Life Time Group Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) March 31, 2022 December 31, 2021 ASSETS Current assets: Cash and cash equivalents $ 41,096 $ 31,637 Accounts receivable, net 9,716 6,464 Center operating supplies and inventories 41,966 41,007 Prepaid expenses and other current assets 47,818 48,883 Income tax receivable 2,465 3,533 Total current assets 143,061 131,524 Property and equipment, net 2,789,418 2,791,464 Goodwill 1,233,176 1,233,176 Operating lease right-of-use assets 1,935,352 1,864,528 Intangible assets, net 173,766 174,241 Other assets 58,667 61,742 Total assets $ 6,333,440 $ 6,256,675 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 75,592 $ 71,308 Construction accounts payable 86,038 83,311 Deferred revenue 40,565 33,871 Accrued expenses and other current liabilities 141,175 147,920 Current maturities of debt 23,793 23,527 Current maturities of operating lease liabilities 46,679 46,315 Total current liabilities 413,842 406,252 Long-term debt, net of current portion 1,804,082 1,775,719 Operating lease liabilities, net of current portion 1,971,743 1,909,883 Deferred income taxes 51,391 55,213 Other liabilities 15,382 18,216 Total liabilities 4,256,440 4,165,283 Commitments and contingencies (Note 11) Stockholders’ equity: Common stock, $ 0.01 par value per share; 500,000 shares authorized; 193,060 shares issued and outstanding 1,931 1,931 Additional paid-in capital 2,765,503 2,743,560 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 and stockholders’ equity $ 6,333,440 $ 6,256,675 See notes to unaudited condensed consolidated financial statements. 3 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 31, 2022 2021 Revenue: Center revenue $ 381,621 $ 245,094 Other revenue 10,633 4,204 Total revenue 392,254 249,298 Operating expenses: Center operations 239,573 174,615 Rent 55,964 50,517 General, administrative and marketing 66,561 38,270 Depreciation and amortization 58,107 61,206 Other operating (income) expense ( 17,035 ) 6,934 Total operating expenses 403,170 331,542 Loss from operations ( 10,916 ) ( 82,244 ) Other (expense) income: Interest expense, net of interest income ( 29,943 ) ( 96,217 ) Equity in earnings (loss) of affiliate 26 ( 293 ) Total other expense ( 29,917 ) ( 96,510 ) Loss before income taxes ( 40,833 ) ( 178,754 ) Benefit from income taxes ( 2,867 ) ( 25,953 ) Net loss $ ( 37,966 ) $ ( 152,801 ) Loss per common share – basic and diluted $ ( 0.20 ) $ ( 1.08 ) Weighted-average common shares outstanding – basic and diluted 192,465 145,196 See notes to unaudited condensed consolidated financial statements. 4 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Net loss $ ( 37,966 ) $ ( 152,801 ) Foreign currency translation adjustments, net of tax of $ 0 1,631 1,162 Comprehensive loss $ ( 36,335 ) $ ( 151,639 ) See notes to unaudited condensed consolidated financial statements. 5 Table of Contents LIFE TIME G ROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount 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 ) Other comprehensive income — — — — 1,631 1,631 Share-based compensation — — 21,438 — — 21,438 Settlement of accrued compensation liabilities through the issuance of share-based compensation awards — — 505 — — 505 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 Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount 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 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. 6 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 37,966 ) $ ( 152,801 ) 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 (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 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 provided by (used in) operating activities 9,062 ( 38,156 ) Cash flows from investing activities: Capital expenditures ( 110,754 ) ( 43,329 ) Proceeds from sale-leaseback transactions 79,666 33,423 Other 4,805 ( 1,167 ) Net cash used in investing activities ( 26,283 ) ( 11,073 ) Cash flows from financing activities: Proceeds from borrowings 3,198 1,907,577 Repayments of debt ( 5,745 ) ( 1,586,777 ) Proceeds from senior secured credit facility 230,000 15,000 Repayments of senior secured credit facility ( 200,000 ) ( 109,000 ) Repayments of finance lease liabilities ( 358 ) ( 372 ) Increase in debt discounts and issuance costs — ( 42,246 ) Other ( 476 ) — Net cash provided by financing activities 26,619 184,182 Effect of exchange rates on cash and cash equivalents 61 18 Increase in cash and cash equivalents 9,459 134,971 Cash and cash equivalents – beginning of period 31,637 33,195 Cash and cash equivalents – end of period $ 41,096 $ 168,166 See notes to unaudited condensed consolidated financial statements. 7 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 454 1. Nature of Business and Basis of Presentation Nature of Business Life Time Group Holdings, Inc. (collectively with its direct and indirect subsidiaries, “Life Time,” “we,” “our,” or the “Company”) is a holding company incorporated in the state of Delaware. Life Time Group Holdings, Inc. changed its name from LTF Holdings, Inc. effective on June 21, 2021. 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 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 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. 