What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-28 · 150 added, 150 removed, 294 unchanged (51% of the section changed)

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You should review the “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the year ended December 31, 2022 filed with the SEC on March 8, 2023, for discussion of the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28, 2024, for discussion of the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Business and Strategy

Life Time, the “Healthy Way of Life Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a community of nearly 1.5 million individual members, who together comprise nearly 815,000 memberships, as of December 31, 2023.

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.

Life Time, the “Healthy Way of Life Company,” is a premier lifestyle and leisure brand offering premium health, fitness and wellness experiences to a community of more than 1.5 million individual members, who together comprise more than 866,000 memberships, as of December 31, 2024.

We are a leading innovator in the industry having successfully created a leisure model that incorporates the country club wellness lifestyle within a fitness and active living community.

We have earned the trust of our members for over 30 years to make their lives healthier and happier by offering them the best places, programs and performers.

We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 175 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 and include ground-up suburban builds, mall or retail locations, vertical residential 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, 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 continuous commitment to members has resulted in strong brand loyalty and fueled our strong, long-term financial performance.

Our luxurious athletic country clubs total over 17 million of indoor square feet and approximately seven million of outdoor 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, indoor and outdoor pickleball courts, basketball courts, LifeSpa, LifeCafe and our childcare and Kids Academy learning spaces.

Our premium service offerings are delivered by over 42,000 Life Time team members, including over 10,800 certified fitness professionals, ranging from personal trainers to studio performers.

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Our average revenue per center membership increased to $3,160 for the year ended December 31, 2024 as compared to $2,810 for the year ended December 31, 2023 and $2,528 for the year ended December 31, 2022.

We had 135 average visits per membership to our centers in 2023 compared to 124 and 113 in 2022 and 2021, respectively, and total visits to our clubs were 103 million in 2023, 86 million in 2022 and 69 million in 2021.

Total visits to our clubs were over 114 million in 2024, 103 million in 2023 and 86 million in 2022, and average visits per membership to our centers remained strong at 143 in 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 revenues.

Our total Center revenue increased to $2,547 million for the year ended December 31, 2024 as compared to $2,154 million for the year ended December 31, 2023 and $1,770 million for the year ended December 31, 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.

We believe it will continue to grow as we open new centers in desirable locations across the country, new members join at higher membership dues rates, our new centers ramp to expected performance, we benefit from capital expenditures already invested in our centers under construction 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 December 31, 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 nine to 10 new centers in 2024.

While we have temporarily slowed down the start of new construction on our ground-up suburban builds and pursued more asset-light opportunities that include leases with tenant improvement allowances and existing facility takeovers with lower capital required and quicker turnaround times, as of December 31, 2023, we had seven new centers under construction, with $241 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 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.

As of December 31, 2024, we had 29 centers open for less than three years and 12 new centers under construction, with significant 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 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 and we are targeting 10 to 12 new locations on average per year.

We believe these combined dynamics create a strong tailwind for the continued growth of our total Center revenue.

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.

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 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 and artificial intelligence, 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 launched a pilot location for our MIORA health optimization and longevity services in 2024 and we plan to expand these offerings to additional locations in 2025 and beyond .

We have also been executing on enhanced offerings within our LifeCafe, LifeShop and LifeSpa, including our newly branded LTH nutritional products .

Additionally, our digital platform is delivering a true omni-channel experience through our integrated digital app that is now available at no cost, 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 LifeShop 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 artificial intelligence, 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 engage and connect 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.

In 2018, we launched Life Time Work, an asset-light branded co-working model that offers premium work spaces in close proximity to our centers and integrates ergonomic furnishings and promotes a healthy working environment.

In 2018, we launched Life Time Work, an asset-light branded co-working model that offers premium work spaces in close proximity to our athletic country clubs and integrates ergonomic furnishings and promotes a healthy working environment.

Life Time Work members also have the ability to receive access to all of our resort-like athletic country club destinations across the United States and Canada.

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

A dditionally, our Life Time Living locati ons, which are also an asset-light model, offer l uxury wellness-oriented residences, also in close proximity to our athletic country clubs.

As of December 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 .

While the inflation rate has improved, it remains elevated and the 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, 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 continue to explore sale-leaseback transactions but are being selective on the timing and rates given our current ability to add new centers through asset-light opportunities and our improved cash flow.

