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) June 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 30,858 $ 25,509 Accounts receivable, net 18,146 13,381 Center operating supplies and inventories 48,148 45,655 Prepaid expenses and other current assets 49,595 45,743 Income tax receivable 6,669 748 Total current assets 153,416 131,036 Property and equipment, net 3,030,480 2,901,242 Goodwill 1,235,029 1,233,176 Operating lease right-of-use assets 2,161,837 2,116,761 Intangible assets, net 173,056 173,404 Other assets 74,218 69,744 Total assets $ 6,828,036 $ 6,625,363 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 83,721 $ 73,973 Construction accounts payable 120,404 125,031 Deferred revenue 41,303 36,859 Accrued expenses and other current liabilities 170,289 154,427 Current maturities of debt 64,814 15,224 Current maturities of operating lease liabilities 54,793 51,892 Total current liabilities 535,324 457,406 Long-term debt, net of current portion 1,792,373 1,805,698 Operating lease liabilities, net of current portion 2,216,647 2,162,424 Deferred income taxes, net 47,347 41,393 Other liabilities 35,633 34,181 Total liabilities 4,627,324 4,501,102 Commitments and contingencies (Note 10) Stockholders’ equity: Common stock, $ 0.01 par value per share; 500,000 shares authorized; 196,031 and 194,271 shares issued and outstanding, respectively. 1,960 1,943 Additional paid-in capital 2,814,424 2,784,416 Accumulated deficit ( 608,412 ) ( 652,876 ) Accumulated other comprehensive loss ( 7,260 ) ( 9,222 ) Total stockholders’ equity 2,200,712 2,124,261 Total liabilities and stockholders’ equity $ 6,828,036 $ 6,625,363 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 June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenue: Center revenue $ 542,125 $ 445,882 $ 1,039,877 $ 827,503 Other revenue 19,606 15,385 32,705 26,018 Total revenue 561,731 461,267 1,072,582 853,521 Operating expenses: Center operations 302,603 279,557 576,712 519,130 Rent 67,434 59,989 133,971 115,953 General, administrative and marketing 52,840 51,950 95,337 118,511 Depreciation and amortization 58,252 57,173 116,449 115,280 Other operating expense (income) 28,194 ( 8,212 ) 30,321 ( 25,247 ) Total operating expenses 509,323 440,457 952,790 843,627 Income from operations 52,408 20,810 119,792 9,894 Other (expense) income: Interest expense, net of interest income ( 31,979 ) ( 27,093 ) ( 63,174 ) ( 57,036 ) Equity in earnings of affiliate 88 8 231 34 Total other expense ( 31,891 ) ( 27,085 ) ( 62,943 ) ( 57,002 ) Income (loss) before income taxes 20,517 ( 6,275 ) 56,849 ( 47,108 ) Provision for (benefit from) income taxes 3,513 ( 3,990 ) 12,385 ( 6,857 ) Net income (loss) $ 17,004 $ ( 2,285 ) $ 44,464 $ ( 40,251 ) Income (loss) per common share: Basic $ 0.09 $ ( 0.01 ) $ 0.23 $ ( 0.21 ) Diluted $ 0.08 $ ( 0.01 ) $ 0.22 $ ( 0.21 ) Weighted-average common shares outstanding: Basic 195,476 193,692 195,026 193,082 Diluted 204,821 193,692 203,872 193,082 See notes to unaudited condensed consolidated financial statements. 4 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income (loss) $ 17,004 $ ( 2,285 ) $ 44,464 $ ( 40,251 ) Foreign currency translation adjustments, net of tax of $ 0 1,894 ( 2,955 ) 1,962 ( 1,324 ) Comprehensive income (loss) $ 18,898 $ ( 5,240 ) $ 46,426 $ ( 41,575 ) See notes to unaudited condensed consolidated financial statements. 5 Table of Contents LIFE TIME GROUP 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 March 31, 2023 194,998 $ 1,950 $ 2,794,657 $ ( 625,416 ) $ ( 9,154 ) $ 2,162,037 Net income — — — 17,004 — 17,004 Other comprehensive income — — — — 1,894 1,894 Share-based compensation — — 8,515 — — 8,515 Stock option exercises 883 9 9,811 — — 9,820 Issuances of common stock in connection with the vesting of restricted stock units 27 — ( 8 ) — — ( 8 ) Issuances of common stock in connection with the employee stock purchase plan 123 1 1,449 — — 1,450 Balance at June 30, 2023 196,031 $ 1,960 $ 2,814,424 $ ( 608,412 ) $ ( 7,260 ) $ 2,200,712 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at December 31, 2022 194,271 $ 1,943 $ 2,784,416 $ ( 652,876 ) $ ( 9,222 ) $ 2,124,261 Net income — — — 44,464 — 44,464 Other comprehensive income — — — — 1,962 1,962 Share-based compensation — — 13,937 — — 13,937 Stock option exercises 1,210 12 13,264 — — 13,276 Issuances of common stock in connection with the vesting of restricted stock units 337 3 ( 113 ) — — ( 110 ) Issuances of common stock in connection with the employee stock purchase plan 123 1 1,449 — — 1,450 Issuances of common stock in connection with business acquisitions 90 1 1,471 — — 