Life Time Group Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 34,527 $ 11,161 Restricted cash and cash equivalents 14,831 18,805 Accounts receivable, net 25,204 23,903 Center operating supplies and inventories 54,539 52,803 Prepaid expenses and other current assets 58,825 57,751 Income tax receivable 8,153 10,101 Total current assets 196,079 174,524 Property and equipment, net 3,146,740 3,171,616 Goodwill 1,235,359 1,235,359 Operating lease right-of-use assets 2,297,649 2,202,601 Intangible assets, net 172,196 172,127 Other assets 76,230 75,914 Total assets $ 7,124,253 $ 7,032,141 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 78,172 $ 81,252 Construction accounts payable 53,070 108,730 Deferred revenue 51,864 49,299 Accrued expenses and other current liabilities 183,625 185,305 Current maturities of debt 12,755 73,848 Current maturities of operating lease liabilities 62,090 58,764 Total current liabilities 441,576 557,198 Long-term debt, net of current portion 1,830,241 1,859,027 Operating lease liabilities, net of current portion 2,374,522 2,268,863 Deferred income taxes, net 68,440 56,066 Other liabilities 41,977 36,875 Total liabilities 4,756,756 4,778,029 Commitments and contingencies (Note 9) Stockholders’ equity: Common stock, $ 0.01 par value per share; 500,000 shares authorized; 199,052 and 196,671 shares issued and outstanding, respectively. 1,990 1,967 Additional paid-in capital 2,873,839 2,835,883 Accumulated deficit ( 499,091 ) ( 576,813 ) Accumulated other comprehensive loss ( 9,241 ) ( 6,925 ) Total stockholders’ equity 2,367,497 2,254,112 Total liabilities and stockholders’ equity $ 7,124,253 $ 7,032,141 See notes to unaudited condensed consolidated financial statements. 3 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenue: Center revenue $ 645,007 $ 542,125 $ 1,225,492 $ 1,039,877 Other revenue 22,754 19,606 38,986 32,705 Total revenue 667,761 561,731 1,264,478 1,072,582 Operating expenses: Center operations 355,510 302,603 677,410 576,712 Rent 74,947 67,434 147,229 133,971 General, administrative and marketing 53,246 52,840 102,099 95,337 Depreciation and amortization 69,714 58,252 135,617 116,449 Other operating expense 9,588 28,194 25,310 30,321 Total operating expenses 563,005 509,323 1,087,665 952,790 Income from operations 104,756 52,408 176,813 119,792 Other (expense) income: Interest expense, net of interest income ( 37,669 ) ( 31,979 ) ( 75,072 ) ( 63,174 ) Equity in (loss) earnings of affiliates ( 464 ) 88 ( 287 ) 231 Total other expense ( 38,133 ) ( 31,891 ) ( 75,359 ) ( 62,943 ) Income before income taxes 66,623 20,517 101,454 56,849 Provision for income taxes 13,818 3,513 23,732 12,385 Net income $ 52,805 $ 17,004 $ 77,722 $ 44,464 Income per common share: Basic $ 0.27 $ 0.09 $ 0.39 $ 0.23 Diluted $ 0.26 $ 0.08 $ 0.38 $ 0.22 Weighted-average common shares outstanding: Basic 198,903 195,476 198,200 195,026 Diluted 206,044 204,821 204,851 203,872 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 (In thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 52,805 $ 17,004 $ 77,722 $ 44,464 Foreign currency translation adjustments, net of tax of $ 0 ( 649 ) 1,894 ( 2,316 ) 1,962 Comprehensive income $ 52,156 $ 18,898 $ 75,406 $ 46,426 See notes to unaudited condensed consolidated financial statements. 5 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at March 31, 2024 198,791 $ 1,988 $ 2,861,359 $ ( 551,896 ) $ ( 8,592 ) $ 2,302,859 Net income — — — 52,805 — 52,805 Other comprehensive loss — — — — ( 649 ) ( 649 ) Share-based compensation — — 10,120 — — 10,120 Stock option exercises 98 1 1,005 — — 1,006 Issuances of common stock in connection with the vesting of restricted stock units 60 — ( 106 ) — — ( 106 ) Issuances of common stock in connection with the employee stock purchase plan 103 1 1,461 — — 1,462 Balance at June 30, 2024 199,052 $ 1,990 $ 2,873,839 $ ( 499,091 ) $ ( 9,241 ) $ 2,367,497 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at December 31, 2023 196,671 $ 1,967 $ 2,835,883 $ ( 576,813 ) $ ( 6,925 ) $ 2,254,112 Net income — — — 77,722 — 77,722 Other comprehensive loss — — — — ( 2,316 ) ( 2,316 ) Share-based compensation — — 17,951 — — 17,951 Stock option exercises 145 1 1,489 — — 1,490 Issuances of common stock in connection with the vesting of restricted stock units 686 6 ( 988 ) — — ( 982 ) Issuances of common stock in connection with the employee stock purchase plan 103 1 1,461 — — 1,462 Settlement of accrued compensation liabilities through the issuance of common stock 1,447 15 18,043 — — 18,058 Balance at June 30, 2024 199,052 $ 1,990 $ 2,873,839 $ ( 499,091 ) $ ( 9,241 ) $ 2,367,497 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at March 31, 2023 194,998 $ 1,950 $ 2,794,657 $ ( 625,416 ) $ ( 9,154 ) $ 2,162,037 Net income — — — 17,004 — 17,004 Other comprehensive income — — — — 1,894 1,894 Share-based compensation — — 8,515 — — 8,515 Stock option exercises 883 9 9,811 — — 9,820 Issuances of common stock in connection with the vesting of restricted stock units 27 — ( 8 ) — — ( 8 ) Issuances of common stock in connection with the employee stock purchase plan 123 1 1,449 — — 1,450 Balance at June 30, 2023 196,031 $ 1,960 $ 2,814,424 $ ( 608,412 ) $ ( 7,260 ) $ 2,200,712 Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Total Equity Shares Amount Balance at December 31, 2022 194,271 $ 1,943 $ 2,784,416 $ ( 652,876 ) $ ( 9,222 ) $ 2,124,261 Net income — — — 44,464 — 44,464 Other comprehensive income — — — — 1,962 1,962 Share-based compensation — — 13,937 — — 13,937 Stock option exercises 1,210 12 13,264 — — 13,276 Issuances of common stock in connection with the vesting of restricted stock units 337 3 ( 113 ) — — ( 110 ) Issuances of common stock in connection with the employee stock purchase plan 123 1 1,449 — — 1,450 Issuances of common stock in connection with business acquisitions 90 1 1,471 — — 1,472 Balance at June 30, 2023 196,031 $ 1,960 $ 2,814,424 $ ( 608,412 ) $ ( 7,260 ) $ 2,200,712 See notes to unaudited condensed consolidated financial statements. 6 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net income $ 77,722 $ 44,464 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 135,617 116,449 Deferred income taxes 12,505 5,864 Share-based compensation 18,698 22,171 Non-cash rent expense 13,650 17,630 Impairment charges associated with long-lived assets 1,420 1,280 (Gain) loss on disposal of property and equipment, net ( 11,067 ) 904 Amortization of debt discounts and issuance costs 4,006 3,919 Changes in operating assets and liabilities 5,642 6,734 Other 2,637 ( 3,124 ) Net cash provided by operating activities 260,830 216,291 Cash flows from investing activities: Capital expenditures ( 301,107 ) ( 337,076 ) Proceeds from sale-leaseback transactions 142,671 78,040 Proceeds from the sale of land 6,328 — Other ( 2,173 ) ( 462 ) Net cash used in investing activities ( 154,281 ) ( 259,498 ) Cash flows from financing activities: Proceeds from borrowings — 44,291 Repayments of debt ( 67,647 ) ( 7,430 ) Proceeds from revolving credit facility 670,000 620,000 Repayments of revolving credit facility ( 695,000 ) ( 620,000 ) Repayments of finance lease liabilities ( 403 ) ( 508 ) Proceeds from financing obligations 4,300 — Payments of debt discounts and issuance costs — ( 2,550 ) Proceeds from stock option exercises 1,490 13,276 Proceeds from issuances of common stock in connection with the employee stock purchase plan 1,462 1,450 Other ( 1,304 ) ( 109 ) Net cash (used in) provided by financing activities ( 87,102 ) 48,420 Effect of exchange rates on cash and cash equivalents and restricted cash and cash equivalents ( 55 ) 136 Increase in cash and cash equivalents and restricted cash and cash equivalents 19,392 5,349 Cash and cash equivalents and restricted cash and cash equivalents – beginning of period 29,966 25,509 Cash and cash equivalents and restricted cash and cash equivalents – end of period $ 49,358 $ 30,858 See notes to unaudited condensed consolidated financial statements. 7 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 454 1. Nature of Business and Basis of Presentation Nature of Business Life Time Group Holdings, Inc. (collectively with its direct and indirect subsidiaries, “Life Time,” “we,” “our,” or the “Company”) is a holding company incorporated in the state of Delaware. As a holding company, Life Time Group Holdings, Inc. does not have its own independent assets or business operations, and all of our assets and business operations are through Life Time, Inc. and its direct and indirect subsidiaries. We are primarily dedicated to providing premium health, fitness and wellness experiences at our athletic country club destinations and via our comprehensive digital platform and portfolio of iconic athletic events – all with the objective of inspiring healthier, happier lives. We design, build and operate our athletic country club destinations that are distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. As of June 30, 2024, we operated 175 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, 2023 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. Reclassification A reclassification has been made on our December 31, 2023 condensed consolidated balance sheet in order to conform to the current period presentation. Specifically, our restricted cash and cash equivalents balance of $ 18.8 million at December 31, 2023 was reclassified out of Cash and cash equivalents and into a separate line item labeled Restricted cash and cash equivalents. This reclassification had no impact on our previously reported statements of operations or cash flows. 