicable.

Mandatory Redemption

On July 22, 2026 (the “Redemption Date”), the Company would be required to redeem any and all outstanding shares of Series A Preferred stock, from any source of funds legally available for such purpose at a price per share equal to the Liquidation Preference in respect of the redeemed shares.

Series A Preferred Stock Issuance

The fair value of the 5.4 million shares of Series A Preferred Stock that the Company issued, as well as the 0.5 million shares associated with the restricted Series A Preferred Stock award that the Company granted to our CEO, during the nine months ended September 30, 2021 was estimated using an as-converted value plus risky put option model.

The put option value was estimated using the Black-Scholes option pricing model.

Primary assumptions used in determining the estimated issuance date fair value of the Series A Preferred Stock include:

the estimated equity value associated with the then outstanding common stock of Life Time Group Holdings, Inc., a strike price of $ 20.00 per share, PIK dividend yield rate of 15.0 %, expected term of 1.0 years, volatility rate of 65.00 % and a risk-free rate of 0.08 %.

For more information regarding the Contribution Agreement and issuance of the Series A Preferred Stock, see Note 6, Debt.

For more information regarding the restricted Series A Preferred Stock, see “—Restricted Series A Preferred Stock” below).

Restricted Series A Preferred Stock

During the second quarter of 2021, in lieu of the vast majority of cash compensation for our CEO for 2021, the Company granted an award of 0.5 million shares of restricted Series A Preferred Stock to our CEO, 50 % of which vests on each anniversary of the grant date with 100% full vesting on the date that is 180 days after an initial underwritten public offering.

Effective as of the grant date, our CEO has all of the rights of a stockholder with respect to these 0.5 million outstanding shares of restricted Series A Preferred Stock, including the right to receive PIK share or cash dividends.

Immediately prior to the granting of this equity award, we had recognized an accrued compensation liability of approximately $ 1.6 million associated with our CEO’s 2021 compensation.

For accounting purposes, the settlement of this $ 1.6 million accrued compensation liability through issuance of the restricted Series A Preferred Stock award was recognized as a decrease in Accrued expenses and other current liabilities and an increase in Additional paid-in capital on our condensed consolidated balance sheet.

As of September 30, 2021, all of the restricted Series A Preferred Stock shares subject to this award were both unvested and outstanding.

LIFE TIME GROUP HOLDINGS , INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Share-based compensation expense associated with this restricted Series A Preferred Stock award will be recognized over the vesting period based on the grant date fair value per share, reduced by the $ 1.6 million of compensation expense associated with the accrued compensation liability that had previously been recognized.

During the three and nine months ended September 30, 2021, we recognized share-based compensation expense associated with this restricted Series A Preferred Stock award of $ 2.3 million and $ 4.0 million, respectively, the offset for which was recognized as an increase in Mezzanine equity on our condensed consolidated balance sheet (details of which are described in “—Mezzanine Equity Classification” below).

As of September 30, 2021, unrecognized share-based compensation expense related to this restricted Series A Preferred Stock award was approxim ately $ 8.1 million.

The estimated fair value associated with this restricted Series A Preferred Stock award will be recognized as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met.

With the consummation of the IPO, previously unrecognized share-based compensation expense associated with this restricted Series A Preferred Stock award will be recognized effective with the date that is 180 days after the effective date associated with such initial public offering.

For more information on share-based compensation, see Note 9, Stockholders’ Equity.

Mezzanine Equity Classification

We applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”), in order to determine the appropriate accounting for both the Series A Preferred Stock that the Company issued, as well as the restricted Series A Preferred Stock award that the Company granted to our CEO, during the nine months ended September 30, 2021.

Based on our analysis, we determined that these shares of Series A Preferred Stock (i) do not meet any of the conditions that would require liability accounting, (ii) are more akin to an equity-like host and (iii) do not contain any embedded features that require bifurcation.

Also, because these shares of Series A Preferred Stock are (x) redeemable upon the occurrence of certain Deemed Liquidation Events that are not solely within the Company’s control;

and (y) required to be redeemed at a determinable price on the Redemption Date, we determined that the carrying value of the Series A Preferred Stock that the Company issued, as well the offset to the recognized share-based compensation expense associated with the restricted Series A Preferred Stock award, is required to be classified as temporary mezzanine equity on our September 30, 2021 condensed consolidated balance sheet.