1,472 Balance at June 30, 2023 196,031 $ 1,960 $ 2,814,424 $ ( 608,412 ) $ ( 7,260 ) $ 2,200,712 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at March 31, 2022 193,060 $ 1,931 $ 2,765,503 $ ( 689,049 ) $ ( 1,385 ) $ 2,077,000 Net loss — — — ( 2,285 ) — ( 2,285 ) Other comprehensive loss — — — — ( 2,955 ) ( 2,955 ) Share-based compensation — — 5,973 — — 5,973 Stock option exercises 114 1 1,193 — — 1,194 Equity issuance costs — — ( 270 ) — — ( 270 ) Issuances of common stock in connection with the vesting of restricted stock units 622 6 ( 6 ) — — — Balance at June 30, 2022 193,796 $ 1,938 $ 2,772,393 $ ( 691,334 ) $ ( 4,340 ) $ 2,078,657 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 — — — ( 40,251 ) — ( 40,251 ) Other comprehensive loss — — — — ( 1,324 ) ( 1,324 ) Share-based compensation — — 27,411 — — 27,411 Stock option exercises 114 1 1,193 — — 1,194 Equity issuance costs — — ( 270 ) — — ( 270 ) Issuances of common stock in connection with the vesting of restricted stock units 622 6 ( 6 ) — — — Settlement of accrued compensation liabilities through the issuance of share-based compensation awards — — 505 — — 505 Balance at June 30, 2022 193,796 $ 1,938 $ 2,772,393 $ ( 691,334 ) $ ( 4,340 ) $ 2,078,657 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) Six Months Ended June 30, 2023 2022 Cash flows from operating activities: Net income (loss) $ 44,464 $ ( 40,251 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 116,449 115,280 Deferred income taxes 5,864 ( 9,009 ) Share-based compensation 22,171 27,411 Non-cash rent expense 17,630 15,635 Impairment charges associated with long-lived assets 1,280 — Loss (gain) on disposal of property and equipment, net 904 ( 49,743 ) Amortization of debt discounts and issuance costs 3,919 3,918 Changes in operating assets and liabilities 6,734 17,909 Other ( 3,124 ) ( 825 ) Net cash provided by operating activities 216,291 80,325 Cash flows from investing activities: Capital expenditures ( 337,076 ) ( 252,640 ) Proceeds from sale-leaseback transactions 78,040 174,246 Other ( 462 ) 692 Net cash used in investing activities ( 259,498 ) ( 77,702 ) Cash flows from financing activities: Proceeds from borrowings 44,291 8,657 Repayments of debt ( 7,430 ) ( 11,539 ) Proceeds from revolving credit facility 620,000 420,000 Repayments of revolving credit facility ( 620,000 ) ( 390,000 ) Repayments of finance lease liabilities ( 508 ) ( 697 ) Payments of debt discounts and issuance costs ( 2,550 ) — Proceeds from stock option exercises 13,276 1,194 Proceeds from issuances of common stock in connection with the employee stock purchase plan 1,450 — Other ( 109 ) ( 476 ) Net cash provided by financing activities 48,420 27,139 Effect of exchange rates on cash and cash equivalents 136 ( 110 ) Increase in cash and cash equivalents 5,349 29,652 Cash and cash equivalents – beginning of period 25,509 31,637 Cash and cash equivalents – end of period $ 30,858 $ 61,289 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. 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 June 30, 2023, we operated 164 centers in 30 states and one Canadian province. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by rules and regulations of the Securities and Exchange Commission (the “SEC”). While these statements reflect normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of the results of the interim period, they do not include all of the information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. When preparing financial statements in conformity with GAAP, we are required 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. All intercompany balances and transactions have been eliminated in consolidation. We have one operating segment and one reportable segment. 2. Summary of Significant Accounting Policies Recently Adopted Accounting Pronouncements We adopted Accounting Standard Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” during the second quarter of 2023. 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, and 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 connection with the debt refinancing that we completed in May 2023, we transitioned from LIBOR to Term Secured Overnight Financing Rate (“SOFR”). The adoption of this ASU did not have a material impact 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. 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) Fair Value Measurements on a Recurring Basis. We had no material remeasurements of such assets or liabilities to fair value during the three and six months ended June 30, 2023 and 2022. Financial Assets and Liabilities. At June 30, 2023 and December 31, 2022, the carrying value and fair value of our outstanding long-term debt was as follows: June 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Long-term debt (1) $ 1,875,463 $ 1,844,444 $ 1,840,171 $ 1,724,178 (1) Excludes unamortized debt discounts and issuance costs. 