2. Summary of Significant Accounting Policies 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, restricted cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value. Fair Value Measurements on a Recurring Basis. We had no material remeasurements of such assets or liabilities to fair value during the three and six months ended June 30, 2024 and 2023. 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) Financial Assets and Liabilities. At June 30, 2024 and December 31, 2023, the carrying value and fair value of our outstanding long-term debt was as follows: June 30, 2024 December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value Long-term debt (1) $ 1,854,657 $ 1,853,245 $ 1,948,145 $ 1,934,695 (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 5, Debt. Fair Value Measurements on a Nonrecurring Basis. Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to our goodwill, intangible assets and other long-lived assets, which are remeasured when the derived fair value is below carrying value on our condensed consolidated balance sheets. For these assets, we do not periodically adjust carrying value to fair value except in the event of impairment. If we determine that impairment has occurred, the carrying value of the asset would be reduced to fair value and the difference would be recorded as a loss within operating income in our condensed consolidated statements of operations. We had no material remeasurements of such assets or liabilities to fair value during the three and six months ended June 30, 2024 and 2023. 3. Supplemental Balance Sheet and Cash Flow Information Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following: June 30, 2024 December 31, 2023 Property held for sale $ 8,600 $ 8,600 Construction contract receivables 18,392 25,280 Prepaid insurance 5,680 2,393 Prepaid commissions 5,683 5,059 Prepaid software licenses and maintenance 6,729 5,481 Other 13,741 10,938 Prepaid expenses and other current assets $ 58,825 $ 57,751 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: June 30, 2024 December 31, 2023 Real estate taxes $ 33,863 $ 32,165 Accrued interest 40,469 38,723 Payroll liabilities 31,614 40,357 Self-insurance accruals 26,422 24,869 Corporate accruals 31,016 33,066 Other 20,241 16,125 Accrued expenses and other current liabilities $ 183,625 $ 185,305 9 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) Supplemental Cash Flow Information (Increases) decreases in operating assets and increases (decreases) in operating liabilities are as follows: Six Months Ended June 30, 2024 2023 Accounts receivable $ ( 1,802 ) $ ( 6,610 ) Center operating supplies and inventories ( 1,761 ) ( 2,476 ) Prepaid expenses and other current assets ( 8,630 ) ( 2,510 ) Income tax receivable 1,947 ( 5,921 ) Other assets 10 131 Accounts payable ( 2,875 ) 9,619 Accrued expenses and other current liabilities 16,014 8,896 Deferred revenue 2,259 4,664 Other liabilities 480 941 Changes in operating assets and liabilities $ 5,642 $ 6,734 Additional supplemental cash flow information is as follows: Six Months Ended June 30, 2024 2023 Net cash paid for income taxes, net of refunds received $ 9,235 $ 12,445 Cash payments for interest, net of capitalized interest 69,984 57,380 Capitalized interest 3,962 9,756 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 128,486 58,419 Finance leases 705 605 Right-of-use asset adjustments recognized as a result of the remeasurement of existing operating lease liabilities 4,631 16,429 Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions — 5,900 Non-cash increase in financing obligations as a result of interest accretion 70 46 4. Revenue Revenue associated with our membership dues, enrollment fees, and certain services from our in-center businesses is recognized over time as earned. Revenue associated with products and services offered in our cafes and spas, as well as through e-commerce, is recognized at a point in time. The following is a summary of revenue, by major revenue stream, that we recognized during the three and six months ended June 30, 2024 and 2023: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Membership dues and enrollment fees $ 462,696 $ 387,115 $ 888,107 $ 744,603 In-center revenue 