What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-10-31 · 132 added, 223 removed, 177 unchanged (67% of the section changed)

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Certain statements in this discussion and analysis are forward-looking statements within the meaning of federal securities regulations.

Forward-looking statements in this discussion and analysis include, but are not limited to, our plans, strategies and prospects, both business and financial, including our financial outlook, possible or assumed future actions, opportunities for growth and margin expansion, improvements to our balance sheet and leverage, capital expenditures, consumer demand, industry and economic trends, business strategies, events or results of operations.

Forward-looking statements in this discussion and analysis include, but are not limited to, our plans, strategies and prospects, both business and financial, including our financial outlook and cash flow, possible or assumed future actions, opportunities for growth and margin expansion, improvements to our balance sheet and leverage, capital expenditures, consumer demand, industry and economic trends, business strategies, events or results of operations.

Generally, forward-looking statements are not based on historical facts but instead represent only our current beliefs and assumptions regarding future events.

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You should understand that forward-looking statements are not guarantees of performance or results and are preliminary in nature.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements.

Statements preceded by, followed by or that otherwise include the words “believes,” “assumes,” “expects,” “anticipates,” “intends,” “continues,” “projects,” “predicts,” “estimates,” “plans,” “potential,” “may increase,” “may result,” “will result,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “foreseeable,” “may,” and “could” as well as the negative version of these words or similar terms and phrases are generally forward-looking in nature and not historical facts.

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We do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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 for total gross proceeds of $702.0 million before deducting the underwriting discounts and other offering expenses.

Additionally, on November 1, 2021, Life Time Group Holdings, Inc.

consummated the sale of nearly 1.6 million additional shares of its common stock pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $28.4 million before deducting the underwriting discounts and commissions.

Business and Strategy

Life Time, the “Healthy Way of Life Co mpany,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a communit y of approximately 1.5 million individua l members, who together compris e more than 830,000 memberships, as of September 30, 2023.

Life Time, the “Healthy Way of Life Co mpany,” is a leading lifestyle and leisure brand offering premium health, fitness and wellness experiences to a communit y of more than 1.5 million individua l members, who together compr ise more than 853,000 memberships, as of March 31, 2024.

Since our founding over 30 years ago, we have sought to continuously innovate ways for our members to lead healthy and happy lives by offering them the best places, programs and performers.

We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes 170 centers—distinctive, resort-like athletic country club destinations—across 31 states in the United States and one province in Canada.

Our track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance.

Our luxurious athletic country clubs, which are located in both affluent suburban and urban locations, total approximately 17 million square feet in the aggregate.

We offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.

We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 170 centers—distinctive, resort-like athletic country club destinations—across 31 states in the United States and one province in Canada.

Our brand loyalty and track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance.

Our luxurious athletic country clubs total approximately 17 million square feet in the aggregate.

Our centers are located in affluent suburban and urban locations.

Depending on the size and location of a center, we offer expansive fitness floors with top-of-the-line equipment, spacious locker rooms, group fitness studios and spaces, indoor and outdoor pools and bistros, indoor and outdoor tennis courts, pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.

Our premium service offerings are delivered by over 39,000 Life Time team members, including over 10,200 certified fitness professionals, ranging from personal trainers to studio performers.

Our members are highly engaged and draw inspiration from the experiences and community we have created.

The value our members place on our community is reflected in the continued strength and growth of our average revenue per center membership and the visits to our athletic country clubs.

Our average revenue per center membership and the visits to our clubs for the nine months ended September 30, 2023 were $2,095 and 78 million, respectively, as compared to $1,885 and 65 million, respectively, for the nine months ended September 30, 2022.

The value our members place on our community is reflected in the continued strength and growth of our average revenue per center membership, center usage and the visits to our athletic country clubs.

Our average revenue per center membership increased to $745 for the three months ended March 31, 2024 as compared to $667 for the three months ended March 31, 2023.

Total visits to our clubs were 28 million for the three months ended March 31, 2024 as compared to 26 million for the three months ended March 31, 2023, and average visits per membership remained strong at 36 average visits per membership to our centers for the three months ended March 31, 2024.

We believe that no other company in the United States delivers the same quality and breadth of health, fitness and wellness experiences that we deliver, which has enabled us to consistently grow our annual membership dues and in-center revenue.

Our total Center revenue increased to $1,608.3 million for the nine months ended September 30, 2023 as compared to $1,307.5 million for the nine months ended September 30, 2022.

We believe it will continue to grow as our new centers ramp to expected performance, we open new centers in desirable locations across the country and we continue to execute on our strategic initiatives discussed below.

Our total Center revenue increased to $580.5 million for the three months ended March 31, 2024 as compared to $497.8 million for the three months ended March 31, 2023.

We believe it will continue to grow as we open new centers in desirable locations across the country, our new centers ramp to expected performance and we continue to execute on our strategic initiatives discussed below.

Our new centers on average have taken three to four years to ramp to expected performance.

As of September 30, 2023, we had 27 centers open for less than three years.

We are also expanding the number of our centers using an asset-light model that targets increasingly affluent markets with higher income members, higher average annual revenue per center membership and higher returns on invested capital.

As we open these new centers in more affluent markets, we believe our average revenue per center membership will naturally increase.