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 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 The unaudited condensed consolidated financial statements include the accounts of Life Time Group Holdings, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In recording transactions and balances resulting from business operations, we use estimates based on the best information available. We revise the recorded estimates when better information is available, facts change, or we can determine actual amounts. These revisions can affect our consolidated operating results. All adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods have been included. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. A summary of our significant accounting policies is included in Note 2 to our annual consolidated financial statements. 8 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 2. Summary of Significant Accounting Policies Recently Adopted Accounting Pronouncements 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 The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The carrying amounts related to cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value. Fair Value Measurements on a Recurring Basis. 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 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. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. For more information regarding our debt, see Note 6, Debt. 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 9 Table of Contents 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 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. 3. Supplemental Balance Sheet and Cash Flow Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: March 31, 2022 December 31, 2021 Construction contract receivables $ 7,407 $ 14,949 Deferred membership origination costs 2,100 3,150 Prepaid expenses 38,311 30,784 Prepaid expenses and other current assets $ 47,818 $ 48,883 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: March 31, 2022 December 31, 2021 Real estate taxes $ 29,723 $ 32,955 Accrued interest 31,226 35,006 Payroll liabilities 27,607 23,243 Utilities 6,769 7,022 Self-insurance accruals 17,270 18,921 Corporate accruals 23,158 24,741 Current maturities of finance lease liabilities 1,223 1,374 Other 4,199 4,658 Accrued expenses and other current liabilities $ 141,175 $ 147,920 Supplemental Cash Flow Information Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows: Three Months Ended March 31, 2022 2021 Accounts receivable $ ( 3,335 ) $ ( 892 ) Center operating supplies and inventories ( 947 ) ( 553 ) Prepaid expenses and other current assets ( 6,460 ) ( 4,238 ) Income tax receivable 1,068 2,607 Other assets 271 1,515 Accounts payable 4,205 7,621 Accrued expenses and other current liabilities ( 5,481 ) 17,409 Deferred revenue 6,735 ( 6,666 ) Other liabilities ( 1,694 ) 160 Changes in operating assets and liabilities $ ( 5,638 ) $ 16,963 10 Table of Contents 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: Three Months Ended March 31, 2022 2021 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 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. 4. Goodwill and Intangibles The goodwill balance was $ 1,233.2 million at both March 31, 2022 and December 31, 2021. Intangible assets consisted of the following: March 31, 2022 Gross Accumulated Amortization Net Trade name $ 163,000 $ — $ 163,000 Other 16,327 ( 5,561 ) 10,766 Total intangible assets $ 179,327 $ ( 5,561 ) $ 173,766 December 31, 2021 Gross Accumulated Amortization Net Trade name $ 163,000 $ — $ 163,000 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. 5. Revenue 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: 11 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) Three Months Ended March 31, 2022 2021 Membership dues and enrollment fees $ 271,915 $ 175,307 In-center revenue 109,706 69,787 Total center revenue 381,621 245,094 Other revenue 10,633 4,204 Total revenue $ 392,254 $ 249,298 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 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 332,987 $ 10,633 $ 343,620 $ 216,103 $ 4,204 $ 220,307 Goods and services transferred at a point in time 48,634 — 48,634 28,991 — 28,991 Total revenue $ 381,621 $ 10,633 $ 392,254 $ 245,094 $ 4,204 $ 249,298 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 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. 6. Debt Debt consisted of the following: March 31, 2022 December 31, 2021 Term Loan Facility, maturing December 2024 $ 273,625 $ 273,625 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 Mortgage Notes, various maturities 139,827 145,572 Construction Loan, maturing February 2026 3,198 — Other debt 4,122 4,122 Fair value adjustment 1,655 1,818 Total debt 1,852,427 1,825,137 Less unamortized debt discounts and issuance costs ( 24,552 ) ( 25,891 ) 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 12 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 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 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 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. Secured Notes On January 22, 2021, Life Time, Inc. 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 %. Life Time, Inc. has the option to call the Secured Notes, in whole or in part, on one or more occasions, beginning on January 15, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to January 15, 2023, Life Time, Inc. may redeem up to 40.00 % of the aggregate principal amount of the Secured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 105.75 % of the principal amount of the Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. 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. 