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Life Time (NYSE:LTH) Q4 Earnings Results: Earnings Meet Expectations, Provide Encouraging Full-Year Guidance

Premium fitness club Life Time (NYSE:LTH) reported fourth-quarter fiscal 2023 results that met analyst expectations, with revenue of $558.8 million, up 18.2% year-over-year. The company expects revenue for the next quarter to be about $590 million, 3.4% higher than analysts’ estimates. Non-GAAP earnings were $0.19 per share, an improvement from $0.09 per share in the same quarter last year.

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Life Long Life (LTH) FY 2023 Fourth Quarter Highlights:

• revenue: $558.8 million vs. analyst estimates of $555.1 million (slight increase)
• EPS (non-GAAP): $0.19 vs. analyst estimate of $0.14 (32.6% higher)
• First Quarter 2024 Revenue Guidance At the midpoint, it stands at $590 million, exceeding analyst estimates of $570.3 million.
• management’s Earnings Guidelines upcoming finance 2024 At $2.48 billion at the midpoint, it beat analyst estimates by 0.9% and implies 11.9% growth (versus 22% in FY2023) (which also beat adjusted EBITDA guidance for the period).
• free cash flow It was -$36.05 million compared to -$74.07 million in the previous quarter.
• Gross Margin (GAAP): Increased from 46.3% to 48.4% in the same quarter last year
• Same store sales 11.7% increase compared to the previous year
• Market capitalization: $2.44 billion

With more than 150 locations and a gym including saunas and steam rooms, Life Time (NYSE:LTH) is a luxury fitness club that emphasizes holistic wellness and fitness.

Leisure facilities Leisure businesses often sell experiences rather than tangible products, and over the past decade, consumers have slowly shifted their spending from ‘things’ to ‘experiences’. Leisure facilities seek to make a profit, but the industry’s high competition and capital intensity require innovation.

Revenue GrowthA company’s long-term performance can signal the quality of its business. Even bad businesses can shine for a quarter or two, but top companies can grow for years. Lifetime’s annual sales growth rate over the past four years was 3.9%, which is slow for a consumer discretionary business. In the consumer discretionary space, short product cycles and rapidly changing trends can hurt sales. That’s why we also chase short-term results. Over the past two years, Life Time’s annual revenue growth rate of 29.7% has been above the four-year trend, suggesting some bright spots.

We can further examine a company’s revenue dynamics by analyzing same-store sales, which shows how much revenue is generated from existing stores. Over the past two years, Lifetime’s same-store sales have grown by an average of 25.2% compared to the previous year. This figure is lower than sales growth, suggesting that new branch openings are improving the company’s top line performance.

Life Time’s year-over-year revenue growth for the quarter reached 18.2%, with revenue of $558.8 million in line with Wall Street estimates. The company is targeting $590 million in revenue for the next quarter, up 15.5% year-over-year, a slowdown from the 30.2% year-over-year increase it recorded in the same quarter last year. Wall Street expects sales to grow 11.2% over the next 12 months, a slowdown compared to the current quarter.

Cash is king. While profits are undoubtedly important in assessing company performance, we believe cash is king because accounting profits cannot be used to pay bills.

Over the past two years, the reinvestment required by Life Time to remain relevant to consumers has drained the company’s resources. Free cash flow margin averaged minus 15.4%, the worst among the consumer discretionary sectors.

Life Time burned $36.05 million in cash in the fourth quarter, which equates to a margin of negative 6.5% and increased cash burn by 65.9% year-over-year. Analysts predict that Life Time’s cash profitability will improve to breakeven next year. Their consensus estimate of negative 10.4% implies an increase in LTM free cash flow margin of 9.9 percentage points.

Key Takeaways from Life Time’s Q4 Results We were impressed by how well Life Time beat analysts’ EPS expectations this quarter. We’re also pleased that earnings guidance for next quarter came in higher than Wall Street expected. Overall, we think this was a really good quarter that should please our shareholders. Shares rose 1% following the report and are currently trading at $12.55 per share.