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

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 has been elevated, which has impacted our expenses and capital expenditures and return on invested capital.

Despite this headwind, we have experienced growth in our revenue and margins and have maintained strong returns on our invested capital.

Our Term Loan Facility and Revolving Credit Facility have variable rates and thus are impacted by higher interest rates.

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.

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Non-GAAP Financial Measures

This discussion and analysis includes certain financial measures that are not presented in accordance with GAAP, including Adjusted net income (loss), Adjusted net income (loss) per common share and Adjusted EBITDA and ratios and calculations related thereto.

This discussion and analysis includes certain financial measures that are not presented in accordance with GAAP, including Adjusted net income (loss), Adjusted net income (loss) per common share, Adjusted EBITDA, free cash flow and ratios and calculations 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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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.

We define Adjusted net income (loss) as net income (loss) excluding the impact of share-based compensation expense as well as (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, 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.

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 as well as (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.

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

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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 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.

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

Free Cash Flow

We define free cash flow as net cash provided by operating activities less capital expenditures, net of construction reimbursements, plus net proceeds from sale-leaseback transactions and land sales.

We believe free cash flow assists investors and analysts in evaluating our liquidity and cash flows, including our ability to make principal payments on our indebtedness and to fund our capital expenditures and working capital requirements.

Our management considers free cash flow to be a key indicator of our liquidity and we present this metric to our board of directors.

Additionally, we believe free cash flow is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry.

Adjusted net income (loss), Adjusted EBITDA and free cash flow 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 or as an alternative to net cash provided by operating activities as a measure of our liquidity and may not be comparable to other similarly titled measures of other businesses.

Adjusted net income (loss), Adjusted EBITDA and free cash flow have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results or cash flows 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), Adjusted EBITDA and free cash flow only for supplemental purposes.

See our consolidated financial statements included elsewhere in this Annual Report for our GAAP results.

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$ 2,705 $ 3,918 $ 10,797

Net cash provided by operating activities $ 575,117 $ 463,004 $ 200,969

Free cash flow (10)

$ 273,580 $ (108,989) $ (38,359)

(1) We define Average Center revenue per center membership as Center revenue less Digital On-hold revenue, divided by the average number of Center memberships for the period, where the average number of Center memberships for the period is an average derived from dividing the sum of the total Center memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.

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

During 2023, we opened 11 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 2024, we opened eight centers.

(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.

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(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.

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51,034 50,144 37,291

COVID-19 related expenses (b)

470 3,056 (1,589)

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

(Gain) loss on sale-leaseback transactions (b)

(2,618) 13,624 (97,632)

Capital transaction costs (d)

Capital transaction costs (c)

Legal settlements (d)

Asset impairments (e)

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Diluted 211,164 204,005 193,570

(a) Share-based compensation expense recognized during the year ended December 31, 2023 is 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.

Share-based compensation expense recognized during the year ended December 31, 2022 is associated with stock options, restricted stock, restricted stock units and our ESPP.

A significant portion of the share-based compensation expense that we recognized during the year ended December 31, 2021 is associated with stock options that were granted prior to 2021.

As of the effective date of the IPO in October 2021, these stock options became fully vested, and they became exercisable either immediately or on April 4, 2022, subject to continued service through such date.

Accordingly, during the period from the effective date of the IPO through April 4, 2022, we recognized share-based compensation expense associated with these stock options in an amount equal to the proportion of the total service period that passed from the respective grant dates associated with each of these stock option awards through April 4, 2022 .

Because the exercisability of these stock options was contingent upon the occurrence of a change of control or an initial public offering, no share-based compensation expense associated with these stock options was recognized prior to the

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

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

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

For the year ended December 31, 2023, COVID-19 related expenses primarily consisted of l egal-related costs in pursuit of our claim against Zurich, partially offset by a subsidy for our Canadian operations.

For the year ended December 31, 2022, COVID-19 related expenses primarily consisted of site development cost write-offs and l egal-related costs in pursuit of our claim against Zurich.

For the year ended December 31, 2021, COVID-19 related credits primarily consisted of the recovery of certain qualifying expenses under the CARES Act, partially offset by COVID-19 legal-related costs in pursuit of our claim against Zurich .