182,311 155,010 337,385 295,274 Total center revenue 645,007 542,125 1,225,492 1,039,877 Other revenue 22,754 19,606 38,986 32,705 Total revenue $ 667,761 $ 561,731 $ 1,264,478 $ 1,072,582 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) The timing associated with the revenue we recognized during the three months ended June 30, 2024 and 2023 is as follows: Three Months Ended June 30, 2024 Three Months Ended June 30, 2023 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 567,920 $ 22,754 $ 590,674 $ 476,332 $ 19,606 $ 495,938 Goods and services transferred at a point in time 77,087 — 77,087 65,793 — 65,793 Total revenue $ 645,007 $ 22,754 $ 667,761 $ 542,125 $ 19,606 $ 561,731 The timing associated with the revenue we recognized during the six months ended June 30, 2024 and 2023 is as follows: Six Months Ended June 30, 2024 Six Months Ended June 30, 2023 Center Revenue Other Revenue Total Revenue Center Revenue Other Revenue Total Revenue Goods and services transferred over time $ 1,084,753 $ 38,986 $ 1,123,739 $ 915,349 $ 32,705 $ 948,054 Goods and services transferred at a point in time 140,739 — 140,739 124,528 — 124,528 Total revenue $ 1,225,492 $ 38,986 $ 1,264,478 $ 1,039,877 $ 32,705 $ 1,072,582 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 in-center services offerings, as well as our media and athletic events. Contract liabilities at June 30, 2024 and December 31, 2023 were $ 52.1 million and $ 49.9 million, respectively. Contract liabilities that will be recognized within one year are classified as deferred revenue in our condensed consolidated balance sheets. Deferred revenue at June 30, 2024 and December 31, 2023 was $ 51.9 million and $ 49.3 million, respectively, and consists primarily of prepaid membership dues, enrollment fees, Dynamic Personal Training and other in-center services, as well as media and athletic events . Contract liabilities that will be recognized in a future period greater than one year are classified as a component of Other liabilities in our condensed consolidated balance sheets. Long-term contract liabilities at June 30, 2024 and December 31, 2023 were $ 0.2 million and $ 0.6 million, respectively, and consist primarily of deferred enrollment fees. 11 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) 5. Debt Debt consisted of the following: June 30, 2024 December 31, 2023 Term Loan Facility, maturing January 2026 $ 310,000 $ 310,000 Revolving Credit Facility, maturing December 2026 65,000 90,000 5.75 % Senior Secured Notes, maturing January 2026 925,000 925,000 8.00 % Senior Unsecured Notes, maturing April 2026 475,000 475,000 Construction Loan, maturing February 2026 27,973 28,000 Mortgage Notes, various maturities 47,882 115,502 Other debt 3,440 4,122 Fair value adjustment 362 521 Total debt 1,854,657 1,948,145 Less unamortized debt discounts and issuance costs ( 11,661 ) ( 15,270 ) Total debt less unamortized debt discount and issuance costs 1,842,996 1,932,875 Less current maturities ( 12,755 ) ( 73,848 ) Long-term debt, less current maturities $ 1,830,241 $ 1,859,027 Term Loan Facility Loans under the Term Loan Facility bear interest at a floating rate per annum of, at our option, Term Secured Overnight Financing Rate (“SOFR”) plus an applicable credit adjustment spread ranging from 0.11448 % to 0.42826 % depending on the duration of borrowing plus the continued applicable margin of 4.00 % or a base rate plus 3.00 %. The applicable margins will increase to 4.25 % and 3.25 %, respectively, if our public corporate family ratings falls below B2 and B from Moody’s and S&P, respectively. We are not required to make principal payments on the Term Loan Facility prior to its maturity. Revolving Credit Facility At June 30, 2024, there were $ 65.0 million of outstanding borrowings under the $ 475.0 million Revolving Credit Facility and there were $ 30.9 million of outstanding letters of credit, resulting in total revolver availability of $ 379.1 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 %. During the three months ended June 30, 2024, we amended the credit agreement governing the Revolving Credit Facility to replace the Canadian Dollar Offered Rate (CDOR), which ceased at the end of June 2024, with the Canadian Overnight Repo Rate Average (CORRA). We do no t have any outstanding borrowings in Canadian dollars under the Revolving Credit Facility. The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the six months ended June 30, 2024 was 9.51 % and $ 187.7 million , respectively. The highest balance during that same period was $ 285.0 million. Mortgage Notes During the six months