We believe we have significant opportunities to continue expanding our portfolio of premium centers in an asset-light manner with plans for 22 to 24 new centers over 2023 and 2024.

While we have shifted our new center growth strategy to pursue more asset-light opportunities that include leases with tenant improvement allowances and existing center takeovers with lower capital required, as of September 30, 2023, we had eight new centers under construction, with $285 million of growth capital expenditures already invested into these new centers that have yet to open.

We believe the combined dynamic of our ramping new centers and the future growth that we have not yet realized from the quicker turnaround center takeovers plus the capital expenditures already invested in our centers under construction creates a strong tailwind for the continued growth of our total Center revenue.

Coming out of the COVID-19 pandemic, we believe that we have built a healthier and stronger business model.

Our initial focus on center recovery has produced strong results in member engagement and increasing memberships, visits and Center revenue.

We have also been able to expand margins by significantly improving the efficiency of our club operations and corporate office.

We also expect to benefit from the greater flow through of our increased revenue and from new members joining at higher membership dues rates.

As of March 31, 2024, we had 27 centers open for less than three years and seven new centers under construction, with $204 million of growth capital expenditures already invested into these new centers that have yet to open.

We are expanding the number of our centers using an asset-light model that targets increasingly affluent markets with higher income members, higher average annual revenue per center membership and higher returns on invested capital.

As we open these new centers in more affluent markets, our average revenue per center membership should naturally increase.

We believe we have significant opportunities to continue expanding our portfolio of premium centers in an asset-light manner with plans for nine to 10 new centers in 2024.

We believe the combined dynamic of our ramping new centers that are open and operating plus the capital expenditures already invested in our centers under construction creates a strong tailwind for the continued growth of our total Center revenue.

Coming out of the COVID-19 pandemic, we believe that we have built an even healthier and stronger business.

Our initial focus on center recovery produced strong results in member engagement and increasing memberships, visits and Center revenue.

We were then able to focus on expanding margins by optimizing our average revenue per center membership and significantly improving the efficiency of our club operations and corporate office.

We have also benefited from the greater flow through of our increased revenue and from new members joining at higher membership dues rates.

We have also implemented several strategic initiatives that are driving revenue, engagement and memberships as we continue to elevate and broaden our member experiences and allow our members to integrate health, fitness and wellness into their lives with greater ease and frequency.

These strategic initiatives include pickleball, Dynamic Personal Training, Dynamic Stretch, small group training such as Alpha, GTX and Ultra Fit, and our ARORA community focused on members aged 55 years and older, where we have experienced a significant increase in our unique participants or total sessions.

Additionally, our enhanced digital platform is delivering a true omni-channel experience for our members, including live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content.

In addition, our members are able to purchase a wide variety of equipment, wearables, apparel, beauty products and nutritional supplements via our digital health store.

We are continuing to invest in our digital capabilities, including our integrated digital app, in order to strengthen our relationships with our members and more comprehensively address their health, fitness and wellness needs so that they can remain engaged and connected with Life Time at any time or place.

We have also launched a pilot for our MIORA health optimization and longevity services and believe we also have opportunities to enhance our offerings within our LifeCafe and LifeSpa during 2024.

Additionally, our enhanced digital platform is delivering a true omni-channel experience, including live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content.

In addition, our digital health store offers a wide variety of equipment, wearables, apparel, beauty products and nutritional supplements.

We are continuing to invest in our digital capabilities, including our integrated digital app and artificial intelligence, in order to strengthen our relationships with our members, reach more people looking for a Healthy Way of Life and more comprehensively address their health, fitness and wellness needs so that they can remain engaged and connected with Life Time at any time or place.

We also continue to expand our “Healthy Way of Life” ecosystem in response to the desire of our members to holistically integrate health and wellness into every aspect of their daily lives.

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Additionally, our Life Time Living locations offer luxury wellness-oriented residences, also in close proximity to one of our athletic country clubs.

As of September 30, 2023, we had 13 Life Time Work and three Life Time Living locations open and operating.

As of March 31, 2024, we had 15 Life Time Work and four Life Time Living locations open and operating.

Our Life Time Living offering is generating interest from new property developers and presenting opportunities for new center development that were not previously available to us.

As we expand our footprint with new centers and nearby work and living spaces, as well as strengthen our digital capabilities, we expect to continue to grow our omni-channel platform to support the “Healthy Way of Life” journey of our members.

We continue to monitor the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession .

More than two years of elevated inflation has impacted our expenses and capital expenditures in several areas, including wages, construction costs and other operating expenses, and thus pressured our margin performance.

Despite this headwind that has shown signs of easing, we have experienced growth in our revenue and margins as discussed above.

The rising interest rate environment has also increased the cost of our Term Loan Facility and Revolving Credit Facility and may result in increased cap rat es and delays on future sale-leaseback transactions.

We continue to explore sale-leaseback transactions but are being selective on whether to execute any additional sale-leasebacks in the current macroeconomic environment given our ability to add new centers through asset-light opportunities and our improved cash flow.

Our omni-channel platform continues to grow as we expand our footprint with new centers and nearby work and living spaces, as well as strengthen our digital capabilities.

We continue to monitor the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates and labor, as well as a potential economic recession .