Accordingly, the issuance date fair value of $ 149.6 million associated with the 5.4 million shares of Series A Preferred Stock that the Company issued during the nine months ended September 30, 2021 was recognized as an increase in Mezzanine equity on our September 30, 2021 condensed consolidated balance sheet.

Also, the offset to the $ 4.0 million of share-based compensation expense associated with the restricted Series A Preferred Stock award that we recognized during the nine months ended September 30, 2021 was recognized as an increase in Mezzanine equity on our September 30, 2021 condensed consolidated balance sheet.

At September 30, 2021, the outstanding shares of Series A Preferred Stock were not redeemable, and we determined that it was not probable that these shares would become redeemable.

Accrued Dividends

At September 30, 2021, PIK dividend shares totaling approximately 0.6 million shares had accrued on the outstanding Series A Preferred Stock and the underlying shares associated with the restricted Series A Preferred Stock award.

At September 30, 2021, the estimated fair value of these PIK dividend shares was approximately $ 16.4 million .

Based on the applicable accounting guidance, because the PIK dividend feature is discretionary, each accrued PIK share is required to be measured on the basis of its fair value on the commitment date, which is generally the dividend accrual date.

Accordingly, we recognized the $ 16.4 million estimated fair value of the accrued PIK dividends as a non-cash increase in Accrued expenses and other current liabilities and a decrease in Additional paid-in capital on our September 30, 2021 condensed consolidated balance sheet.

Stockholders’ Equity

Authorized Common Stock

For information on the increase in the amount of authorized shares of common stock of Life Time Group Holdings, Inc.

during the nine months ended September 30, 2021, see “Series A Preferred Stock—Authorization and Designation” under Note 8, Mezzanine Equity.

Share-Based Compensation

2021 Equity Incentive Plan

On October 6, 2015, our board of directors adopted the LTF Holdings, Inc.

2015 Equity Incentive Plan (as amended, the “2015 Equity Plan”).

During the nine months ended September 30, 2021, our board of directors and stockholders approved an amendment to the 2015 Equity Plan.

Pursuant to the amendment, the 2015 Equity Plan provided for the issuance of up to approximately 30.6 million shares of our common stock, plus an annual increase on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2025, by a number equal to 1.5 % of the fully diluted shares of our common stock outstanding on the last day of the immediately preceding fiscal year;

provided, that no annual increase shall occur on or after the Company (or its successor) becomes a publicly listed company.

In connection with the IPO and effective October 6, 2021, we adopted the 2021 Incentive Award Plan (the “2021 Equity Plan”), under which we may grant cash and equity-based incentive awards to our employees, consultants and directors.

The maximum number of shares of our common stock available for issuance under the 2021 Equity Plan is equal to the sum of (i) approximately 14.5 million shares of our common stock, (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 4 % of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year and (B) such lesser amount as determined by our board of directors, and (iii) the approximately 1.0 million shares of our common stock that were available for issuance under the 2015 Equity Plan as of October 6, 2021.

Effective January 1, 2022, the number of shares of our common stock available for issuance under the 2021 Equity Plan increased by approximately 7.7 million shares pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence.

Additionally, the number of shares of our common stock available for issuance under the 2021 Equity Plan may increase with respect to awards under the 2015 Equity Plan and any other prior equity incentive plans of the Company or its predecessor which are forfeited or lapse unexercised and which following the effective date of the 2021 Equity Plan are not issued under such prior plan;

provided, however, no more than 14.5 million shares may be issued upon the exercise of incentive stock options.

The share reserve formula under the 2021 Equity Plan is

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

On June 6, 2019, we launched a voluntary stock option purchase offer (the “Offer”) whereby, subject to certain conditions and limitations, we offered eligible holders (not including our CEO) of qualifying stock options under the 2015 Equity Plan (“Covered Options”) the right to sell up to a certain number of vested Covered Options back to us.

The Offer terminated on July 3, 2019.

In connection with the Offer, we purchased approximately 1.6 million Covered Options.

Effective with the purchase date, the 1.6 million Covered Options were cancelled, thereby removing these shares from the number of shares available for future grants under the 2015 Equity Plan.

As of September 30, 2021, approximately 1.0 million shares were available for future stock-based award grants to employees and other eligible participants under the 2015 Equity Plan.

intended to provide us with the continuing ability to grant equity awards to eligible employees, directors and consultants for the ten-year term of the 2021 Equity Plan.