ended June 30, 2024 , we fully paid at maturity the principal balance and remaining accrued interest associated with two of our Mortgage Notes totaling $ 62.9 million. Debt Covenants We are required to comply with certain affirmative and restrictive covenants under our Credit Facilities, Secured Notes, Unsecured Notes, Construction Loan and Mortgage Notes. We are also required to comply with a first lien net leverage ratio covenant under the Revolving Credit Facility, which requires us to maintain a first lien net leverage ratio, if 30.00 % or more of the Revolving Credit Facility commitments are outstanding shortly after the end of any fiscal quarter (excluding all cash collateralized undrawn letters of credit and other undrawn letters of credit up to $ 20.0 million). As of June 30, 2024, we were either in compliance in all material respects with the covenants or the covenants were not applicable. 12 Table of Contents LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Table amounts in thousands except per share data) Future Maturities of Long-Term Debt Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at June 30, 2024 were as follows: July 2024 through June 2025 $ 12,755 July 2025 through June 2026 1,750,386 July 2026 through June 2027 86,816 July 2027 through June 2028 1,495 July 2028 through June 2029 173 Thereafter 2,670 Total future maturities of long-term debt $ 1,854,295 6. Leases Sale-Leaseback Transactions During the six months ended June 30, 2024 , we entered into and consummated sale-leaseback transactions with two unrelated third parties. Under these transactions, we sold four properties for gross proceeds of $ 147.9 million , which was reduced by transaction costs of $ 0.9 million , for net cash proceeds of $ 147.0 million . The estimated fair value of the properties sold was $ 143.6 million . Accordingly, the aggregate cash sales price associated with these arrangements was decreased by a $ 4.3 million aggregate off-market adjustment to $ 142.7 million . This aggregate off-market adjustment was recognized as financing obligations and the proceeds are reported within financing activities on our condensed consolidated statement of cash flows. During the six months ended June 30, 2024, we recognized a net gain of $ 7.5 million on the sale-leaseback transactions, which is inclu ded in Other operating expense in o ur condensed consolidated statement of operations. Right-of-use assets and lease liabilities recognized in connection with these sale-leaseback transactions were $ 93.6 million and $ 92.8 million , respectively. 7. Stockholders’ Equity Share-Based Compensation Expense Share-based compensation expense for the three months ended June 30, 2024 was $ 11.1 million, of which $ 10.1 million and $ 1.0 million was associated with equity-classified awards and liability-classified awards, respectively. Share-based compensation expense for the six months ended June 30, 2024 was $ 18.7 million, of which $ 18.0 million and $ 0.7 million was associated with equity-classified awards and liability-classified awards, respectively. Share-based compensation expense for the three months ended June 30, 2023 was $ 16.5 million, of which $ 8.5 million and $ 8.0 million was associated with equity-classified awards and liability-classified awards, respectively. Share-based compensation expense for the six months ended June 30, 2023 was $ 22.2 million, of which $ 13.9 million and $ 8.3 million was associated with equity-classified awards and liability-classified awards, respectively. Restricted Stock Units During the six months ended June 30, 2024, the Company granted approximately 1.6 million restricted stock unit awards under the 2021 Incentive Award Plan, of which approximately 1.1 million were time-based vesting awards and approximately 0.5 million were performance-based vesting awards granted to our executives in connection with our short-term incentive compensation program. We determine the grant date fair value of restricted stock unit awards by multiplying the number of restricted stock unit awards by the closing trading price of our common stock on the grant date. 