Inflation continues to remain elevated, which has impacted our expenses and capital expenditures in several areas, including wages, construction costs and other operating expenses, and thus pressured our margin performance.

Despite this headwind, we have experienced growth in our revenue and margins.

The rising interest rate environment has also increased the cost of our Term Loan Facility and Revolving Credit Facility and may result in increased capitalization rat es and delays on future sale-leaseback transactions.

We will continue to monitor the macroeconomic environment, but we believe that our business is resilient and has performed well historically during different economic cycles including during a recession.

Non-GAAP Financial Measures

This discussion and analysis includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States (“GAAP”), including Adjusted net income (loss), Adjusted net income (loss) per common share, Adjusted EBITDA and ratios related thereto.

This discussion and analysis includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States (“GAAP”), including Adjusted net income, Adjusted net income per common share, Adjusted EBITDA and ratios related thereto.

These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

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The reconciliations of the Company’s non-GAAP financial measures to the corresponding GAAP measures should be carefully eva luated.

We use Adjusted net income (loss) and Adjusted EBITDA as important performance metrics for the Company.

Adjusted Net Income (Loss)

We define Adjusted net income (loss) as net income (loss) excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19, less the tax effect of these adjustments.

Adjusted Net Income

We define Adjusted net income as net income excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19, less the tax effect of these adjustments.

Adjusted EBITDA

We define Adjusted EBITDA as net income (loss) before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19.

Management uses Adjusted net income (loss) and Adjusted EBITDA to evaluate the Company’s performance.

We believe that Adjusted net income (loss) and Adjusted EBITDA are important metrics for management, investors and analysts as they remove the impact of items that we do not believe are indicative of our core operating performance and allows for consistent comparison of our operating results over time and relative to our peers.

We use Adjusted net income (loss) and Adjusted EBITDA to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and to establish annual budgets and forecasts.

We define Adjusted EBITDA as net income before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19.

Management uses Adjusted net income and Adjusted EBITDA to evaluate the Company’s performance.

We believe that Adjusted net income and Adjusted EBITDA are important metrics for management, investors and analysts as they remove the impact of items that we do not believe are indicative of our core operating performance and allows for consistent comparison of our operating results over time and relative to our peers.

We use Adjusted net income and Adjusted EBITDA to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and to establish annual budgets and forecasts.

We also use Adjusted EBITDA or variations thereof to establish short-term incentive compensation for management.

Adjusted net income (loss) and Adjusted EBITDA should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.

These are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income (loss) or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

Adjusted net income (loss) and Adjusted EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results as reported under GAAP.

Furthermore, we compensate for the limitations described above by relying primarily on our GAAP results and using Adjusted net income (loss) and Adjusted EBITDA only for supplemental purposes.

Adjusted net income and Adjusted EBITDA should be considered in addition to, and not as a substitute for or superior to, financial measures calculated in accordance with GAAP.

These are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

Adjusted net income and Adjusted EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results as reported under GAAP.

Furthermore, we compensate for the limitations described above by relying primarily on our GAAP results and using Adjusted net income and Adjusted EBITDA only for supplemental purposes.

See our condensed consolidated financial statements included elsewhere in this report for our GAAP results.

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These are not measurements of our financial performance under GAAP and should not be considered as alternatives to any other performance measures derived in accordance with GAAP.

Set forth below are certain GAAP and non-GAAP measurements and key performance indicators for the three and nine months ended September 30, 2023 and 2022.

Set forth below are certain GAAP and non-GAAP measurements and key performance indicators for the three months ended March 31, 2024 and 2023.

The following information has been presented consistently for all periods presented.

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

($ in thousands, except for Average Center revenue per center membership data)

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Average Center revenue per center membership (1)

$ 722 $ 660 $ 2,095 $ 1,885

Comparable center revenue (2)

11.4% 25.6% 16.6% 35.7%

Net new center openings (3)

Total centers (end of period) (3)

170 156 170 156

Total center square footage (end of period) (4)

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GAAP and Non-GAAP Financial Measures

Net income (loss) $ 7,915 $ 24,732 $ 52,379 $ (15,519)

Net income (loss) margin (5)

1.4 % 5.0 % 3.2 % (1.1) %

Adjusted net income (loss) (6)

$ 26,684 $ (11,535) $ 91,139 $ (66,832)

Adjusted net income (loss) margin (6)

Net income $ 24,917 $ 27,460

Net income margin (5)

Adjusted net income (6)

$ 30,525 $ 23,211

Adjusted net income margin (6)

Adjusted EBITDA (7)

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Total centers (end of period) is the number of centers operational as of the last day of the period.

During the third quarter of 2023, we opened six centers.

During the nine months ended September 30, 2023, we opened 10 centers and closed one center.

(4) Total center square footage (end of period) reflects the aggregate fitness square footage, which we use as a metric for evaluating the efficiencies of a center as of the end of the period.

The square footage figures exclude areas used for tennis courts, outdoor swimming pools, outdoor play areas and stand-alone Work, Sport and Swim locations.

During the three months ended March 31, 2024, we opened one center, which excludes two acquired centers that are not currently considered new center openings as they are under major remodel.