13 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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. has the option to redeem the Unsecured Notes, in whole or in part, on one or more occasions, beginning on February 1, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to February 1, 2023, Life Time, Inc. may redeem up to 40.00 % of the aggregate principal amount of the Unsecured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 108.00 % of the principal amount of the Unsecured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. 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. 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 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 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. 14 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) Future Maturities of Long-Term Debt 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 7. Leases Lease Cost 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 March 31, Classification in Condensed Consolidated Statements of Operations 2022 2021 Lease cost: Operating lease cost $ 54,753 $ 49,303 Rent Short-term lease cost 356 227 Rent Variable lease cost 855 987 Rent Finance lease cost: Amortization of right-of-use assets 355 364 Depreciation and amortization Interest on lease liabilities 32 50 Interest expense, net of interest income Total lease cost $ 56,351 $ 50,931 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: March 31, 2022 December 31, 2021 Classification on Condensed Consolidated Balance Sheet Lease right-of-use assets: Operating leases $ 1,935,352 $ 1,864,528 Operating lease right-of-use assets Finance leases (1) 1,719 2,073 Other assets Total lease right-of-use assets $ 1,937,071 $ 1,866,601 Lease liabilities: Current Operating leases $ 46,679 $ 46,315 Current maturities of operating lease liabilities Finance leases 1,223 1,374 Accrued expenses and other current liabilities Non-Current Operating leases 1,971,743 1,909,883 Operating lease liabilities, net of current portion Finance leases 550 757 Other liabilities Total lease liabilities $ 2,020,195 $ 1,958,329 (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. 15 Table of Contents 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 March 31, 2022 were as follows: March 31, 2022 Weighted-average remaining lease term (1) Operating leases 17.7 years Finance leases 1.9 years Weighted-average discount rate Operating leases 7.98 % Finance leases 6.24 % (1) The weighted-average remaining lease term associated with our operating and finance lease liabilities does not include all of the optional renewal periods available to us under our current lease arrangements. 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. 16 Table of Contents 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 Supplemental cash flow information associated with our operating and finance leases is as follows: Three Months Ended March 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 48,022 $ 44,377 Operating cash flows from finance leases 32 50 Financing cash flows from finance leases 358 372 Non-cash information: Right-of-use assets obtained in exchange for initial lease liabilities: Operating leases 67,940 66,426 Finance leases — 801 Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities: Operating leases 2,882 ( 4,148 ) Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions 15,600 9,500 Maturities of Operating and Finance Lease Liabilities The maturities associated with our operating and finance lease liabilities at March 31, 2022 are as follows: Operating Leases Finance Leases Total 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 Total lease payments 3,902,364 1,858 3,904,222 Less: Imputed interest 1,883,942 85 1,884,027 Present value of lease liabilities $ 2,018,422 $ 1,773 $ 2,020,195 8. Stockholders’ Equity 2021 Equity Incentive Plan 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 17 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 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 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. 18 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) Restricted Stock Units 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. 9. Income Taxes 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. 10. 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. 19 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 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 March 31, 2022 2021 Net loss $ ( 37,966 ) $ ( 152,801 ) Dividends accrued on Series A Preferred Stock — ( 4,282 ) 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 March 31, 2022 2021 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 11. Commitments and Contingencies Life Time, Inc. et al. v. Zurich American Insurance Company 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 threatened 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 project s. 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 We are also engaged in other proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to court rulings, negotiations between affected parties and governmental intervention. We establish reserves for matters that are probable and estimable in amounts we believe are adequate to cover reasonable adverse judgments. Based upon the information available to us and discussions with legal counsel, it is our opinion that the outcome of the various legal actions and claims that are incidental to our business will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. Such matters are subject to many uncertainties, and the outcomes of individual matters are not predictable with assurance. 12. Subsequent Events 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 . 20 Table of Contents