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) Performance Stock Units During the six months ended June 30, 2024, the Company granted approximately 0.5 million three-year performance stock unit awards under the 2021 Incentive Award Plan, all of which were granted to our executives in connection with our long-term incentive compensation program. Approximately 0.3 million of the performance stock unit awards are based on our Adjusted EBITDA with performance determined each year for one-third of such award but the entire award does not vest until the end of the three-year period and approximately 0.2 million of the performance stock unit awards are based on our leverage ratio at the end of each year with one-third vesting each year dependent on achieving the leverage ratio target for such year. We determine the grant date fair value of performance stock unit awards by multiplying the number of performance stock unit awards by the closing trading price of our common stock on the grant date. Other Share-Based Payment Awards In the event specified performance metrics are met under our 2024 incentive compensation program for team members who are not executive officers, awards thereunder will be paid out in cash or through the issuance of fully-vested shares of the Company’s common stock or a combination thereof at the time of such performance determination in 2025. As of June 30, 2024, we expect that these awards will be settled in a combination of cash and shares of the Company’s common stock. Because the portion of incentive compensation that we currently expect to pay through the issuance of shares of the Company’s common stock represents a fixed dollar that, if payable, will be settled in a variable number of shares of the Company’s common stock, we are currently accounting for this portion of these awards as liability-classified share-based payment awards. Accordingly, the offset to the share-based compensation expense we have recognized in connection with these awards during the six months ended June 30, 2024 is included in Accrued expenses and other current liabilities on our June 30, 2024 condensed consolidated balance sheet. In February 2024, our Board of Directors determined that our 2023 performance exceeded the maximum performance metric under our 2023 short-term incentive program and issued corresponding shares of common stock to our employees. As a result, the $ 18.1 million liability we had recognized in connection with liability-classified share-based payment awards, which was included in Accrued expenses and other current liabilities on our December 31, 2023 condensed consolidated balance sheet, was reclassified out of Accrued expenses and other current liabilities and into Common stock and Additional paid-in capital on our condensed consolidated balance sheet during the six months ended June 30, 2024. 8. Income Per Share For the three and six months ended June 30, 2024 and 2023 , o ur potentially dilutive securities included stock options, restricted stock units and shares to be issued under our employee stock purchase plan. The following table sets forth the calculation of basic and diluted income per share for the three and six months ended June 30, 2024 and 2023: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 52,805 $ 17,004 $ 77,722 $ 44,464 Weighted-average common shares outstanding – basic 198,903 195,476 198,200 195,026 Dilutive effect of stock-based compensation awards 7,141 9,345 6,651 8,846 Weighted-average common shares outstanding – diluted 206,044 204,821 204,851 203,872 Income per common share – basic $ 0.27 $ 0.09 $ 0.39 $ 0.23 Income per common share – diluted $ 0.26 $ 0.08 $ 0.38 $ 0.22 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) The following is a summary of potential shares of common stock that were antidilutive and excluded from the weighted average share computations for the three and six months ended June 30, 2024 and 2023: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options 5,843 5,370 5,843 6,310 Restricted stock units 382 766 382 824 Potential common shares excluded from the weighted average share calculations 6,225 6,136 6,225 7,134 9. 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 projects. The Court granted Zurich’s dispositive motions on July 25, 2024, dismissing Life Time’s claims with prejudice, and entered judgment on July 26, 2024. Life Time intends to appeal from that judgment, in whole or in part, to the Minnesota Court of Appeals. 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. 10. Subsequent Events On July 29, 2024, the Company entered into an agreement for the sale-leaseback of one property for gross proceeds of $ 25.0 million. The closing on this property is expected to be completed early in the fourth quarter 2024. In preparing the accompanying condensed consolidated financial statements, we have evaluated the period from June 30, 2024 through the date the condensed consolidated financial statements were issued for material subsequent events. There have been no other 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