For more information regarding this claim against Zurich, see Item 3, Legal Proceedings, in this Annual 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 and gain on sale-leaseback transactions that we recognized during the years ended December 31, 2023 , 2022 and 2021, see “Sale-Leaseback Transactions” within Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual 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.

(a) Share-based compensation expense recognized during the year ended December 31, 2024 was associated with stock options, restricted stock units, performance stock units, our employee stock purchase plan (“ESPP”) that launched on December 1, 2022, and liability-classified awards related to our 2024 short-term incentive plan.

Share-based compensation expense recognized during the year ended December 31, 2023 was associated with stock options, restricted stock units, our ESPP and liability-classified awards related to our 2023 short-term incentive plan.

Share-based compensation expense recognized during the year ended December 31, 2022 was associated with stock options, restricted stock, restricted stock units and our ESPP.

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

For details on the gain and loss on sale-leaseback transactions that we recognized during the years ended December 31, 2024 , 2023 and 2022, see “Sale-Leaseback Transactions” within Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report.

(c) 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.

(d) We adjust for the impact of unusual legal settlements.

These costs are non-recurring in nature and do not reflect costs associated with our normal ongoing operations.

(e) Represents non-cash asset impairments of our long-lived assets, excluding impairments on development costs that are part of our normal course of business.

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

(f) Includes (i) a $13.8 million write-off of the unamortized debt discounts and issuance costs associated with the extinguishment of our former Term Loan Facility and Construction Loan and the loss on the satisfaction and discharge of our 5.750% Senior Secured Notes and 8.000% Senior Unsecured Notes for the year ended December 31, 2024, (ii) (gain) loss on sales of land of $(5.0) million and $0.4 million for the years ended December 31, 2024 and 2023, respectively, (iii) incremental net expenses we recognized related to the COVID-19 pandemic of $0.6 million, $0.5 million and $3.1 million for the years ended December 31, 2024, 2023 and 2022, respectively, (iv) gain on sales of the Company’s triathlons and certain other assets of $(4.9) million and $(1.9) million for the years ended December 31, 2023 and 2022, respectively, (v) large corporate restructuring charges and executive level involuntary terminations of $0.5 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively, and (vi) other transactions which are unusual or non-recurring in nature of $(0.4) million for the year ended December 31, 2022.

(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.

(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 as well as (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.

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

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Net income (loss) $ 156,240 $ 76,063 $ (1,793)

Interest expense, net of interest income 130,797 113,537 224,516

Interest expense, net of interest income (f)

148,095 130,797 113,537

Provision for (benefit from) income taxes 52,528 18,727 (825)

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51,034 50,144 37,291

COVID-19 related expenses (credits) (b)

470 3,056 (1,589)

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

(Gain) loss on sale-leaseback transactions (b)

(2,618) 13,624 (97,632)

Capital transaction costs (d)

Capital transaction costs (c)

Legal settlements (d)

Asset impairments (e)

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Adjusted EBITDA $ 676,780 $ 536,831 $ 281,724

(a) – (f) See the corresponding footnotes to the table in footnote 6 immediately above.

(a) – (e) See the corresponding footnotes to the table in footnote 6 immediately above.

(g) Includes (i) (gain) loss on sales of land of $(5.0) million and $0.4 million for the years ended December 31, 2024 and 2023, respectively, (ii) incremental net expenses we recognized related to the COVID-19 pandemic of $0.6 million, $0.5 million and $3.1 million for the years ended December 31, 2024, 2023 and 2022, respectively, (iii)

gain on sales of the Company’s triathlons and certain other assets of $(4.9) million and $(1.9) million for the years ended December 31, 2023 and 2022, respectively, (iv) large corporate restructuring charges and executive level involuntary terminations of $0.5 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively, and (v) other transactions which are unusual or non-recurring in nature of $(0.4) million for the year ended December 31, 2022.

(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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Non-cash rent expense for our properties under development represents non-cash expense associated with properties that are still under development at the end of each period presented.

(10) Free cash flow, a non-GAAP financial measure, is calculated as net cash provided by operating activities less capital expenditures, net of construction reimbursements, plus net proceeds from sale-leaseback transactions and land sales.