As of March 31, 2022, approximately 20.6 million shares were available for future awards to employees and other eligible participants under the 2021 Equity Plan.

2021 Employee Stock Purchase Plan

In connection with the IPO and effective October 6, 2021, we adopted the 2021 Employee Stock Purchase Plan (the “ESPP”).

The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at periodic intervals, with their accumulated payroll deductions.

The ESPP consists of two components:

an Internal Revenue Service (“IRS”) Code section 423 (“Section 423”) component, which is intended to qualify under Section 423 of the IRS Code and a non-Section 423 component, which need not qualify under Section 423 of the IRS Code.

The aggregate number of shares of our common stock that has initially been reserved for issuance under the ESPP is equal to (i) approximately 2.9 million shares of our common stock, and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 1 % of the aggregate number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of our shares of common stock as determined by our board of directors;

provided that in no event will more than 29.0 million shares of our common stock be available for issuance under the Section 423 component of the ESPP.

Our board of directors determined that no additional shares would become available under the ESPP as of January 1, 2022 pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence.

Our board of directors or the compensation committee will have authority to interpret the terms of the ESPP and determine eligibility of participants.

The ESPP will permit participants to purchase common stock through payroll deductions of up to a percentage of their eligible compensation, which includes a participant’s gross base compensation for services to us.

On the first trading day of each offering period, each participant will automatically be granted an option to purchase shares of our common stock.

The option will expire at the end of the applicable offering period and will be exercised on each purchase date during such offering period to the extent of the payroll deductions accumulated during the offering period.

The purchase price will be at such discount as determined by our board of directors or compensation committee, but no greater than 85 % of the fair market value of a share of our common stock on the date determined by our board of directors or compensation committee.

Participants may voluntarily end their participation in the ESPP prior to the end of the applicable offering period and will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock.

Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the option purchase price, subject to the certain participation limitations.

Participation will end automatically upon a participant’s termination of employment.

No offering periods commenced under the ESPP during the three months ended March 31, 2022.

Stock Options

Summary of Stock Option Activity

Stock option activity for the nine months ended September 30, 2021 is as follows:

Shares Weighted Average

Exercise Price

Outstanding as of December 31, 2020 21,119 $ 11.00

Granted 3,189 19.32

Forfeited ( 190 ) 17.41

Outstanding as of September 30, 2021 $ 24,118 12.05

Exercisable as of September 30, 2021 $ — —

During the nine month s ended September 30, 2021, the Company granted approximately 3.2 million stock options under the 2015 Equity Plan, of which approximately 1.1 million were granted to executives and approximately 2.1 million were granted to non-executive service providers.

These options have a ten-year contractual term from the date of grant.

The exercise pric es and terms of these awards were determined and approved by our board of directors or a committee thereof.

The exercise price associated with each of these awards is not less than the fair market value per share of our common stock, as determined by our board of directors or a committee thereof, at the time of grant.

Of the 1.1 million options granted to executives during the nine months ended September 30, 2021, 50 % are time vesting options and 50 % are performance vesting options.

The time vesting options vest in four equal installments on each of the first four anniversaries of the first calendar day of the month in which the grant date occurred, subject to continuous employment from the grant date through the applicable vesting date.

All or a portion of the performance vesting options shall vest only upon the attainment of certain targets for the twelve month period commencing on January 1, 2021 and ending on December 31, 2021, as defined in the underlying option agreements, subject to continuous employment from the grant date through the membership dues revenue determination date.

Both the time vesting and performance vesting options shall become exercisable on the occurrence of the first measurement date to occur following the grant date, which is generally defined to include the date of a change in control, the first date following the expiration of the lock-up period applicable to the optionee related to an initial public offering, or death or disability, all as defined and subject to the terms and conditions in the underlying option agreements.

The 2.1 million stock options that were granted to non-executive team members during the nine months ended September 30, 2021 are time vesting options, which vest in four equal installments on each of the first four anniversaries of the first calendar day of the month in which the grant date occurred, subject to continuous employment from the grant date through the applicable vesting date.

These options shall become exercisable on the effective date associated with the first measurement date (as described immediately above) to occur following the grant date.