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 goodwill, intangible assets and other long-lived assets, which are remeasured when the derived fair 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. We had no material remeasurements of such assets or liabilities to fair value during the three and six months ended June 30, 2023 and 2022. 3. Supplemental Balance Sheet and Cash Flow Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: June 30, 2023 December 31, 2022 Property held for sale $ 8,687 $ 4,987 Construction contract receivables 7,209 8,867 Prepaid insurance 5,166 3,414 Prepaid software licenses and maintenance 11,187 10,009 Other 17,346 18,466 Prepaid expenses and other current assets $ 49,595 $ 45,743 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: June 30, 2023 December 31, 2022 Real estate taxes $ 30,722 $ 32,373 Accrued interest 38,945 36,518 Payroll liabilities 30,256 19,908 Utilities 8,774 7,285 Self-insurance accruals 24,129 21,369 Corporate accruals 31,648 29,731 Other 5,815 7,243 Accrued expenses and other current liabilities $ 170,289 $ 154,427 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) Supplemental Cash Flow Information (Increases) decreases in operating assets and increases (decreases) in operating liabilities are as follows: Six Months Ended June 30, 2023 2022 Accounts receivable $ ( 6,610 ) $ ( 4,215 ) Center operating supplies and inventories ( 2,476 ) ( 2,739 ) Prepaid expenses and other current assets ( 2,510 ) ( 2,199 ) Income tax receivable ( 5,921 ) 961 Other assets 131 453 Accounts payable 9,619 4,064 Accrued expenses and other current liabilities 8,896 17,503 Deferred revenue 4,664 7,368 Other liabilities 941 ( 3,287 ) Changes in operating assets and liabilities $ 6,734 $ 17,909 Additional supplemental cash flow information is as follows: Six Months Ended June 30, 2023 2022 Net cash paid for income taxes, net of refunds received $ 12,445 $ 1,158 Cash payments for interest, net of capitalized interest 57,380 53,514 Capitalized interest 9,756 6,497 Non-cash activity: Issuances of common stock in connection with a business acquisition 1,472 — Right-of-use assets obtained in exchange for initial lease liabilities: Operating leases 58,419 196,256 Finance leases 605 — Right-of-use asset adjustments recognized as a result of the remeasurement of existing operating lease liabilities 16,429 5,626 Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions 5,900 26,240 Non-cash increase in financing obligations as a result of interest accretion 46 — 4. Goodwill The goodwill balance was $ 1,235.0 million and $ 1,233.2 million at June 30, 2023 and December 31, 2022, respectively. The $ 1.8 million change in goodwill for the six months ended June 30, 2023 was related to a business acquisition during the first quarter of 2023. There were no goodwill impairment charges recorded during the three and six months ended June 30, 2023 and 2022. 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) 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 and six months ended June 30, 2023 and 2022: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Membership dues and enrollment fees $ 387,115 $ 309,262 $ 744,603 $ 581,178 In-center revenue 155,010 136,620 295,274 246,325 Total center revenue 542,125 445,882 1,039,877 827,503 Other revenue 19,606 15,385 32,705 26,018 Total revenue $ 561,731 $ 461,267 $ 1,072,582 $ 853,521 The timing associated with the revenue we recognized during the three months ended June 30, 2023 and 2022 is as follows: Three Months Ended June 30, 2023 Three Months Ended June 30, 2022 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 476,332 $ 19,606 $ 495,938 $ 384,898 $ 15,385 $ 400,283 Goods and services transferred at a point in time 65,793 — 65,793 60,984 — 60,984 Total revenue $ 542,125 $ 19,606 $ 561,731 $ 445,882 $ 15,385 $ 461,267 The timing associated with the revenue we recognized during the six months ended June 30, 2023 and 2022 is as follows: Six Months Ended June 30, 2023 Six Months Ended June 30, 2022 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 915,349 $ 32,705 $ 948,054 $ 717,885 $ 26,018 $ 743,903 Goods and services transferred at a point in time 124,528 — 124,528 109,618 — 109,618 Total revenue $ 1,039,877 $ 32,705 $ 1,072,582 $ 827,503 $ 26,018 $ 853,521 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, Dynamic Personal Training and other center services offerings, as well as our media and athletic events. Contract liabilities at June 30, 2023 and December 31, 2022 were $ 43.5 million and $ 38.9 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 June 30, 2023 and December 31, 2022 was $ 41.3 million and $ 36.9 million, respectively, and consists primarily of prepaid membership dues, enrollment fees, Dynamic Personal Training and other in-center services, as well as media and athletic events . 