(4) Total center square footage (end of period) reflects the aggregate square footage, excluding areas used for tennis courts, outdoor swimming pools, outdoor play areas and stand-alone Work, Sport and Swim locations.

We use this metric for evaluating the efficiencies of a center as of the end of the period.

These figures are approximations.

(5) Net income (loss) margin is calculated as net income (loss) divided by total revenue.

(6) We present Adjusted net income (loss) as a supplemental measure of our performance.

Adjusted net income (loss) margin is calculated as Adjusted net income (loss) divided by total revenue.

The following table provides a reconciliation of net income (loss) and income (loss) per common share, the most directly comparable GAAP measures, to Adjusted net income (loss) and Adjusted net income (loss) per common share:

Three Months Ended Nine Months Ended

September 30, September 30,

(5) Net income margin is calculated as net income divided by total revenue.

(6) We present Adjusted net income as a supplemental measure of our performance.

Adjusted net income margin is calculated as Adjusted net income divided by total revenue.

The following table provides a reconciliation of net income and income per common share, the most directly comparable GAAP measures, to Adjusted net income and Adjusted net income per common share:

Three Months Ended

($ in thousands) 2024 2023

Net income (loss) $ 7,915 $ 24,732 $ 52,379 $ (15,519)

Net income $ 24,917 $ 27,460

Share-based compensation expense (a)

14,858 5,803 37,029 33,214

COVID-19 related expenses (b)

93 354 339 937

Loss (gain) on sale-leaseback transactions (c)

12,672 (48,583) 13,431 (98,167)

Capital transaction costs (d)

Asset impairments (e)

5,340 — 6,620 —

(405) 1,172 (5,191) 1,021

Gain on sale-leaseback transactions (b)

(2,232) 1,373

Adjusted net income (loss) $ 26,684 $ (11,535) $ 91,139 $ (66,832)

Income (loss) per common share:

Adjusted net income $ 30,525 $ 23,211

Income per common share:

Basic $ 0.13 $ 0.14

Diluted $ 0.12 $ 0.14

Adjusted income (loss) per common share:

Adjusted income per common share:

Basic $ 0.15 $ 0.12

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Diluted 202,756 202,855

(a) Shar e-based compensation expense recognized during the three and nine months ended September 30, 2023 was associated with stock options, restricted stock units, our employee stock purchase plan (“ESPP”) that launched on December 1, 2022, and liability classified awards related to our short-term incentive plan in 2023.

Shar e-based compensation expense recognized during the three and nine months ended September 30, 2022 was associated with stock options, restricted stock and restricted stock units.

The majority of this expense in 2022 was associated with awards that were fully vested and became exercisable on April 4, 2022 in connection with the expiration of the lock-up period following our IPO.

(b) Represents the incremental expenses we recognized related to the COVID-19 pandemic.

We adjust for these expenses as they do not represent expenses associated with our normal ongoing operations.

We believe that adjusting for these expenses provides a more accurate and consistent representation of our actual operating performance from period to period.

For the three months ended September 30, 2023 and the three and nine months ended September 30, 2022 , COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich.

For the nine months ended September 30, 2023, COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich, partially offset by a subsidy for our Canadian operations.

For more information regarding this claim, see Note 10, Commitments and Contingencies, to our condensed consolidated financial statements in this report.

(c) We adjust for the impact of losses and gains on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations.

For details on the loss on sale-leaseback transactions that we recognized during the nine months ended September 30, 2023, see “Sale-Leaseback Transactions” within Note 7, Leases, to our condensed consolidated financial statements in this report.

(d) Represents costs related to capital transactions, including debt and equity offerings that are non-recurring in nature, but excluding direct costs related to the IPO, which were netted against the proceeds of the IPO.

(e) Represents non-cash asset impairments of our long-lived assets.

(f) Includes benefits and costs associated with transactions that are unusual and non-recurring in nature.

(g) Represents the estimated tax effect of the total adjustments made to arrive at Adjusted net income (loss) using the effective income tax rates for the respective periods.

(a) Shar e-based compensation expense recognized during the three months ended March 31, 2024 was associated with stock options, restricted stock units, performance stock units and our employee stock purchase plan (“ESPP”) that launched on December 1, 2022.

Shar e-based compensation expense recognized during the three months ended March 31, 2023 was associated with stock options, restricted stock units, our ESPP and liability classified awards related to our short-term incentive plan in 2023.

(b) We adjust for the impact of losses and gains on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations.

(d) Represents the estimated tax effect of the total adjustments made to arrive at Adjusted net income using the effective income tax rates for the respective periods.

(7) We present Adjusted EBITDA as a supplemental measure of our performance.

We define Adjusted EBITDA as net income (loss) before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, loss (gain) on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19.

We define Adjusted EBITDA as net income before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, loss (gain) on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19.

Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total revenue.