The following table provides a reconciliation from net cash provided by operating activities to free cash flow:

Year Ended December 31,

($ in thousands) 2024 2023 2022

Net cash provided by operating activities $ 575,117 $ 463,004 $ 200,969

Capital expenditures, net of construction reimbursements (524,535) (697,993) (591,178)

Proceeds from sale-leaseback transactions 207,421 121,831 351,850

Proceeds from land sales 15,577 4,169 —

Free cash flow $ 273,580 $ (108,989) $ (38,359)

Factors Affecting the Comparability of our Results of Operations

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Throughout this Annual Report, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when we refer to “COVID-19,” or “the pandemic” such as when we describe the “impact of COVID-19” on our operations, we mean the coronavirus-related orders issued by governmental authorities affecting our operations and/or the presence of coronavirus in our centers, including COVID-19 positive members or team members.

We re-opened our first center on May 8, 2020 and continued to re-open our centers as state and local governmental authorities permitted, subject to operating processes and protocols that we developed i n consultation with an epidemiologist (MD/PhD) to provide a healthy and clean environment for our members and team members and to meet various governmental requirements and restrictions.

Our centers were also impacted in 2021 as a result of the Delta variant and then again later in 2021 and into 2022 with the Omicron variant.

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

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

We define net debt as the current and long-term portion of our debt, excluding unamortized debt discounts and issuance costs and fair value adjustments, less unrestricted cash and cash equivalents.

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 2023 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.

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.

Our leverage ratio was elevated due in part to the adverse impacts o f COVID-19.

We have significantly improved our leverage ratio and believe that we can reach and maintain a leverage ratio of 2.25 times or below.

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 year ended December 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 $50.1 million.

During the year ended December 31, 2024, we recognized share-based compensation expense associated with stock options, restricted stock units, performance stock units, our ESPP and liability-classified awards related to our 2024 short-term incentive plan, totaling approximately $51.0 million.

During the year ended December 31, 2023, we recognized share-based compensation expense associated with stock options, restricted stock units, our ESPP and liability-classified awards related to our 2023 short-term incentive plan, totaling approximately $50.1 million.

During the year ended December 31, 2022, we recognized share-based compensation expense associated with stock options, restricted stock, restricted stock units and our ESPP totaling approximately $37.3 million.

During the year ended December 31, 2021, we recognized share-based compensation expense associated with stock options, restricted Series A Preferred Stock, restricted stock and restricted stock units totaling approximately $334.3 million, a significant portion of which is associated with stock options that were granted prior to 2021.

As of the effective date of the IPO, these stock options became fully vested, and they became exercisable either immediately or on April 4, 2022, subject to continued service through such date.

Accordingly, during the period from the effective date of the IPO through April 4, 2022 , we recognized share-based compensation expense associated with these stock options in an amount equal to the proportion of the total service period that passed from the respective grant dates associated with each of these stock option awards through April 4, 2022 .

For more information on our share-based compensation arrangements, see Note 10, Stockholders’ Equity, to our consolidated financial statements included in Part II, Item 8 of this Annual Report.

58 unchanged sentences

274,681 244,397 10.5 % 11.0 %

Other operating expense (income)

Other operating expense

70,418 86,363 2.7 % 3.9 %

6 unchanged sentences

(148,095) (130,797) (5.7) % (5.9) %

Equity in earnings of affiliates

Equity in (loss) earnings of affiliates

(620) 377 — % — %

1 unchanged sentence

(148,715) (130,420) (5.7) % (5.9) %

Income (loss) before income taxes

Income before income taxes

208,768 94,790 8.0 % 4.3 %

Provision for (benefit from) income taxes

Provision for income taxes

52,528 18,727 2.0 % 0.9 %

Net income (loss)

$ 156,240 $ 76,063 6.0 % 3.4 %

Total revenue .

The $394.0 million increase in Total revenue for the year ended December 31, 2023 as compared to the year ended December 31, 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.

The $404.4 million increase in Total revenue for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was due to continued strong growth in membership dues and in-center revenue, including higher average dues as a result of pricing actions already completed and higher rack rates at newer centers, membership growth in our new and ramping centers and higher member utilization of our in-center offerings.