Unless otherwise determined by the administrator of the 2015 Equity Plan, with respect to the 3.2 million stock options that the Company granted during the nine months ended September 30, 2021:

(i) upon an option holder’s termination of services for any reason, any portion of an option that has not become vested on or prior to the termination date shall be forfeited on such date and shall not thereafter become vested or exercisable, and (ii) upon an involuntary termination by the Company for cause (as defined in the underlying option agreement), any portion of an option that has become vested on or prior to the termination date shall be forfeited on such date and shall not thereafter become exercisable.

At September 30, 2021, options to purchase approximately 24.1 million shares of our common stock were outstanding.

At September 30, 2021, there were no options exercisable because the option exercisability provisions of the underlying stock option agreements were not met.

During the three months ended March 31, 2022, the Company granted approximately 0.9 million stock option awards under the 2021 Equity Plan.

These options have a 10-year contractual term from the date of grant and vest in four ratable annual installments on each of the first four anniversaries of the grant date, subject to continuous employment or service from the grant date through the applicable vesting date.

The exercise price associated with each of these awards is not less than the fair market value per share of our common stock at the time of grant.

The fair value of the options granted during the three months ended March 31, 2022 was calculated using the Black-Scholes option pricing model.

Options to purchase approximately 25.5 million shares of our common stock were outstanding as of March 31, 2022, of which approximately 9.4 million were exercisable as of March 31, 2022 and approximately 12.1 million of additional options became exercisable as of April 4, 2022, which is the first date following the expiration of the 180-day lock-up period related to the IPO .

Share-based compensation expense associated with stock options for the three months ended March 31, 2022 was $ 11.4 million, of which $ 1.0 million, $ 10.1 million and $ 0.3 million is included in Center operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations.

No share-based compensation expense related to stock options was recognized during the three months ended March 31, 2021.

As of March 31, 2022 , unrecognized share-based compensation expense related to stock options was approximately $ 26.1 million, which is expected to be recognized over a weighted average remaining period of 3.3 years.

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

Fair Value of Stock Option Awards

The fair value of the approximately 3.2 million stock options granted during the nine months ended September 30, 2021 was calculated using the Black-Scholes option pricing model.

The following weighted average assumptions were used in determining the fair value of these options:

Nine Months Ended September 30, 2021

Dividend yield 0.00 %

Risk-free interest rate (1)

Expected volatility (2)

Expected term of options (in years) (3)

Fair Value $ 10.71

(1) The risk-free rate is based on the U.S.

treasury yields, in effect at the time of grant or modification, corresponding with the expected term of the options.

(2) Expected volatility is based on historical volatilities for a time period similar to that of the expected term of the options.

(3) Expected term of the options is based on probability and expected timing of market events leading to option exercise.

Share-Based Compensation Expense Associated with Stock Options

No share-based compensation expense associated with stock options was recognized for the three and nine months ended September 30, 2021 and 2020.

As of September 30, 2021, unrecognized share-based compensation expense related to stock options was approximately $ 347.8 million .

The estimated fair value associated with each outstanding option will be recognized as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met.

A significant portion of the $ 347.8 million unrecognized share-based compensation expense as of September 30, 2021 is associated with stock options that were granted prior to 2021.

Each of these options shall become fully vested and exercisable immediately prior to the effective date associated with the first measurement date (as described in “—Summary of Stock Option Activity” above for all stock options other than those granted to our CEO, which stock options held by our CEO become fully vested and exercisable immediately prior to the effective date associated with a change of control or an initial public offering (notwithstanding any lock-up period)) to occur after the grant date.

Accordingly, upon the consummation of the first measurement date to occur after the grant date associated with each of these options, previously unrecognized share-based compensation expense associated with the vested portion of the then-outstanding options will be recognized as of the effective date associated with such measurement date.

Restricted Stock Units

Beginning on March 15, 2020, our CEO decided to forego 100 % of his base salary for the remainder of 2020.

During the second quarter of 2021, our compensation committee, in consultation with our CEO and our board of directors, established a new compensation program for our CEO.

Under the new program, in light of the foregone salary and bonuses in 2020, the compensation committee determined to grant our CEO an equity award of approximately 0.5 million restricted stock units, 50 % of which vests on each anniversary of the grant date with 100% full vesting on the date that is 180 days after an initial underwritten public offering.

At December 31, 2020, we had recognized an accrued compensation liability of approximately $ 2.2 million associated with our CEO’s 2020 compensation.