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 June 30, 2023 and December 31, 2022 were $ 2.2 million and $ 2.0 million, respectively, and consist primarily of deferred enrollment fees. 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) 6. Debt Debt consisted of the following: June 30, 2023 December 31, 2022 Term Loan Facility (1) $ 310,000 $ 273,625 Revolving Credit Facility, maturing December 2026 20,000 20,000 Secured Notes, maturing January 2026 925,000 925,000 Unsecured Notes, maturing April 2026 475,000 475,000 Construction Loan, maturing February 2026 28,000 21,330 Mortgage Notes, various maturities 112,498 119,928 Other debt 4,122 4,122 Fair value adjustment 843 1,166 Total debt 1,875,463 1,840,171 Less unamortized debt discounts and issuance costs ( 18,276 ) ( 19,249 ) Total debt less unamortized debt discount and issuance costs 1,857,187 1,820,922 Less current maturities ( 64,814 ) ( 15,224 ) Long-term debt, less current maturities $ 1,792,373 $ 1,805,698 (1) See “—Refinancing Transaction” below. Refinancing Transaction On May 9, 2023, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a tenth amendment to the credit agreement governing our senior secured credit agreement (the “Amended Credit Agreement”). Pursuant to the Amended Credit Agreement, we refinanced our $ 273.6 million Term Loan Facility that had a maturity date in December 2024 to our $ 310.0 million Term Loan Facility that has a maturity date of January 15, 2026. A portion of the net incremental cash proceeds we received under the Amended Credit Agreement was used to pay down the then existing balance on our Revolving Credit Facility. We also converted the facilities under the Amended Credit Agreement from LIBOR to SOFR. Loans under the Term Loan Facility bear interest at a floating rate per annum of, at our option, SOFR plus an applicable credit adjustment spread ranging from 0.11448 % to 0.42826 % dependi ng on the duration of borrowing plus the continued applicable margin of 4.75 % or a base rate plus 3.75 %. The applicable margins will decrease to 4.50 % and 3.50 %, respectively, upon our achievement of public corporate family ratings of B2 and B from Moody's and S&P, respectively. Loans under the Term Loan Facility were issued with original issue discount of 0.50 %. This refinancing transaction was accounted for as a debt modification. Revolving Credit Facility At June 30, 2023, there were $ 20.0 million of outstanding borrowings under the Revolving Credit Facility and there were $ 30.5 million of outstanding letters of credit, resulting in total revolver availability of $ 424.5 million, which was available at intervals ranging from 30 to 180 days at interest rates of SOFR plus the applicable credit adjustment spread plus 3.50 % or base rate plus 2.50 %. The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the six months ended June 30, 2023 was 8.56 % and $ 63.5 million, respectively. The highest balance during that same period was $ 150.0 million. Debt Covenants We are required to comply with certain affirmative and restrictive covenants under our Credit Facilities, Secured Notes, Unsecured Notes and Mortgage 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). As of June 30, 2023, we were either in compliance in all material respects with the covenants or the covenants were not applicable. 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) Future Maturities of Long-Term Debt Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at June 30, 2023 were as follows: July 2023 through June 2024 $ 64,814 July 2024 through June 2025 12,379 July 2025 through June 2026 1,751,066 July 2026 through June 2027 41,816 July 2027 through June 2028 1,496 Thereafter 3,049 Total future maturities of long-term debt $ 1,874,620 7. Leases Sale-Leaseback Transactions During the six months ended June 30, 2023, we entered into and consummated sale-leaseback transactions with two unrelated third parties. Under these transactions, we sold two properties with a combined net book value of $ 84.7 million for $ 78.5 million, which was reduced by transaction costs of $ 0.5 million, for