With respect to the $392.3 million increase in Center revenue for the year ended December 31, 2024 as compared to the year ended December 31, 2023:

• 75.6% was from membership dues and enrollment fees, which increased $296.7 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

This increase reflects pricing adjustments we made in our existing centers, as well as an increase in dues revenue as a result of our new and ramping centers;

This increase reflects the improvement in our Center memberships, which increased to 812,062 as of December 31, 2024 from 763,216 as of December 31, 2023, as well as higher average monthly dues per Center membership during the year ended December 31, 2024 as compared to the year ended December 31, 2023;

• 24.4% was from in-center revenue, which increased $95.6 million for the year ended December 31, 2024 as compared to the year ended December 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 year ended December 31, 2023 as compared to the year ended December 31, 2022.

The $9.2 million increase in Other revenue for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by the improved performance of our Life Time Work and Life Time Living locations.

This increase was recognized across all of our primary in-center businesses and reflects the higher utilization of our offerings by our members, particularly Dynamic Personal Training, during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

The $12.1 million increase in Other revenue for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by the improved performance of our Life Time Work locations, media and events business and Life Time Living locations.

Center operations expenses .

The $116.2 million increase in Center operations expenses for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily due to increased operating costs related to our new and ramping centers, which consisted primarily of labor-related costs in support of increased membership and in-center business,

increased costs in our existing centers to support the higher utilization of our in-center business offerings by our members, and the continued investment in our facilities to deliver the highest member experience.

The $208.1 million increase in Center operations expenses for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to operating costs related to our new and ramping centers as well as costs to support growth in memberships and in-center business revenue.

Rent expense .

The $29.9 million increase in Rent expense for the year ended December 31, 2023 as compared to the year ended December 31, 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 six properties since May 31, 2022 for future centers where we started incurring GAAP rent expense, most of which is non-cash.

The $29.8 million increase in Rent expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by the timing of sale-leaseback transactions during both the current and prior year, the timing of taking possession of other leased properties, as well as the recognition of a higher level of contingent rent expense, which is generally determined based on a percentage of center-specific revenue and/or other center-specific financial metrics over contractually specified levels.

General, administrative and marketing expenses.

General, administrative and marketing expenses decreased $12.8 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to reduced center support overhead and advertising and marketing, partially offset by an increase in share-based compensation.

The $19.9 million increase in General, administrative and marketing expenses for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to increased information technology costs, center support overhead to enhance and broaden our member services and experiences and share-based compensation and benefit-related expen s es .

Depreciation and amortization expenses .

Depreciation and amortization expenses increased $15.5 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily due to new center openings.

Other operating expense (income) .

Other operating expense for the year ended December 31, 2023 was $86.4 million as compared to Other operating income of $44.4 million for the year ended December 31, 2022.

The $130.8 million change was primarily attributable to the recognition of a $13.6 million loss on sale-leaseback transactions during the year ended December 31, 2023 as compared to the recognition of a $97.5 million gain on sale-leaseback transactions during the year ended December 31, 2022, the recognition of $9.1 million of property development cost write-offs during the year ended December 31, 2023 as compared to the recognition of $2.1 million of property development cost write-offs during the year ended December 31, 2022, a $5.6 million loss associated with the sale of an outparcel of land during the year ended December 31, 2023, of which $5.3 million was recognized as an impairment charge, and increased costs in support of increased business activity for the year ended December 31, 2023 as compared to the year ended December 31, 2022 .

The $30.3 million increase in Depreciation and amortization expenses for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to new center openings.

Other operating expense .

The $15.9 million decrease in Other operating expense for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily due to the recognition of a $5.0 million gain on sales of outparcels of land, a $2.6 million gain on sale-leaseback transactions and the recognition of $11.0 millio n of impairment charges associated with property development cost write-offs during the year ended December 31, 2024 as compared to the recognition of a $5.6 million loss on the sale of an outparcel of land, of which $5.3 million was recognized as an impairment charge, a $13.6 million loss on sale-leaseback transactions, the recognition of $9.1 million of impairment charges associated with property development cost write-offs during the year ended December 31, 2023, partially offset by a $4.9 million gain on the sale of two triathlon events during the year ended December 31, 2023 and increased costs to support other revenue growth during the year ended December 31, 2024 .

Interest expense, net of interest income .

The $17.3 million increase in Interest expense, net of interest income for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was driven by a higher average level of outstanding borrowings and higher interest rates during the year ended December 31, 2023 as compared to the year ended December 31, 2022.