For accounting purposes, the settlement of this $ 2.2 million accrued compensation liability through the issuance of the restricted stock units was recognized as a decrease in Accrued expenses and other current liabilities and an increase in Additional paid-in capital on our condensed consolidated balance sheet.

As of September 30, 2021, all of the restricted stock units subject to this award were both unvested and outstanding.

Also during the second quarter of 2021, our compensation committee granted approximately 0.1 million restricted stock units to certain of our non-CEO executives and a new director, 50 % of which vests on each anniversary of the grant date and, for the grants to our non-CEO executives, 100 % full vesting occurs effective on the date that is 180 days after an initial underwritten public offering.

As of September 30, 2021, all of the restricted stock units subject to these awards were both unvested and outstanding.

Share-Based Compensation Expense Associated with Restricted Stock Units

Share-based compensation expense associated with the restricted stock units that were granted to our CEO and non-CEO executives will be recognized over the vesting period based on the grant date fair value per share of $ 19.32 .

The expense measurement associated with the restricted stock units granted to our CEO will be reduced by the $ 2.2 million of compensation expense associated with the accrued compensation liability that had previously been recognized.

Share-based compensation expense associated with restricted stock units that were granted to our new director will be recognized on a straight-line basis evenly over the vesting period.

During the three months ended March 31, 2022, the Company granted approximately 0.1 million restricted stock unit awards under the 2021 Equity Plan, of which approximately half vest in four ratable annual installments on each of the first four anniversaries of the grant date and the other awards vest in two ratable annual installments on each of the first two anniversaries of the grant date .

The awards that vest in two ratable annual installments were granted to executives as part of their incentive compensation for 2021, which had been recognized as an accrued compensation liability at December 31, 2021.

The fair value of these restricted stock unit awards issued to executives was approximately $ 0.5 million.

Accordingly, effective with the grant date associated with these restricted stock units, we recognized a $ 0.5 million decrease in Accrued expenses and other current liabilities and a $ 0.5 million increase in Additional paid-in capital on our condensed consolidated balance sheet.

At March 31, 2022, approximately 1.9 million restricted stock units were outstanding.

Share-based compensation expense associated with restricted stock units for the three months ended March 31, 2022 was $ 5.2 million, of which $ 0.2 million and $ 5.0 million is included in Center operations and General, administrative and marketing, respectively, in our condensed consolidated statement of operations.

No share-based compensation expense related to restricted stock units was recognized during the three months ended March 31, 2021.

As of March 31, 2022 , unrecognized share-based compensation expense related to restricted stock units was approximately $ 19.4 million, which is expected to be recognized over a weighted average remaining period of 3.5 years.

Restricted Stock

At March 31, 2022, approximately 0.6 million shares associated with a restricted stock award were outstanding.

Share-based compensation expense associated with this restricted stock award for the three months ended March 31, 2022 was $ 4.8 million, all of which is included in General, administrative and marketing in our condensed consolidated statement of operations.

No share-based compensation expense related to restricted stock awards was recognized during the three months ended March 31, 2021.

As of March 31, 2022 , unrecognized share-based compensation expense related to this restricted stock award was approximately $ 0.2 million, all of which will be recognized during the second quarter of 2022.

The benefit from income taxes was $ 2.9 million for the three months ended March 31, 2022 compared to $ 26.0 million for the three months ended March 31, 2021.

The effective tax rate was 7.0 % and 14.5 % for those same periods, respectively.

The effective tax rate applied to our pre-tax loss for the three months ended March 31, 2022 is lower than our federal statutory rate of 21% and reflects an increase in the valuation allowance associated with certain of our deferred tax assets as well as deductibility limitations associated with executive compensation.

Management regularly evaluates the future realization of deferred tax assets and provides a valuation allowance, if considered necessary, based on such evaluation.

As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies and future expectations of income.

Based upon this analysis, an increase to the valuation allowance of $ 4.6 million was recorded during the three months of March 31, 2022 to reduce our net deferred tax assets to the amount that is more likely than not to be realized.

Loss Per Share

For the three months ended March 31, 2022 , o ur potentially dilutive securities include stock options, restricted stock units and restricted stock.

For the three months ended March 31, 2021 , o ur potentially dilutive securities include stock options and Series A convertible participating preferred stock (“Series A Preferred Stock”).