net cash proceeds of $ 78.0 million. The estimated fair value of the property sold was $ 84.4 million. Accordingly, the aggregate sales price associated with these arrangements was increased by $ 5.9 million, which resulted in the recognition of a loss of $ 0.8 million on these transactions. This loss is inclu ded in Other operating expense (income) in o ur condensed consolidated statement of operations. Right-of-use assets and lease liabilities recognized related to these sale-leaseback transactions were $ 49.9 million and $ 43.5 million, respectively. On March 29, 2023, the Company entered into an agreement for the sale-leaseback of one property for gross proceeds of $ 45.5 million. The closing on this property is expected to be completed on or before September 30, 2023. 8. Stockholders’ Equity Share-Based Compensation Expense For the three and six months ended June 30, 2023, total share-based compensation expense was $ 16.5 million and $ 22.2 million, respectively. Of this amount, $ 8.5 million and $ 13.9 million, respectively, was associated with equity-classified awards and $ 8.0 million and $ 8.3 million, respectively, was associated with liability-classified awards. For the three and six months ended June 30, 2022, total share-based compensation expense was $ 6.0 million and $ 27.4 million, respectively, all of which was associated with equity-classified awards. The liability-classified awards granted during the three and six months ended June 30, 2023 were performance-based and relate to our short-term incentive compensation program. In the event specified performance metrics are met, these awards will be settled through the issuance of fully-vested shares of the Company’s common stock at such time of determination in 2024. Because the incentive compensation associated with these awards represents a fixed dollar amount that, if payable, will be settled in a variable number of shares of the Company’s common stock, we are currently accounting for these awards as liability-classified awards. Accordingly, the offset to the $ 8.3 million of share-based compensation expense we have recognized in connection with these awards during the six months ended June 30, 2023 is included in Accrued expenses and other current liabilities on our June 30, 2023 condensed consolidated balance sheet. 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) 9. Income (Loss) Per Share For the three and six months ended June 30, 2023 , o ur potentially dilutive securities include stock options, restricted stock units and shares to be issued under our ESPP. For the three and six months ended June 30, 2022 , o ur potentially diluti ve securities include stock options and restricted stock units. Due to the net loss that we recognized during th e three and six months ended June 30, 2022, 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 and six months ended June 30, 2022. The following table sets forth the calculation of basic and diluted income (loss) per share for the three and six months ended June 30, 2023 and 2022: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Net income (loss) $ 17,004 $ ( 2,285 ) $ 44,464 $ ( 40,251 ) Weighted-average common shares outstanding – basic 195,476 193,692 195,026 193,082 Dilutive effect of stock-based compensation awards 9,345 — 8,846 — Weighted-average common shares outstanding – diluted 204,821 193,692 203,872 193,082 Income (loss) per common share – basic $ 0.09 $ ( 0.01 ) $ 0.23 $ ( 0.21 ) Income (loss) per common share – diluted $ 0.08 $ ( 0.01 ) $ 0.22 $ ( 0.21 ) The following is a summary of potential shares of common stock that were antidilutive and excluded from the weighted average share computations for the three and six months ended June 30, 2023 and 2022: Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Stock options 5,370 25,318 6,310 25,318 Restricted stock units 766 2,787 824 2,787 Potential common shares excluded from the weighted average share calculations 6,136 28,105 7,134 28,105 10. 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 threat of the 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. The 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 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) 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. 11. Subsequent Events In preparing the accompanying condensed consolidated financial statements, we have evaluated the period from June 30, 2023 through the date the condensed consolidated financial statements were issued for material subsequent events. There have been no 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 . 15 Table of Contents