Provision for (benefit from) income taxes .

The provision for income taxes was $18.7 million for the year ended December 31, 2023 as compared to a $0.8 million benefit from income taxes for the year ended December 31, 2022 .

The effective tax rate was 19.8% and 31.5% for those periods, respectively.

The increase in provision for income taxes for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by the increase in earnings before income taxes, partially offset by the decrease in valuation allowance associated with certain of our deferred tax assets.

The effective tax rate applied to our pre-tax income for the year ended December 31, 2023 was slightly lower than our statutory rate of 21% and reflects a decrease in the valuation allowance associated with certain of our deferred tax assets, partially offset by the tax deficiencies associated with the share-based payment awards and increase in state income tax provisions.

Net income (loss) .

As a result of the factors described above, net income was $76.1 million for the year ended December 31, 2023 as compared to a net loss of $1.8 million for the year ended December 31, 2022 .

The $17.3 million increase in Interest expense, net of interest income for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was driven by the write-off of unamortized debt discounts and issuance costs associated with the extinguishment of our former Term Loan Facility and Construction Loan and the loss on the satisfaction and discharge of our 5.750% Senior Secured Notes and 8.000% Senior Unsecured Notes during the year ended December 31, 2024.

Provision for income taxes .

The $33.8 million increase in provision for income taxes for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by an increase in earnings before taxes, offset by a reduction in valuation allowance associated with certain of our deferred tax assets.

The effective tax rate was 25.2% and 19.8% for those same periods, respectively.

The effective tax rate applied to our pre-tax income for the year ended December 31, 2024 was higher than our statutory federal rate of 21% and reflects an increase due to deductibility limitations associated with executive compensation and state income tax provisions, partially offset by a reduction in valuation allowance associated with certain of our deferred tax assets.

As a result of the factors described above, net income was $156.2 million for the year ended December 31, 2024 as compared to $76.1 million for the year ended December 31, 2023 .

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 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.

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

In addition, during the year ended December 31, 2023, we completed sale-leaseback transactions associated with three properties.

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

During 2021, we refinanced a significant portion of our outstanding debt and we completed sale-leaseback transactions associated with two

We made significant progress in 2024 towards our priorities of improving our balance sheet, reducing leverage and generating positive free cash flow.

Transactions we consummated during 2024 to execute on these priorities included:

• Consummated a registered offering for the issuance and sale of 6.0 million shares of our common stock in August 2024 for total gross proceeds of $130.5 million, which was reduced by underwriting discounts and commissions and other expenses.

We used $110.0 million of these net proceeds to pay down the aggregate principal amount outstanding under our former Term Loan Facility.

• Amended our senior secured credit agreement in September 2024 to, among other things, (i) increase the commitments under the revolving credit facility to $650.0 million, (ii) reduce the floating interest rate per annum to, at our option, Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.50% or a base rate plus 1.50% (subject to certain first lien leverage and ratings-based step-downs), and reduce the undrawn commitment fee rate from 50 basis points to 25 basis points, and (iii) extend the maturity of the revolving credit facility to September 2029.

• Paid off the remaining aggregate principal amount of $200.0 million of our former Term Loan Facility in September 2024.

• Amended our senior secured credit agreement in November 2024 to, among other things, incur new term loans in an aggregate principal amount of $1,000 million that mature in 2031 and bear interest at a rate per annum of SOFR plus an applicable margin of 2.50% (subject to a certain ratings-based step-down).

Concurrently with the new term loans, we issued $500 million in aggregate principal amount of 6.000% Senior Secured Notes due 2031.

We used the net proceeds from the secured notes and new term loans and cash from our balance sheet to fund the satisfaction and discharge of the 5.750% Senior Secured Notes due 2026 and 8.000% Senior Unsecured Notes due 2026.

• Completed sale-leaseback transactions associated with six properties.

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

For information regarding the debt refinancing transactions, see Note 8, Debt, to our consolidated financial statements in Part II, Item 8 of this Annual Report.

For more information regarding the sale-leaseback transactions that were consummated during 2023, 2022 and 2021, see Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report.

We continue to explore potential sale-leaseback transactions, but we are being selective on the timing and rates given our ability to add new centers through asset-light opportunities and our improved cash flows from operations.