Due to the net loss that we recognized during each of the three months ended March 31, 2022 and 2021, the potentially dilutive shares of common stock associated with these equity-based securities were determined to be antidilutive and, therefore, are excluded from the computation of diluted loss per share for the three months ended March 31, 2022 and 2021.

LIFE TIME GROUP HOLDINGS, INC.

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(Table amounts in thousands except per share data)

Share-based compensation expense associated with restricted stock units for the three and nine months ended September 30, 2021 was $ 1.8 million and $ 2.9 million, respectively.

Share-based compensation expense associated with restricted stock units is included in General, administrative and marketing in our condensed consolidated statements of operations.

As of September 30, 2021, unrecognized share-based compensation expense related to restricted stock units was approximately $ 6.6 million .

The estimated fair value associated with each outstanding restricted stock unit will be recognized as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met.

With the consummation of the IPO, previously unrecognized share-based compensation expense associated with the then-outstanding restricted stock units granted to our CEO and non-CEO executives will be recognized effective with the date that is 180 days after the effective date associated with such initial public offering.

Restricted Series A Preferred Stock

For information regarding the restricted Series A Preferred Stock award that was granted to our CEO during the nine months ended September 30, 2021, see Note 8, Mezzanine Equity.

Stockholder Note Receivable

In August 2021, we entered into an agreement pursuant to which the outstanding balance owed under the stockholder note receivable was cancelled.

The cancellation of the $ 15.0 million outstanding principal balance associated with the loan was accounted for as an equity transaction, and the Stockholder note receivable and Additional paid-in capital balances recognized on our condensed consolidated balance sheet were each reduced by $ 15.0 million.

The income tax benefit of approximately $ 3.6 million associated with the stockholder note receivable cancellation was recognized as an increase in both Income tax receivable and Additional paid-in capital on our condensed consolidated balance sheet.

The following table sets forth the calculation of basic and diluted loss per share for the three months ended March 31, 2022 and 2021:

Three Months Ended

Net loss $ ( 37,966 ) $ ( 152,801 )

Dividends accrued on Series A Preferred Stock

Loss available to common stockholders $ ( 37,966 ) $ ( 157,083 )

Weighted average common shares outstanding—basic and diluted 192,465 145,196

Loss per share—basic and diluted $ ( 0.20 ) $ ( 1.08 )

The following is a summary of potential shares of common stock that were excluded from the computation of diluted loss per share for the three months ended March 31, 2022 and 2021:

Three Months Ended

Stock options 25,465 21,049

Restricted stock units 1,925 —

Restricted stock 595 —

Series A Preferred Stock — 5,430

Potential common shares excluded from diluted loss per share 27,985 26,479

Commitments and Contingencies

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On August 19, 2020, Life Time, Inc., several of its subsidiaries, and a joint venture entity, Bloomingdale Life Time Fitness LLC (collectively, the “Life Time Parties”) filed a complaint against Zurich American Insurance Company (“Zurich”) in the Fourth Judicial District of the State of Minnesota, County of Hennepin (Case No.

27-CV-20-10599) (the “Action”) seeking declaratory relief and damages with respect to Zurich’s failure under a property/business interruption insurance policy to provide certain coverage to the Life Time Parties related to the closure or suspension by governmental authorities of their business activities due to the spread or threat of spread of COVID-19.

On March 15, 2021, certain of the Life Time Parties filed a First Amended Complaint in the Action adding claims against Zurich under a Builders’ Risk policy related to the suspension of multiple construction projects.

The parties are currently in discovery.

This Action is subject to many uncertainties, and the outcome of the matter is not predictable with any assurance.

Other Litigation

We are also engaged in other proceedings incidental to the normal course of business.

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Subsequent Events

In preparing the accompanying condensed consolidated financial statements, we have evaluated the period from September 30, 2021 through the date the condensed consolidated financial statements were issued for material subsequent events.

With the exception of the subsequent events disclosed in Note 1, Nature of Business and Basis of Consolidation and Presentation, there have been no other such events or transactions during this time which would have a material effect on the condensed consolidated financial statements and therefore would require recognition or disclosure .

In preparing the accompanying condensed consolidated financial statements, we have evaluated the period from March 31, 2022 through the date the condensed consolidated financial statements were issued for material subsequent events.

There have been no other such events or transactions during this time which would have a material effect on the condensed consolidated financial statements and therefore would require recognition or disclosure .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements