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) September 30, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 25,441 $ 25,509 Accounts receivable, net 19,190 13,381 Center operating supplies and inventories 48,557 45,655 Prepaid expenses and other current assets 48,369 45,743 Income tax receivable 11,715 748 Total current assets 153,272 131,036 Property and equipment, net 3,074,634 2,901,242 Goodwill 1,235,359 1,233,176 Operating lease right-of-use assets 2,187,804 2,116,761 Intangible assets, net 172,422 173,404 Other assets 73,572 69,744 Total assets $ 6,897,063 $ 6,625,363 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 76,138 $ 73,973 Construction accounts payable 107,955 125,031 Deferred revenue 39,357 36,859 Accrued expenses and other current liabilities 179,382 154,427 Current maturities of debt 64,033 15,224 Current maturities of operating lease liabilities 56,320 51,892 Total current liabilities 523,185 457,406 Long-term debt, net of current portion 1,815,965 1,805,698 Operating lease liabilities, net of current portion 2,248,026 2,162,424 Deferred income taxes, net 57,377 41,393 Other liabilities 35,621 34,181 Total liabilities 4,680,174 4,501,102 Commitments and contingencies (Note 10) Stockholders’ equity: Common stock, $ 0.01 par value per share; 500,000 shares authorized; 196,183 and 194,271 shares issued and outstanding, respectively. 1,962 1,943 Additional paid-in capital 2,824,949 2,784,416 Accumulated deficit ( 600,497 ) ( 652,876 ) Accumulated other comprehensive loss ( 9,525 ) ( 9,222 ) Total stockholders’ equity 2,216,889 2,124,261 Total liabilities and stockholders’ equity $ 6,897,063 $ 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenue: Center revenue $ 568,402 $ 479,995 $ 1,608,279 $ 1,307,498 Other revenue 16,775 16,386 49,480 42,404 Total revenue 585,177 496,381 1,657,759 1,349,902 Operating expenses: Center operations 319,401 295,253 896,113 814,383 Rent 69,225 63,213 203,196 179,166 General, administrative and marketing 51,668 57,139 147,005 175,650 Depreciation and amortization 63,618 56,400 180,067 171,680 Other operating expense (income) 34,516 ( 31,358 ) 64,837 ( 56,605 ) Total operating expenses 538,428 440,647 1,491,218 1,284,274 Income from operations 46,749 55,734 166,541 65,628 Other (expense) income: Interest expense, net of interest income ( 33,075 ) ( 27,696 ) ( 96,249 ) ( 84,732 ) Equity in earnings of affiliate 56 95 287 129 Total other expense ( 33,019 ) ( 27,601 ) ( 95,962 ) ( 84,603 ) Income (loss) before income taxes 13,730 28,133 70,579 ( 18,975 ) Provision for (benefit from) income taxes 5,815 3,401 18,200 ( 3,456 ) Net income (loss) $ 7,915 $ 24,732 $ 52,379 $ ( 15,519 ) Income (loss) per common share: Basic $ 0.04 $ 0.13 $ 0.27 $ ( 0.08 ) Diluted $ 0.04 $ 0.12 $ 0.26 $ ( 0.08 ) Weighted-average common shares outstanding: Basic 196,146 193,918 195,404 193,364 Diluted 204,298 198,381 203,954 193,364 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) $ 7,915 $ 24,732 $ 52,379 $ ( 15,519 ) Foreign currency translation adjustments, net of tax of $ 0 ( 2,265 ) ( 6,015 ) ( 303 ) ( 7,339 ) Comprehensive income (loss) $ 5,650 $ 18,717 $ 52,076 $ ( 22,858 ) 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 June 30, 2023 196,031 $ 1,960 $ 2,814,424 $ ( 608,412 ) $ ( 7,260 ) $ 2,200,712 Net income — — — 7,915 — 7,915 Other comprehensive loss — — — — ( 2,265 ) ( 2,265 ) Share-based compensation — — 8,906 — — 8,906 Stock option exercises 152 2 1,619 — — 1,621 Balance at September 30, 2023 196,183 $ 1,962 $ 2,824,949 $ ( 600,497 ) $ ( 9,525 ) $ 2,216,889 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 — — — 52,379 — 52,379 Other comprehensive loss — — — — ( 303 ) ( 303 ) Share-based compensation — — 22,842 — — 22,842 Stock option exercises 1,362 14 14,884 — — 14,898 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 September 30, 2023 196,183 $ 1,962 $ 2,824,949 $ ( 600,497 ) $ ( 9,525 ) $ 2,216,889 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at June 30, 2022 193,796 $ 1,938 $ 2,772,393 $ ( 691,334 ) $ ( 4,340 ) $ 2,078,657 Net income — — — 24,732 — 24,732 Other comprehensive loss — — — — ( 6,015 ) ( 6,015 ) Share-based compensation — — 5,803 — — 5,803 Stock option exercises 195 2 1,994 — — 1,996 Balance at September 30, 2022 193,991 $ 1,940 $ 2,780,190 $ ( 666,602 ) $ ( 10,355 ) $ 2,105,173 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 — — — ( 15,519 ) — ( 15,519 ) Other comprehensive loss — — — — ( 7,339 ) ( 7,339 ) Share-based compensation — — 33,214 — — 33,214 Stock option exercises 309 3 3,187 — — 3,190 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 September 30, 2022 193,991 $ 1,940 $ 2,780,190 $ ( 666,602 ) $ ( 10,355 ) $ 2,105,173 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) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income (loss) $ 52,379 $ ( 15,519 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 180,067 171,680 Deferred income taxes 15,994 ( 10,957 ) Share-based compensation 37,029 33,214 Non-cash rent expense 26,900 27,304 Impairment charges associated with long-lived assets 6,620 153 Loss (gain) on disposal of property and equipment, net 13,742 ( 98,498 ) Amortization of debt discounts and issuance costs 5,862 5,898 Changes in operating assets and liabilities ( 4,407 ) 14,055 Other ( 3,240 ) ( 2,010 ) Net cash provided by operating activities 330,946 125,320 Cash flows from investing activities: Capital expenditures ( 525,796 ) ( 409,946 ) Proceeds from sale-leaseback transactions 121,831 373,451 Other 416 ( 985 ) Net cash used in investing activities ( 403,549 ) ( 37,480 ) Cash flows from financing activities: Proceeds from borrowings 44,291 8,657 Repayments of debt ( 11,202 ) ( 21,993 ) Proceeds from revolving credit facility 986,000 710,000 Repayments of revolving credit facility ( 961,000 ) ( 710,000 ) Repayments of finance lease liabilities ( 771 ) ( 1,043 ) Proceeds from financing obligations 1,500 — Payments of debt discounts and issuance costs ( 2,550 ) ( 43 ) Proceeds from stock option exercises 14,897 3,190 Proceeds from issuances of common stock in connection with the employee stock purchase plan 1,450 — Other ( 110 ) ( 476 ) Net cash provided by (used in) financing activities 72,505 ( 11,708 ) Effect of exchange rates on cash and cash equivalents 30 ( 700 ) (Decrease) increase in cash and cash equivalents ( 68 ) 75,432 Cash and cash equivalents – beginning of period 25,509 31,637 Cash and cash equivalents – end of period $ 25,441 $ 107,069 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 September 30, 2023, we operated 170 centers in 31 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 nine months ended September 30, 2023 and 2022. Financial Assets and Liabilities. At September 30, 2023 and December 31, 2022, the carrying value and fair value of our outstanding long-term debt was as follows: September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Long-term debt (1) $ 1,896,529 $ 1,851,542 $ 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. Except for an impairment charge of $ 5.3 million related to the sale of an outparcel of land that was recognized during the three months ended September 30, 2023 , we had no material remeasurements of such assets or liabilities to fair value during the three and nine months ended September 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: September 30, 2023 December 31, 2022 Property held for sale $ 8,600 $ 4,987 Construction contract receivables 11,886 8,867 Prepaid insurance 2,718 3,414 Prepaid software licenses and maintenance 9,743 10,009 Other 15,422 18,466 Prepaid expenses and other current assets $ 48,369 $ 45,743 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) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: September 30, 2023 December 31, 2022 Real estate taxes $ 37,420 $ 32,373 Accrued interest 36,082 36,518 Payroll liabilities 37,377 19,908 Utilities 6,154 7,285 Self-insurance accruals 26,070 21,369 Corporate accruals 28,223 29,731 Other 8,056 7,243 Accrued expenses and other current liabilities $ 179,382 $ 154,427 Supplemental Cash Flow Information (Increases) decreases in operating assets and increases (decreases) in operating liabilities are as follows: Nine Months Ended September 30, 2023 2022 Accounts receivable $ ( 8,044 ) $ ( 6,056 ) Center operating supplies and inventories ( 2,903 ) ( 3,140 ) Prepaid expenses and other current assets 3,316 2,166 Income tax receivable ( 10,967 ) 3,533 Other assets 5,203 638 Accounts payable 2,191 2,069 Accrued expenses and other current liabilities 10,596 19,954 Deferred revenue 1,277 ( 1,467 ) Other liabilities ( 5,076 ) ( 3,642 ) Changes in operating assets and liabilities $ ( 4,407 ) $ 14,055 Additional supplemental cash flow information is as follows: Nine Months Ended September 30, 2023 2022 Net cash paid for income taxes, net of refunds received $ 13,172 $ 3,628 Cash payments for interest, net of capitalized interest 91,896 82,607 Capitalized interest 14,498 11,228 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 