Additionally, we 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.

Additionally, on October 12, 2021, we completed our IPO of 39.0 million shares of our common stock at a public offering price of $18.00 per share, resulting in total gross proceeds of $702.0 million before deducting the underwriting discounts and other offering expenses.

Additionally, on November 1, 2021, we consummated the sale of nearly 1.6 million additional shares of our common stock at the IPO price of $18.00 per share pursuant to the partial exercise by the underwriters of their over-allotment option, resulting in total gross proceeds of approximately $28.4 million before deducting the underwriting discounts and commissions.

On October 13, 2021, we paid down $575.7 million (including a $5.7 million pre-payment penalty) of our Term Loan Facility with a portion of the net proceeds we received from the IPO.

We used the remaining net proceeds from the IPO, along with the additional net proceeds of approximately $27.1 million from the sale of the additional nearly 1.6 million shares of common stock, for general corporate purposes.

We believe the steps we have taken to strengthen our balance sheet and to reduce our cash outflows leave us well-positioned to manage our business.

For more information regarding the sale-leaseback transactions that were consummated during 2024, as well as the sale-leaseback transactions that were consummated in 2023 and 2022, see Note 9, Leases, to our consolidated financial statements in Part II, Item 8 of this Annual Report.

As the opportunity arises or as our business needs require, we may seek to raise capital through additional debt or equity financing.

3 unchanged sentences

As of December 31, 2024, there were $10.0 million of outstanding borrowings under our Revolving Credit Facility and there were $31.2 million of outstanding letters of credit, resulting in total availability under our Revolving Credit Facility of $608.8 million.

Total cash and cash equivalents, exclusive of restricted cash, at December 31, 2023 was $11.2 million, resulting in total cash and availability under our Revolving Credit Facility of $363.3 million.

Total cash and cash equivalents at December 31, 2024 was $10.9 million, resulting in total cash and availability under our Revolving Credit Facility of $619.7 million.

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

1 unchanged sentence

2024 2023 2022

Net cash provided by (used in) operating activities

Net cash provided by operating activities

$ 575,117 $ 463,004 $ 200,969

1 unchanged sentence

(292,744) (574,160) (243,542)

Net cash provided by financing activities

Net cash (used in) provided by financing activities

(284,385) 115,552 36,798

Effect of exchange rate on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Effect of exchange rate on cash and cash equivalents and restricted cash and cash equivalents

(76) 61 (353)

(Decrease) increase in cash and cash equivalents and restricted cash and cash equivalents

$ (2,088) $ 4,457 $ (6,128)

Operating Activities

The $262.0 million increase in net cash provided by operating activities for the year December 31, 2023 as compared to the year ended December 31, 2022 was primarily the result of higher profitability.

The $221.0 million increase in net cash provided by operating activities for the year December 31, 2022 as compared to the year ended December 31, 2021 was primarily the result of higher profitability, before the impact of non-cash share-based compensation expense, due to the recovery from the impact of COVID-19 on our business.

The $112.1 million increase in net cash provided by operating activities for the year December 31, 2024 as compared to the year ended December 31, 2023 was primarily the result of increased business performance and profitability.

The $262.0 million increase in net cash provided by operating activities for the year December 31, 2023 as compared to the year ended December 31, 2022 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.

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

We fund 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 $281.4 million decrease in net cash used in investing activities for the year December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by a $173.5 million decrease in capital expenditures, a $85.6 million increase in proceeds that we received from sale-leaseback transactions, and a $11.4 million increase in proceeds from the sale of land during the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Of the $211.7 million, $123.3 million and $373.2 million in total proceeds we received from sale-leaseback transactions during the years ended December 31, 2024, 2023 and 2022, respectively, $207.4 million, $121.8 million and $351.8 million were reported within investing activities and $4.3 million, $1.5 million and $21.4 million were reported within financing activities on our consolidated statement of cash flows during the years ended December 31, 2024, 2023 and 2022, respectively.

The $330.6 million increase in net cash used in investing activities for the year December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by a $230.0 million decrease in the amount of proceeds that we received from sale-leaseback transactions during the year ended December 31, 2023 as compared to the year ended December 31, 2022, and a $106.8 million increase in capital expenditures for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

The increase in total capital expenditures for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by new center construction activity and investment into our existing centers to modernize them as we executed our strategic initiatives.

Of the $123.3 million in total proceeds we received from sale-leaseback transactions during the year ended December 31, 2023, $121.8 million and $1.5 million is reported within investing activities and financing activities, respectively, on our consolidated statement of cash flows.

Of the $373.2 million in total proceeds we received from sale-leaseback transactions during the year ended December 31, 2022, $351.8 million and $21.4 million is reported within investing activities and financing activities, respectively, on our consolidated statement of cash flows.

The $26.4 million decrease in net cash used in investing activities for the year December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by a $277.9 million increase in the amount of proceeds that we received from sale-leaseback transactions during the year ended December 31, 2022 as compared to the year ended December 31, 2021, partially offset by a $262.3 million increase in capital expenditures for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

During the year ended December 31, 2021, we received $74.0 million of proceeds from sale-leaseback transactions, all of which is reporting within investing activities on our consolidated statement of cash flows.

The increase in total capital expenditures for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by new center construction activity, continued investments in technology and corporate capital expenditures related to Life Time Work.

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

Year Ended December 31,

2024 2023 2022

Growth capital expenditures (1)

$ 334,479 $ 467,895 $ 409,435

Maintenance capital expenditures (2)

108,635 102,880 98,111

Modernization and technology capital expenditures (3)

81,421 127,218 83,632

Total capital expenditures $ 524,535 $ 697,993 $ 591,178

(1) Consist of new center land and construction, initial major remodels of acquired centers, major remodels of existing centers that expand existing square footage, asset acquisitions including the purchase of previously leased centers and other growth initiatives.

(2) Consist of general maintenance of existing centers.

(3) Consist of modernization of existing centers and technology.

The decrease in total capital expenditures for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by the amount, timing and type of new center construction activity and higher modernization expenditures during the year ended December 31, 2023 as part of our pickleball expansion and studio and fitness floor conversions.

The increase in total capital expenditures for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by new center construction activity and investments into our existing centers to modernize them as we executed our strategic initiatives.

Financing Activities

The $78.8 million increase in net cash provided by financing activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by net incremental proceeds we received from borrowings under our Term Loan Facility, Revolving Credit Facility and our construction loan and proceeds from stock option exercises during the year ended December 31, 2023.

The $251.6 million decrease in net cash provided by financing activities for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by net proceeds we received from borrowings under our Term Loan Facility and our secured and unsecured notes during the year ended December 31, 2021.

The $399.9 million increase in net cash used in financing activities for the year ended December 31, 2024 as compared to the year ended December 31, 2023 was primarily driven by the purchase of U.S.

government obligations in connection with the satisfaction and discharge of debt, the payoff of our former Term Loan Facility and Construction Loan, lower net borrowings under our Revolving Credit Facility and payments of our mortgage notes, partially offset by the proceeds from our new Term Loan Facility, 6.000% Senior Secured Notes and equity offering during the year ended December 31, 2024.

The $78.8 million increase in net cash provided by financing activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 was primarily driven by net incremental proceeds we received from borrowings under our former Term Loan Facility, Revolving Credit Facility and our construction loan and proceeds from stock option exercises during the year ended December 31, 2023.

Cash Requirements

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Contracted services include agreements with third-party service providers for software licenses and support, and marketing services .

We expect to pay approximatel y $12.5 million for contracted services in the next 12 months and approximately $4.0 million beyond 12 months.

We expect to pay approximately $11.1 million for contracted services in the next 12 months and approximately $4.3 million beyond 12 months.

Capital Expenditures

Our primary capital expenditure requirements include growth capital expenditures, which include new center land and construction, growth initiatives and major remodels of existing centers, as well as maintenance capital expenditures to keep our centers operational and meeting our standards.

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.

Our primary capital expenditure requirements include growth capital expenditures, which include new center land and construction, initial major remodels of acquired centers, major remodels of existing centers that expand existing square footage, asset acquisitions including the purchase of previously leased centers and other growth initiatives, maintenance capital expenditures to keep our centers operational and meeting our standards, and capital expenditures for the modernization of existing centers and technology.

We believe we will generate 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-K

Item 7. Management’s Discussion and Analysis