The following table provides a reconciliation of net income (loss), the most directly comparable GAAP measure, to Adjusted EBITDA:

Three Months Ended Nine Months Ended

September 30, September 30,

The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA:

Three Months Ended

($ in thousands) 2024 2023

Net income (loss) $ 7,915 $ 24,732 $ 52,379 $ (15,519)

Net income $ 24,917 $ 27,460

Interest expense, net of interest income 37,403 31,195

Provision for (benefit from) income taxes 5,815 3,401 18,200 (3,456)

Provision for income taxes 9,914 8,872

Depreciation and amortization 65,903 58,197

Share-based compensation expense (a)

14,858 5,803 37,029 33,214

COVID-19 related expenses (a)

93 354 339 937

Loss (gain) on sale-leaseback transactions (a)

12,672 (48,583) 13,431 (98,167)

Capital transaction costs (a)

Asset impairments (a)

5,340 — 6,620 —

(405) 1,172 (5,191) 1,021

Gain on sale-leaseback transactions (b)

Adjusted EBITDA $ 145,977 $ 120,102

(a) See the corresponding footnotes to the table in note 6 immediately above.

(a) - (c) See the corresponding footnotes to the table in footnote 6 immediately above.

(8) Represents non-capital expenditures associated with opening new centers that are incurred prior to the commencement of a new center opening.

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The performance of our centers has improved significantly as our centers have ramped back from the adverse impacts of COVID-19.

We have experienced a slightly faster recovery in our membership dues revenue compared to our in-center revenue.

We expect membership dues revenue to remain a higher percentage of our total revenue for at least the near term.

We are focused on improving the ratio of our net debt to Adjusted EBITDA, or our leverage ratio.

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Our leverage ratio was elevated due in part to the adverse impacts o f COVID-19, which required us to incur additional debt and significantly reduced our Adjusted EBITDA.

We have significantly improved our leverage ratio in the first nine months of 2023 and believe that we can continue to improve our leverage ratio as our profitability improves and we continue to strengthen our balance sheet.

We have significantly improved our leverage ratio and believe that we can continue to improve our leverage ratio as our profitability improves and we continue to strengthen our balance sheet.

Investment in Business

We have continued to invest in our business to elevate and broaden our member experiences and drive additional revenue per center membership, including improving our in-center services and products, such as pickleball, Dynamic Personal Training, Dynamic Stretch, small group training and our ARORA community, introducing new types of memberships, providing concierge-type member services and expanding our omni-channel offerings.

We have continued to invest in our business to elevate and broaden our member experiences and drive member engagement and additional revenue per center membership, including improving our in-center services and products, such as pickleball, Dynamic Personal Training, Dynamic Stretch, small group training and our ARORA community, introducing new types of memberships, providing concierge-type member services and expanding our omni-channel offerings.

Elevating our member experiences requires investment in our team members, programs, products, services and centers.

These investments may impact our short-term results of operations and cash flows as our investments in our business may be made more quickly than we achieve additional revenue per center membership.

While we remain focused on providing exceptional experiences to our members and growing our revenue, we are also focused on center and overhead support efficiencies given our recovery of membership dues and a significant portion of our center memberships.

While we remain focused on providing exceptional experiences to our members and growing our revenue, we are also focused on center and overhead support efficiencies.

Impact of Our Asset-light, Flexible Real Estate Strategy on Rent Expense

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Macroeconomic Trends

We have been monitoring the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession .

We have been monitoring the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates and labor, as well as a potential economic recession .

See “—Overview—Macroeconomy” for additional information.

Share-Based Compensation

During the nine months ended September 30, 2023, we recognized share-based compensation expense associated with stock options, restricted stock units, our ESPP that launched on December 1, 2022 and liability classified awards related to our short-term incentive plan in 2023, totaling approximately $37.0 million .

During the nine months ended September 30, 2022, we recognized share-based compensation expense associated with stock options, restricted stock and restricted stock units totaling approximately $33.2 million.

During the three months ended March 31, 2024, we recognized share-based compensation expense associated with stock options, restricted stock units, performance stock units and our ESPP, totaling approximately $7.6 million.

During the three months ended March 31, 2023, we recognized share-based compensation expense associated with stock options, restricted stock units, our ESPP and liability classified awards related to our short-term incentive plan in 2023, totaling approximately $5.6 million.

Critical Accounting Policies and Estimates

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Ultimate results could differ from those estimates.

In recording transactions and balances resulting from business operations, we use estimates based on

the best information available.

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.

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Results of Operations

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Three Months Ended March 31,

As a Percentage of Total Revenue

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Depreciation and amortization 65,903 58,197 11.0 % 11.4 %

Other operating expense (income) 34,516 (31,358) 5.9 % (6.3) %

Other operating expense 15,722 2,127 2.6 % 0.4 %

Total operating expenses 524,660 443,467 87.8 % 86.8 %

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Interest expense, net of interest income (37,403) (31,195) (6.3) % (6.1) %

Equity in earnings of affiliate 56 95 — % — %

Equity in earnings of affiliates 177 143 — % — %

Total other expense (37,226) (31,052) (6.3) % (6.1) %

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Total revenue.

The $88.8 million increase in Total revenue for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was due to continued strong growth in membership dues and in-center revenue, including continuing to realize the benefits of pricing actions already completed, membership growth in our new and ramping centers and higher member utilization of our in-center offerings.

With respect to the $88.4 million increase in Center revenue for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022:

• 81.7% was from membership dues and enrollment fees, which increased $72.2 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

This increase reflects the improvement in our Center memberships, which increased to 784,331 as of September 30, 2023 from 728,729 as of September 30, 2022, as well as higher average monthly dues per Center membership during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 ;

• 18.3% was from in-center revenue, which increased $16.2 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 .

This increase was recognized across all of our primary in-center businesses and reflects the higher utilization of our offerings by our members during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 .

T he $0.4 million increase in Other revenue for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily driven by the improved performance of our Life Time Work and Life Time Living locations.

The $85.8 million increase in Total revenue for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was due to continued strong growth in membership dues and in-center revenue, includi ng continuing to realize the benefits of pricing actions already completed, membership growth in our new and ramping centers, the continued re-ramp of our centers and higher member utilization of our in-center offerings.

With respect to the $82.7 million increase in Center revenue for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023:

• 82.1% was from membership dues and enrollment fees, which increased $67.9 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

This increase reflects the improvement in our Center memberships, which increased to 802,010 as of March 31, 2024 from 764,173 as of March 31, 2023, as well as higher average monthly dues per Center membership during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023;

• 17.9% was from in-center revenue, which increased $14.8 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

This increase was recognized across all of our primary in-center businesses and reflects the higher utilization of our offerings by our members during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Th e $3.1 million increase in Other revenue for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by the improved performance of our Life Time Work and Life Time Living locations.

Center operations expenses .

Th e $24.1 million increase in Center operations expenses for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily due to increased operating costs related to our new and ramping centers as well as growth in memberships and in-center business revenue.

The $47.8 million increase in Center operations expenses for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to increased operating costs related to our new and ramping centers as well as growth in memberships and in-center business revenue.

Rent expense .

T he $6.0 million increase in Rent expense for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily driven by the timing of sale-leaseback transactions during both the current and prior year as well as our taking possession of two properties during the current year fo r future centers where we started incurring GAAP rent expense, most of which is non-cash .

The $5.7 million increase in Rent expense for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by the timing of sale-leaseback transactions during the prior year as well as our taking possession of four properties since May 31, 2023 f or future centers where we started incurring GAAP rent expense, most of which is non-cash .

General, administrative and marketing expenses.

General, administrative and marketing expenses decreased $5.5 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to reduced center support overhead, advertising and marketing and cash incentive compensation expenses, partially offset by higher share-based compensation expense.

General, administrative and marketing expenses increased $6.4 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to higher share-based compensation expense, timing of marketing expenses primarily related to our new club openings and increased information technology costs.

Depreciation and amortization .

Depreciation and amortization increased $7.2 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, primarily due to new center openings.

Other operating expense (income) .

Other operating expense for the three months ended September 30, 2023 was $34.5 million as compared to Other operating income of $31.4 million for the three months ended September 30, 2022.

The $65.9 million change was primarily attributable to the recognition of a $13.2 million loss on a sale-leaseback transaction during the three months ended September 30, 2023 as compared to the recognition of a $47.9 million gain on sale-leaseback transactions during the three months ended September 30, 2022, and a $5.6 million loss associated with the sale of an outparcel of land during the three months ended September 30, 2023, of which $5.3 million was recognized as an impairment charge.

Depreciation and amortization increased $7.7 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to new center openings.

Other operating expense .

Other operating expense increased $13.6 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to the recognition of a $6.7 million gain on sale-leaseback transactions and a $4.8 million gain on the sale of two triathlon events during the three months ended March 31, 2023, as well as increased costs to support other revenue growth.

Interest expense, net of interest income .

The $5.4 million increase in Interest expense, net of interest income for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was driven by a higher average level of outstanding borrowings and higher interest rates during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

T he $6.2 million increase in Interest expense, net of interest income for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was driven by a higher average level of outstanding borrowings during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 .

Provision for income taxes .

The provision for income taxes was $5.8 million for the three months ended September 30, 2023 as compared to $3.4 million for the three months ended September 30, 2022.

The effective tax rate was 42.4% and 12.1% for those same periods, respectively.

The increase in provision for income taxes for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 was primarily driven by a change in the valuation allowance associated with certain of our deferred tax assets and the tax deficiencies associated with share-based payment awards, partially offset by a decrease in earnings before income taxes and research tax credits.

The effective tax rate applied to our pre-tax income for the three months ended September 30, 2023 is higher than our statutory rate of 21.0% and reflects the tax deficiencies associated with share-based payment awards and state income tax provisions, partially offset by a decrease in the valuation allowance associated with certain of our deferred tax assets and research tax credits.

As a result of the factors described above, net income was $7.9 million for the three months ended September 30, 2023 as compared to $24.7 million for the three months ended September 30, 2022.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

As a Percentage of Total Revenue

2023 2022 2023 2022

Center revenue $ 1,608,279 $ 1,307,498 97.0 % 96.9 %

Other revenue 49,480 42,404 3.0 % 3.1 %

Total revenue 1,657,759 1,349,902 100.0 % 100.0 %

Operating expenses:

Center operations 896,113 814,383 54.1 % 60.3 %

Rent 203,196 179,166 12.3 % 13.3 %

General, administrative and marketing 147,005 175,650 8.9 % 13.0 %

Depreciation and amortization 180,067 171,680 10.8 % 12.7 %

Other operating expense (income) 64,837 (56,605) 3.9 % (4.2) %

Total operating expenses 1,491,218 1,284,274 90.0 % 95.1 %

Income from operations 166,541 65,628 10.0 % 4.9 %

Other (expense) income:

Interest expense, net of interest income (96,249) (84,732) (5.8) % (6.3) %

Equity in earnings of affiliate 287 129 — % — %

Total other expense (95,962) (84,603) (5.8) % (6.3) %

Income (loss) before income taxes 70,579 (18,975) 4.2 % (1.4) %

Provision for (benefit from) income taxes 18,200 (3,456) 1.1 % (0.3) %

Net income (loss) $ 52,379 $ (15,519) 3.1 % (1.1) %

Total revenue.

The $307.9 million increase in Total revenue for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was due to continued strong growth in membership dues and in-center revenue, including continuing to realize the benefits of pricing actions already completed, membership growth in our new and ramping centers, the continued re-ramp of our centers and higher member utilization of our in-center offerings.

With respect to the $300.8 million increase in Center revenue for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022:

• 78.3% was from membership dues and enrollment fees, which increased $235.6 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

This increase reflects the improvement in our Center memberships, which increased to 784,331 as of September 30, 2023 from 728,729 as of September 30, 2022, as well as higher average monthly dues per Center membership during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022;

• 21.7% was from in-center revenue, which increased $65.2 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

This increase was recognized across all of our primary in-center businesses and reflects the higher utilization of our offerings by our members during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Th e $7.1 million increase in Other revenue for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily driven by the improved performance of our Life Time Work and Life Time Living locations.

Center operations expenses .

The $81.7 million increase in Center operations expenses for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily due to increased operating costs related to our new and ramping centers as well as growth in memberships and in-center business revenue.

Rent expense .

The $24.0 million increase in Rent expense for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily driven by the timing of sale-leaseback transactions during both

the current and prior year as well as our taking possession of three properties since May 31, 2022 f or future centers where we started incurring GAAP rent expense, most of which is non-cash .

General, administrative and marketing expenses.

General, administrative and marketing expenses decreased $28.6 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to lower cash incentive compensation expense and reduced center support overhead and advertising and marketing expenses.

Depreciation and amortization .

Depreciation and amortization increased $8.4 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to new center openings.

Other operating expense (income) .

Other operating expense for the nine months ended September 30, 2023 was $64.8 million as compared to Other operating income of $56.6 million for the nine months ended September 30, 2022.

The $121.4 million change was primarily attributable to the recognition of a $13.4 million loss on sale-leaseback transactions during the nine months ended September 30, 2023 as compared to the recognition of a $98.0 million gain on sale-leaseback transactions during the nine months ended September 30, 2022, as well as increased costs to support other revenue growth.

Interest expense, net of interest income .

T he $11.5 million increase in Interest expense, net of interest income for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was driven by a higher average level of outstanding borrowings and higher interest rates during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 .

Provision for (benefit from) income taxes .

The provision for income taxes was $18.2 million for the nine months ended September 30, 2023 as compared to a $3.5 million benefit from income taxes for the nine months ended September 30, 2022 .

The $1.0 million increase in provision for income taxes for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by a change in the valuation allowance associated with certain of our deferred tax assets and tax deficiencies associated with share-based payment awards, offset by a decrease in earnings before income taxes.

The effective tax rate was 28.5% and 24.4% for those same periods, respectively.

The increase in provision for income taxes for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily driven by the increase in earnings before income taxes and the tax deficiencies associated with share-based payment awards, offset by a change in the valuation allowance associated with certain of our deferred tax assets and research tax credits.

The effective tax rate applied to our pre-tax income for the nine months ended September 30, 2023 is slightly higher than our statutory rate of 21% and reflects an increase due to deductibility limitations associated with executive compensation, the tax deficiencies associated with share-based payment awards and state income tax provisions, largely offset by a change in the valuation allowance associated with certain of our deferred tax assets and research tax credits.

Net income (loss) .

As a result of the factors described above, net income was $52.4 million for the nine months ended September 30, 2023 as compared to a net loss of $15.5 million for the nine months ended September 30, 2022 .

The effective tax rate applied to our pre-tax income for the three months ended March 31, 2024 is higher than our statutory rate of 21% and reflects an increase due to deductibility limitations associated with executive compensation and state income tax provisions.

As a result of the factors described above, net income was $24.9 million and $27.5 million for the three months ended March 31, 2024 and 2023, respectively.

Liquidity and Capital Resources

Our principal liquidity needs include the acquisition and development of new centers, lease requirements and debt service, investments in our business and technology and expenditures necessary to maintain and update or enhance our centers and associated fitness equipment and member experiences.

We have primarily satisfied our historical liquidity needs with cash flow from operations, drawing on the Revolving Credit Facility, construction reimbursements and through sale-leaseback transactions.

Our top priorities remain improving our balance sheet, reducing leverage and having positive cash flow from operations after all capital expenditures.

Our top priorities continue to include improving our balance sheet, reducing leverage and generating positive free cash flow.

Our cash flow from operations continues to improve and we have taken significant actions to improve our liquidity.

In May 2023, 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.

For more information regarding the debt refinancing transaction, see Note 6, Debt, to our condensed consolidated financial statements included in this report.

In addition, during the nine months ended September 30, 2023, we completed sale-leaseback transactions associated with three properties.