106,285 316,071 Finance leases 963 142 Right-of-use asset adjustments recognized as a result of the remeasurement of existing operating lease liabilities 17,845 7,366 Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions 5,900 10,090 Non-cash increase in financing obligations as a result of interest accretion 83 — 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) 4. Goodwill The goodwill balance was $ 1,235.4 million and $ 1,233.2 million at September 30, 2023 and December 31, 2022, respectively. The $ 2.2 million change in goodwill for the nine months ended September 30, 2023 was related to business acquisitions during the nine months ended September 30, 2023. There were no goodwill impairment charges recorded during the three and nine months ended September 30, 2023 and 2022. 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 nine months ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Membership dues and enrollment fees $ 407,903 $ 335,717 $ 1,152,506 $ 916,895 In-center revenue 160,499 144,278 455,773 390,603 Total center revenue 568,402 479,995 1,608,279 1,307,498 Other revenue 16,775 16,386 49,480 42,404 Total revenue $ 585,177 $ 496,381 $ 1,657,759 $ 1,349,902 The timing associated with the revenue we recognized during the three months ended September 30, 2023 and 2022 is as follows: Three Months Ended September 30, 2023 Three Months Ended September 30, 2022 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 502,003 $ 16,775 $ 518,778 $ 419,758 $ 16,386 $ 436,144 Goods and services transferred at a point in time 66,399 — 66,399 60,237 — 60,237 Total revenue $ 568,402 $ 16,775 $ 585,177 $ 479,995 $ 16,386 $ 496,381 The timing associated with the revenue we recognized during the nine months ended September 30, 2023 and 2022 is as follows: Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 1,417,352 $ 49,480 $ 1,466,832 $ 1,137,643 $ 42,404 $ 1,180,047 Goods and services transferred at a point in time 190,927 — 190,927 169,855 — 169,855 Total revenue $ 1,608,279 $ 49,480 $ 1,657,759 $ 1,307,498 $ 42,404 $ 1,349,902 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 September 30, 2023 and December 31, 2022 were $ 40.1 million and $ 38.9 million, respectively. 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) Contract liabilities that will be recognized within one year are classified as deferred revenue in our condensed consolidated balance sheets. Deferred revenue at September 30, 2023 and December 31, 2022 was $ 39.4 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 September 30, 2023 and December 31, 2022 were $ 0.7 million and $ 2.0 million, respectively, and consist primarily of deferred enrollment fees. 6. Debt Debt consisted of the following: September 30, 2023 December 31, 2022 Term Loan Facility (1) $ 310,000 $ 273,625 Revolving Credit Facility, maturing December 2026 45,000 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 108,725 119,928 Other debt 4,122 4,122 Fair value adjustment 682 1,166 Total debt 1,896,529 1,840,171 Less unamortized debt discounts and issuance costs ( 16,531 ) ( 19,249 ) Total debt less unamortized debt discount and issuance costs 1,879,998 1,820,922 Less current maturities ( 64,033 ) ( 15,224 ) Long-term debt, less current maturities $ 1,815,965 $ 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 September 30, 2023, there were $ 45.0 million of outstanding borrowings under the Revolving Credit Facility and there were $ 32.6 million of outstanding letters of credit, resulting in total revolver availability of $ 397.4 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 nine months ended September 30, 2023 was 8.54 % and $ 59.5 million, respectively. The highest balance during that same period was $ 120.0 million. 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) 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 September 30, 2023, we were either in compliance in all material respects with the covenants or the covenants were not applicable. 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, 2023 were as follows: October 2023 through September 2024 $ 64,033 October 2024 through September 2025 12,515 October 2025 through September 2026 1,751,209 October 2026 through September 2027 64,877 October 2027 through September 2028 165 Thereafter 3,048 Total future maturities of long-term debt $ 1,895,847 7. Leases Sale-Leaseback Transactions During the nine months ended September 30, 2023, we entered into and consummated sale-leaseback transactions with unrelated third parties. Under these transactions, we sold three properties with a combined net book value of $ 141.1 million for $ 124.0 million, which was reduced by transaction costs of $ 0.7 million, for net cash proceeds of $ 123.3 million. The estimated fair value of the property sold was $ 128.4 million. Accordingly, the aggregate sales price associated with these arrangements was increased by $ 4.4 million, which resulted in the recognition of a loss of $ 13.4 million on these transactions. This loss is inclu ded in Other operating expense (income) in o ur condensed consolidated statement of operations. Of the $ 4.4 million aggregate net sales price increase recognized in connection with these transactions, $ 5.9 million was associated with a property sale in which the sales price was less than the fair value of the properties sold, which was recognized as an increase in the aggregate sales price associated with this property and an increase in the related operating lease right-of-use asset, and $ 1.5 million was associated with a property sale in which the sales price was greater than the fair value of the property sold, which was recognized as a reduction in the aggregate sales price associated with this property and as a financing obligation separate from the related operating lease liability. For cash flow purposes, the $ 1.5 million of proceeds we received from this financing obligation are reported within financing activities on our condensed consolidated statement of cash flows. Right-of-use assets and lease liabilities recognized in connection with these sale-leaseback transactions were $ 74.0 million and $ 67.3 million, respectively. 8. Stockholders’ Equity Share-Based Compensation Expense For the three and nine months ended September 30, 2023, total share-based compensation expense was $ 14.9 million and $ 37.0 million, respectively. Of this amount, $ 8.9 million and $ 22.8 million, respectively, was associated with equity-classified awards and $ 6.0 million and $ 14.2 million, respectively, was associated with liability-classified awards. For the three and nine months ended September 30, 2022, total share-based compensation expense was $ 5.8 million and $ 33.2 million, respectively, all of which was associated with equity-classified awards. The liability-classified awards granted during the nine months ended September 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 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) 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 $ 14.2 million of share-based compensation expense we have recognized in connection with these awards during the nine months ended September 30, 2023 is included in Accrued expenses and other current liabilities on our September 30, 2023 condensed consolidated balance sheet. 9. Income (Loss) Per Share For the three and nine months ended September 30, 2023 , o ur potentially dilutive securities included stock options, restricted stock units and shares to be issued under our ESPP. For the three and nine months ended September 30, 2022 , o ur potentially diluti ve securities included stock options and restricted stock units. Due to the net loss that we recognized during th e nine months ended September 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 nine months ended September 30, 2022. The following table sets forth the calculation of basic and diluted income (loss) per share for the three and nine months ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income (loss) $ 7,915 $ 24,732 $ 52,379 $ ( 15,519 ) Weighted-average common shares outstanding – basic 196,146 193,918 195,404 193,364 Dilutive effect of stock-based compensation awards 8,152 4,463 8,550 — Weighted-average common shares outstanding – diluted 204,298 198,381 203,954 193,364 Income (loss) per common share – basic $ 0.04 $ 0.13 $ 0.27 $ ( 0.08 ) Income (loss) per common share – diluted $ 0.04 $ 0.12 $ 0.26 $ ( 0.08 ) 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 nine months ended September 30, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Stock options 6,533 6,060 6,272 25,139 Restricted stock units 872 2,658 872 2,786 Potential common shares excluded from the weighted average share calculations 7,405 8,718 7,144 27,925 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) 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 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 September 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