During 2022, we completed sale-leaseback transactions associated with nine properties and also rewired our Company to improve the efficiency of our club operations and corporate office.

We continue to explore potential sale-leaseback opportunities for a number of our properties, but we are being selective on whether to execute any additional sale-leasebacks in the current macroeconomic environment given our ability to add new centers through asset-light opportunities and our improving cash flows from operations.

For more information regarding the sale-leaseback transactions that were consummated during the nine months ended September 30, 2023 , see Note 7, Leases, to our condensed consolidated financial statements included in this report .

In December 2023, we amended our Term Loan Facility to reduce the interest rate by 0.50%.

During 2023, we completed sale-leaseback transactions associated with three properties.

We are optimistic that we will execute sale-leaseback transactions for multiple properties in 2024.

Additionally, w e benefit from our in-house architecture, design and construction expertise that allows us to create operationally efficient centers and control the cost and pace of capital expenditures, including in determining when to begin or delay construction on a new athletic country club.

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There can be no assurance that any such financing would be available on commercially acceptable terms, or at all.

Volatility in these markets, particularly in light of the rising interest rate environment, may increase costs associated with issuing debt instruments or affect our ability to access those markets, which could have an adverse impact on our ability to raise additional capital, to refinance existing debt and/or to react to changing economic and business conditions.

Volatility in these markets, particularly in light of the higher interest rate environment, may increase costs associated with issuing debt instruments or affect our ability to access those markets, which could have an adverse impact on our ability to raise additional capital, to refinance existing debt and/or to react to changing economic and business conditions.

In addition, it is possible that our ability to access the credit and capital markets could be limited at a time when we would like or need to do so.

As of September 30, 2023, there were $45.0 million of outstanding borrowings under our Revolving Credit Facility and there were $32.6 million of outstanding letters of credit, resulting in total availability under our Revolving Credit Facility of $397.4 million.

Total cash and cash equivalents, exclusive of restricted cash, at September 30, 2023 was $9.2 million, resulting in total cash and availability under our Revolving Credit Facility of $406.6 million.

The following table sets forth our condensed consolidated statements of cash flows data (in thousands):

Nine Months Ended

September 30,

As of March 31, 2024, there were $220.0 million of outstanding borrowings under our Revolving Credit Facility and there were $30.9 million of outstanding letters of credit, resulting in total availability under our $475.0 million Revolving Credit Facility of $224.1 million.

Total cash and cash equivalents at March 31, 2024 was $18.6 million , resulting in total cash and availability under our Revolving Credit Facility of $242.7 million.

The following table sets forth our condensed consolidated statements of cash flows data (amounts in thousands):

Three Months Ended

Net cash provided by operating activities $ 90,407 $ 74,348

Net cash used in investing activities (158,588) (136,851)

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

Net cash provided by financing activities 74,975 72,325

Effect of exchange rates on cash and cash equivalents and restricted cash and cash equivalents (36) 6

Increase in cash and cash equivalents and restricted cash and cash equivalents $ 6,758 $ 9,828

Operating Activities

The $205.6 million increase in cash provided by operating activities for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily the result of higher profitability.

The $16.1 million increase in net cash provided by operating activities for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily the result of increased business performance and profitability.

Investing Activities

Investing activities consist primarily of the acquisition and development of new centers, investments in our business and technology and expenditures necessary to maintain and update or enhance our centers and associated fitness equipment.

We finance the purchase of our property, centers and equipment through operating cash flows, proceeds from sale-leaseback transactions, construction reimbursements and draws on our Revolving Credit Facility.

The $366.1 million increase in net cash used in investing activities for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily driven by a higher level of new center construction activity and a lower amount of proceeds that we received from sale-leaseback transactions during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

The $21.7 million increase in net cash used in investing activities for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by a $32.7 million decrease in the amount of proceeds that we received from sale-leaseback transactions, offset by a $14.0 million decrease in capital expenditures during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

The following table reflects capital expenditures by type of expenditure (in thousands):

Three Months Ended

Growth capital expenditures (1)

$ 105,225 $ 123,049

Maintenance capital expenditures (2)

51,576 47,765

Total capital expenditures $ 156,801 $ 170,814

(1) Includes new center land and construction, asset acquisitions and initial major remodels of acquired centers.

(2) Includes general maintenance and modernization of existing centers and technology.

The decrease in total capital expenditures for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by less new center construction activity.

Financing Activities

The $84.2 million increase in cash provided by financing activities for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 was primarily driven by net incremental proceeds we received from borrowings under our Term Loan Facility, Revolving Credit Facility and Construction Loan and proceeds from stock option exercises during the nine months ended September 30, 2023.

We expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, sale-leaseback transactions and the borrowing capacity available under our Revolving Credit Facility.

The $2.7 million increase in net cash provided by financing activities for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily driven by net incremental proceeds we received from borrowings under our Revolving Credit Facility, largely offset by our payment of a mortgage note and less proceeds from stock option exercises, during the three months ended March 31, 2024.

We believe we have adequate amounts of cash to meet our requirements and plans for cash in the short-term and long-term and expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, sale-leaseback transactions, the borrowing capacity available under our Revolving Credit Facility and additional debt and equity financing as needed.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis