UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

~~______________________________________________________~~

FORM 10-Q

~~____________________________________________________~~

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40887

Life Time Group Holdings, Inc.

(Exact name of re~~gistrant~~registrant as specified in its charter)


Delaware						47-3481985
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2902 Corporate Place

Chanhassen, Minnesota 55317

(952) 947-0000

(Address of principal executive offices, including zip ~~code~~code; Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share	LTH	The New York Stock Exchange

Indicate by check mark whether the ~~registrant~~registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated ~~Filer~~filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 7, 20~~November 15, 2021~~,22, the ~~Registrant~~registrant had ~~193,059,950~~194,188,729 shares of common stock outstanding, par value $0.01 per share.

Table of Contents

TABLE OF CONTENTS

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LIFE TIME GROUP HOLDINGS,, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

September 30,
2021 December 31,
2020
ASSETS
Current assets:
Cash and cash equivalents $ 44,827 $ 33,195
Accounts receivable 8,326 4,805
Center operating supplies and inventories 40,113 36,276
Prepaid expenses and other current assets 35,214 87,231
Income tax receivable 3,466 4,192
Total current assets 131,946 165,699
Property and equipment, net 2,699,104 2,692,712
Goodwill 1,233,176 1,233,176
Operating lease right-of-use assets 1,864,246 1,708,597
Intangible assets, net 173,604 164,419
Other assets 55,425 52,955
Total assets $ 6,157,501 $ 6,017,558
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 71,962 $ 54,104
Construction accounts payable 51,946 39,936
Deferred revenue 28,190 42,274
Accrued expenses and other current liabilities 183,703 117,675
Current maturities of debt 31,841 139,266
Current maturities of operating lease liabilities 44,137 49,877
Total current liabilities 411,779 443,132
Long-term debt, net of current portion 2,331,500 2,133,330
Operating lease liabilities, net of current portion 1,902,784 1,738,393
Deferred income taxes 131,655 195,122
Other liabilities 25,027 26,168
Total liabilities 4,802,745 4,536,145
Commitments and contingencies (Note 10) 0 0
Mezzanine equity:
Series A convertible participating preferred stock, $0.01 par value per share; 12,000 shares authorized; 5,930 and 0 shares issued and outstanding, respectively 153,620 —
Stockholders’ equity:
Common stock, $0.01 par value per share; 200,000 and 170,000 shares authorized, respectively; 145,196 shares issued and outstanding 1,452 1,452
Additional paid-in capital 1,548,904 1,569,905
Stockholder note receivable — (15,000)
Retained deficit (346,313) (71,714)
Accumulated other comprehensive loss (2,907) (3,230)
Total stockholders’ equity 1,201,136 1,481,413
Total liabilities, mezzanine equity and stockholders’ equity $ 6,157,501 $ 6,017,558

~~See notes to unaudited condensed consolidated financial statements.~~

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(In thousands, except per share data)~~

~~(Unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Revenue:
Center revenue $ 372,000 $ 228,349 $ 933,690 $ 704,919
Other revenue 13,040 2,681 23,835 14,991
Total revenue 385,040 231,030 957,525 719,910
Operating expenses:
Center operations 231,996 165,572 625,322 515,350
Rent 52,513 47,539 154,552 138,470
General, administrative, and marketing 45,304 32,204 126,896 119,665
Depreciation and amortization 57,977 61,359 177,005 188,483
Other operating 14,796 15,152 30,660 37,412
Total operating expenses 402,586 321,826 1,114,435 999,380
Loss from operations (17,546) (90,796) (156,910) (279,470)
Other (expense) income:
Interest expense, net of interest income (39,849) (30,967) (176,144) (95,724)
Equity in earnings of affiliate (28) 37 (412) (206)
Total other expense (39,877) (30,930) (176,556) (95,930)
Loss before income taxes (57,423) (121,726) (333,466) (375,400)
Benefit from income taxes (11,981) (28,079) (58,867) (99,096)
Net loss $ (45,442) $ (93,647) $ (274,599) $ (276,304)
Loss per common share—basic and diluted $ (0.36) $ (0.64) $ (2.00) $ (1.90)
Weighted-average common shares outstanding—basic and diluted 145,196 145,196 145,196 145,118

~~See notes to unaudited condensed consolidated financial statement~~s.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~

~~(In thousands)~~

~~(Unaudited)~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net loss $ (45,442) $ (93,647) $ (274,599) $ (276,304)
Foreign currency translation adjustments, net of tax of $0 (2,404) 2,436 323 (3,413)
Comprehensive loss $ (47,846) $ (91,211) $ (274,276) $ (279,717)


	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	107,069	$	31,637
Accounts receivable, net	12,281		6,464
Center operating supplies and inventories	44,084		41,007
Prepaid expenses and other current assets	44,829		48,883
Income tax receivable	—		3,533
Total current assets	208,263		131,524
Property and equipment, net	2,772,385		2,791,464
Goodwill	1,233,176		1,233,176
Operating lease right-of-use assets	2,148,828		1,864,528
Intangible assets, net	173,492		174,241
Other assets	65,403		61,742
Total assets	$	6,601,547	$	6,256,675
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	72,951	$	71,308
Construction accounts payable	118,671		83,311
Deferred revenue	32,296		33,871
Accrued expenses and other current liabilities	167,457		147,920
Current maturities of debt	15,046		23,527
Current maturities of operating lease liabilities	50,746		46,315
Total current liabilities	457,167		406,252
Long-term debt, net of current portion	1,775,248		1,775,719
Operating lease liabilities, net of current portion	2,206,753		1,909,883
Deferred income taxes	43,941		55,213
Other liabilities	13,265		18,216
Total liabilities	4,496,374		4,165,283
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.01 par value per share; 500,000 shares authorized; 193,991 and 193,060 shares issued and outstanding, respectively.	1,940		1,931
Additional paid-in capital	2,780,190		2,743,560
Accumulated deficit	(666,602)		(651,083)
Accumulated other comprehensive loss	(10,355)		(3,016)
Total stockholders’ equity	2,105,173		2,091,392
Total liabilities and stockholders’ equity	$	6,601,547	$	6,256,675

See notes to unaudited condensed consolidated financial statements.

Table of Contents

LIFE TIME GROUP HOLDINGS,, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue:
Center revenue	$	479,995	$	372,000	$	1,307,498	$	933,690
Other revenue	16,386		13,040		42,404		23,835
Total revenue	496,381		385,040		1,349,902		957,525
Operating expenses:
Center operations	295,253		231,996		814,383		625,322
Rent	63,213		52,513		179,166		154,552
General, administrative and marketing	57,139		45,304		175,650		126,896
Depreciation and amortization	56,400		57,977		171,680		177,005
Other operating (income) expense	(31,358)		14,796		(56,605)		30,660
Total operating expenses	440,647		402,586		1,284,274		1,114,435
Income (loss) from operations	55,734		(17,546)		65,628		(156,910)
Other (expense) income:
Interest expense, net of interest income	(27,696)		(39,849)		(84,732)		(176,144)
Equity in earnings (loss) of affiliate	95		(28)		129		(412)
Total other expense	(27,601)		(39,877)		(84,603)		(176,556)
Income (loss) before income taxes	28,133		(57,423)		(18,975)		(333,466)
Provision for (benefit from) income taxes	3,401		(11,981)		(3,456)		(58,867)
Net income (loss)	$	24,732	$	(45,442)	$	(15,519)	$	(274,599)

Income (loss) per common share:
Basic	$	0.13	$	(0.36)	$	(0.08)	$	(2.00)
Diluted	$	0.12	$	(0.36)	$	(0.08)	$	(2.00)
Weighted-average common shares outstanding:
Basic	193,918		145,196		193,364		145,196
Diluted	198,381		145,196		193,364		145,196

See notes to unaudited condensed consolidated financial statements.

Table of Contents

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	24,732	$	(45,442)	$	(15,519)	$	(274,599)
Foreign currency translation adjustments, net of tax of $0	(6,015)		(2,404)		(7,339)		323
Comprehensive income (loss)	$	18,717	$	(47,846)	$	(22,858)	$	(274,276)

See notes to unaudited condensed consolidated financial statements.

Table of Contents

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity

	Shares	Amount
Balance at June 30, 2022	193,796	$	1,938	$	2,772,393	$	(691,334)	$	(4,340)	$	2,078,657
Net income	—	—		—		24,732		—		24,732
Other comprehensive loss	—	—		—		—		(6,015)		(6,015)
Share-based compensation	—	—		5,803		—		—		5,803
Stock option exercises	195	2		1,994		—		—		1,996



Balance at September 30, 2022	193,991	$	1,940	$	2,780,190	$	(666,602)	$	(10,355)	$	2,105,173


		Common Stock			Additional Paid-In Capital		Stockholder Note Receivable		Retained Deficit		Accumulated Other Comprehensive Loss		Total Equity			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity

		Shares	Amount													Shares	Amount
Balance at July 1, 2021		145,196	$	1,452	$	1,564,591	$	(15,000)	$	(300,871)	$	(503)	$	1,249,669
Balance at December 31, 2021															Balance at December 31, 2021	193,060	$	1,931	$	2,743,560	$	(651,083)	$	(3,016)	$	2,091,392
Net loss	Net loss	—	—		—		—		(45,442)		—		(45,442)		Net loss	—	—		—		(15,519)		—		(15,519)
Other comprehensive loss	Other comprehensive loss	—	—		—		—		—		(2,404)		(2,404)		Other comprehensive loss	—	—		—		—		(7,339)		(7,339)
Share-based compensation	Share-based compensation	—	—		1,794		—		—		—		1,794		Share-based compensation	—	—		33,214		—		—		33,214
Cancellation of stockholder note receivable		—	—		(11,355)		15,000		—		—		3,645
Dividends on preferred stock		—	—		(6,126)		—		—		—		(6,126)
Balance at September 30, 2021		145,196	$	1,452	$	1,548,904	$	—	$	(346,313)	$	(2,907)	$	1,201,136
Stock option exercises															Stock option exercises	309	3		3,187		—		—		3,190
Equity issuance costs															Equity issuance costs	—	—		(270)		—		—		(270)
Issuance of common shares in connection with the vesting of restricted stock units															Issuance of common shares in connection with the vesting of restricted stock units	622	6		(6)		—		—		—
Settlement of accrued compensation liabilities through the issuance of share-based compensation awards															Settlement of accrued compensation liabilities through the issuance of share-based compensation awards	—	—		505		—		—		505
Balance at September 30, 2022															Balance at September 30, 2022	193,991	$	1,940	$	2,780,190	$	(666,602)	$	(10,355)	$	2,105,173


		Common Stock			Additional Paid-In Capital		Stockholder Note Receivable		Retained Deficit		Accumulated Other Comprehensive Loss		Total Equity			Common Stock			Additional Paid-In Capital		Stockholder Note Receivable		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity

		Shares	Amount													Shares	Amount
Balance at January 1, 2021		145,196	$	1,452	$	1,569,905	$	(15,000)	$	(71,714)	$	(3,230)	$	1,481,413
Balance at June 30, 2021															Balance at June 30, 2021	145,196	$	1,452	$	1,564,591	$	(15,000)	$	(300,871)	$	(503)	$	1,249,669
Net loss	Net loss	—	—		—		—		(274,599)		—		(274,599)		Net loss	—	—		—		—		(45,442)		—		(45,442)
Other comprehensive income		—	—		—		—		—		323		323
Other comprehensive loss															Other comprehensive loss	—	—		—		—		—		(2,404)		(2,404)
Share-based compensation	Share-based compensation	—	—		2,924		—		—		—		2,924		Share-based compensation	—	—		1,794		—		—		—		1,794
Settlement of accrued compensation liabilities through the issuance of share-based compensation awards		—	—		3,844		—		—		—		3,844
Cancellation of stockholder note receivable	Cancellation of stockholder note receivable	—	—		(11,355)		15,000		—		—		3,645		Cancellation of stockholder note receivable	—	—		(11,355)		15,000		—		—		3,645
Dividends on preferred stock	Dividends on preferred stock	—	—		(16,414)		—		—		—		(16,414)		Dividends on preferred stock	—	—		(6,126)		—		—		—		(6,126)
Balance at September 30, 2021	Balance at September 30, 2021	145,196	$	1,452	$	1,548,904	$	—	$	(346,313)	$	(2,907)	$	1,201,136	Balance at September 30, 2021	145,196	$	1,452	$	1,548,904	$	—	$	(346,313)	$	(2,907)	$	1,201,136

Common Stock Additional Paid-In
Capital Stockholder Note
Receivable Retained Earnings Accumulated Other Comprehensive Loss Total
Equity
Shares Amount
Balance at July 1, 2020 145,196 $ 1,452 $ 1,569,905 $ (15,000) $ 105,821 $ (10,501) $ 1,651,677
Net loss — — — — (93,647) — (93,647)
Other comprehensive income — — — — — 2,436 2,436
Balance at September 30, 2020 145,196 $ 1,452 $ 1,569,905 $ (15,000) $ 12,174 $ (8,065) $ 1,560,466


		Common Stock			Additional Paid-In Capital		Stockholder Note Receivable		Retained Earnings		Accumulated Other Comprehensive Loss		Total Equity			Common Stock			Additional Paid-In Capital		Stockholder Note Receivable		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Equity

		Shares	Amount													Shares	Amount
Balance at January 1, 2020		141,596	$	1,416	$	1,479,941	$	(15,000)	$	288,478	$	(4,652)	$	1,750,183
Balance at December 31, 2020															Balance at December 31, 2020	145,196	$	1,452	$	1,569,905	$	(15,000)	$	(71,714)	$	(3,230)	$	1,481,413
Net loss	Net loss	—	—		—		—		(276,304)		—		(276,304)		Net loss	—	—		—		—		(274,599)		—		(274,599)
Other comprehensive income	Other comprehensive income	—	—		—		—		—		(3,413)		(3,413)		Other comprehensive income	—	—		—		—		—		323		323
Common stock issuance		3,600	36		89,964		—		—		—		90,000
Balance at September 30, 2020		145,196	$	1,452	$	1,569,905	$	(15,000)	$	12,174	$	(8,065)	$	1,560,466
Share-based compensation															Share-based compensation	—	—		2,924		—		—		—		2,924
Settlement of accrued compensation liabilities through the issuance of share-based compensation awards															Settlement of accrued compensation liabilities through the issuance of share-based compensation awards	—	—		3,844		—		—		—		3,844
Cancellation of stockholder note receivable															Cancellation of stockholder note receivable	—	—		(11,355)		15,000		—		—		3,645
Dividends on preferred stock															Dividends on preferred stock	—	—		(16,414)		—		—		—		(16,414)
Balance at September 30, 2021															Balance at September 30, 2021	145,196	$	1,452	$	1,548,904	$	—	$	(346,313)	$	(2,907)	$	1,201,136

See notes to unaudited condensed consolidated financial statements.

Table of Contents

LIFE TIME GROUP HOLDINGS,, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(15,519)	$	(274,599)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	171,680		177,005
Deferred income taxes	(10,957)		(63,467)
Share-based compensation	33,214		6,959
Non-cash rent expense	27,304		11,546
Impairment charges associated with long-lived assets	153		2,455
(Gain) loss on disposal of property and equipment, net	(98,498)		3,515
Loss on debt extinguishment	—		40,993
Write-off of discounts and debt issuance costs	—		18,325
Amortization of debt discounts and issuance costs	5,898		7,761
Changes in operating assets and liabilities	14,055		57,614
Other	(2,010)		(3,429)
Net cash provided by (used in) operating activities	125,320		(15,322)
Cash flows from investing activities:
Capital expenditures	(409,946)		(201,741)
Acquisitions, net of cash acquired	—		(9,139)
Proceeds from sale-leaseback transactions	373,451		73,981

Other	(985)		(1,291)
Net cash used in investing activities	(37,480)		(138,190)
Cash flows from financing activities:
Proceeds from borrowings	8,657		1,907,577
Repayments of debt	(21,993)		(1,602,164)
Proceeds from revolving credit facility	710,000		134,000
Repayments of revolving credit facility	(710,000)		(228,000)
Repayments of finance lease liabilities	(1,043)		(1,133)
Increase in debt discounts and issuance costs	(43)		(45,151)

Proceeds from stock option exercises	3,190		—
Other	(476)		—
Net cash (used in) provided by financing activities	(11,708)		165,129
Effect of exchange rates on cash and cash equivalents	(700)		15
Increase in cash and cash equivalents	75,432		11,632
Cash and cash equivalents – beginning of period	31,637		33,195
Cash and cash equivalents – end of period	$	107,069	$	44,827

Nine Months Ended
September 30,
2021 2020
Cash flows from operating activities:
Net loss $ (274,599) $ (276,304)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 177,005 188,483
Deferred income taxes (63,467) (69,229)
Non-cash rent expense 11,546 34,489
Impairment charges associated with long-lived assets 2,455 16,903
Loss (gain) on disposal of property and equipment, net 3,515 (2,894)
Loss on debt extinguishment 40,993 —
Write-off of discounts and debt issuance costs 18,325 —
Amortization of discounts and debt issuance costs 7,761 8,959
Share-based compensation 6,959 —
Changes in operating assets and liabilities 57,614 45,096
Other (3,429) (1,668)
Net cash used in operating activities (15,322) (56,165)
Cash flows from investing activities:
Capital expenditures (201,741) (213,876)
Acquisitions, net of cash acquired (9,139) —
Proceeds from sale-leaseback transactions 73,981 122,883
Proceeds from the sale of land held for sale — 22,971
Other (1,291) 5,360
Net cash used in investing activities (138,190) (62,662)
Cash flows from financing activities:
Proceeds from borrowings 1,907,577 116,583
Repayments of debt (1,602,164) (27,104)
Proceeds from senior secured credit facility 134,000 506,000
Repayments of senior secured credit facility (228,000) (587,902)
Deposit associated with a pending sale-leaseback transaction — 15,000
Repayments of finance lease liabilities (1,133) (1,034)
Increase in debt discounts and issuance costs (45,151) (425)
Proceeds from the issuance of common stock — 90,000
Net cash provided by financing activities 165,129 111,118
Effect of exchange rates on cash and cash equivalents 15 (185)
Increase (decrease) in cash and cash equivalents 11,632 (7,894)
Cash and cash equivalents—beginning of period 33,195 47,951
Cash and cash equivalents—end of period $ 44,827 $ 40,057

See notes to unaudited condensed consolidated financial statements.

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 ~~Consolidation and~~ 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. Life Time Group Holdings, Inc. changed its name from LTF Holdings, Inc. effective on June 21, 2021. 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. ~~Life Time Group Holdings, Inc. changed its name from LTF Holdings, Inc. effective on June 21, 2021.~~ We are primarily dedicated to providing premium health, fitness and wellness experiences at our athletic ~~resort~~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 ~~resort~~country club destinations that are distinctive and large, multi-use sports and athletic, professional fitness, family recreation and spa centers in a resort-like environment. As of September 30, ~~2021,~~2022, we operated ~~155~~156 centers in 29 states and 1one Canadian province.

COVID-19 Impact

OnIn March ~~11,~~ 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic, ~~and recommended containment and mitigation measures worldwide. On March 13, 2020,~~ the United States declared a National Public Health Emergency ~~with respect to COVID-19. On March 16, 2020,~~and we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding ~~COVID-19, during which time we did not draft or collect monthly access membership dues or recurring product charges from our members.~~COVID-19. We re-opened our first center on May 8, 2020 and continued to re-open our centers as state and local governmental authorities permitted.

~~All~~ With the exception of our three Canadian centers, which were temporarily closed during a portion of January 2022, all of our centers ~~are currently~~were open during the three and we are collecting monthly access membership dues and recurring product charges from active members associated with all of our centers. Whether we will need to close any of our centers, and the duration of any such future center closures that may occur, remains uncertain and is dependent on future developments that cannot be accurately predicted at this time.nine months ended September 30, 2022.

Initial Public Offering

On October 12, 2021, Life Time Group Holdings, Inc. consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock at a public offering price of $18.00 per share, resulting in total gross proceeds of $702.0 million, which was reduced by underwriting discounts and other offering and issuance expenses of ~~$22.9~~$28.0 million, of which approximately $0.3 million was recognized during 2022, for net proceeds of ~~$679.1~~$674.0 million. The shares of the ~~Company's~~Company’s common stock began trading on The New York Stock Exchange (the “NYSE”) under the symbol “LTH” on October 7, 2021. A registration statement on Form S-1 relating to the offering of these securities was declared effective by the Securities and Exchange Commission (the “SEC”) on October 6, 2021.

Upon consummation of the IPO, the 5.4 million shares of Series A Preferred Stock (as defined in Note 2, Summary of Significant Accounting Policies) then outstanding automatically converted into approximately 6.7 million shares of common stock of Life Time Group Holdings, Inc. Also upon consummation of the IPO, the 0.5 million shares of restricted Series A Preferred Stock then outstanding converted into approximately 0.6 million restricted shares of common stock of Life Time Group Holdings, Inc. For more information regarding the Series A Preferred Stock, see Note 8, Mezzanine Equity.

Additionally, on October 12, 2021, in connection with the consummation of the IPO, we adopted an amended and restated Certificate of Incorporation under which the Company’s authorized share total was increased to 500.0 million shares of common stock, par value $0.01 per share, and 10.0 million shares of preferred stock, par value $0.01 per share, and the Series A Preferred Stock became no longer authorized.

On October 13, 2021, we used a portion of the $679.1 million of net proceeds we received in connection with the IPO to pay down $575.7 million (including a $5.7 million prepayment penalty) of our Term Loan Facility (as defined in Note 6, Debt). For more information regarding our Term Loan Facility, see Note 6, Debt.

On November 1, 2021, Life Time Group Holdings, Inc. consummated the sale of nearly 1.6 million additional shares of its 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, which was reduced by underwriting discounts and other offering expenses of $1.3 million, for net proceeds of $27.1 million. We ~~intend to use~~used these net proceeds, as well as the remaining portion of the net proceeds we received in connection with the IPO after the $575.7 million (including a $5.7 million prepayment penalty) partial pay down of our Term Loan Facility (as defined in Note 6, Debt), for general corporate purposes.

As of September 30, 2021, total unrecognized share-based compensation expense associated with stock options, restricted Series A Preferred Stock and restricted stock units was $362.5 million. As a result of the consummation of the IPO, a significant portion of this total unrecognized share-based compensation expense amount will be recognized during the fourth quarter of 2021. For more information regarding share-based compensation expense, see Note 8, Mezzanine Equity and Note 9, Stockholders' Equity.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

With the exception of Note 11, Subsequent Events, the remaining notes to unaudited condensed consolidated financial statements contained herein provide applicable disclosures of events that have occurred and circumstances that existed up through and including September 30, 2021. Accordingly, these notes have not been updated to disclose the impact, if any, of any subsequent events, including the impact associated with the IPO.

~~2. Summary of Significant Accounting Policies~~

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Life Time Group Holdings, Inc. and its ~~wholly owned~~wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (‘‘GAAP’’), which require us 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. In recording transactions and balances resulting from business operations, we use estimates based on the best information available. We revise the recorded estimates when better information is available, facts change, or we can determine actual amounts. These revisions can affect our consolidated operating results. All adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial position, results of operations and cash flows for the periods have been included.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. A summary of our significant accounting policies is included in Note 2 to our annual consolidated financial statements.

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)

2. Summary of Significant Accounting Policies

Recently Adopted Accounting Pronouncements

In ~~August 2020,~~November 2021, the Financial Accounting Standards Board ~~(“FASB”~~(the “FASB”) issued Accounting ~~Standards~~Standard Update (“ASU”) ~~2020-06, Debt—Debt~~2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance,” to increase the transparency of government assistance, including with ~~Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”)~~respect to ~~simplify~~the disclosure of the types of assistance an entity receives, an entity’s method of accounting for ~~certain financial instruments. ASU 2020-06 eliminates~~government assistance and the ~~current models that require separation~~effect of ~~beneficial conversion and cash conversion features from convertible instruments and simplifies~~ the ~~derivative scope exception guidance pertaining to equity classification of contracts in~~assistance on an entity’s ~~own equity.~~financial statements. The ~~new standard also introduces additional disclosures for convertible debt and freestanding instruments~~amendments are to be applied either (1) prospectively to all applicable transactions that are ~~indexed~~reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to ~~and settled in an entity’s own equity.~~those transactions. We adopted this ASU ~~2020-06 also amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective~~as of January 1, 2022 and ~~should be~~ applied ~~on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 effective January 1, 2021.~~ it prospectively. The adoption of this ASU ~~2020-06~~ did not have anany impact on our ~~condensed~~financial position, results of operations or cash flows.

New Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848): Scope,” which provides implementation guidance associated with ASU 2020-04 and clarifies certain optional expedients in Topic 848. The guidance in ASU 2020-04 is effective for all entities as of March 12, 2020 and may be applied through December 31, 2022. We are still evaluating the impact of ASU 2020-04, but we do not expect that the adoption of this ASU will have a material impact on our consolidated financial statements.

~~Segment Reporting~~

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is our Founder, Chairman and Chief Executive Officer (“CEO”). Our CODM assesses financial performance and allocates resources based on the consolidated financial results at the total entity level. Accordingly, we have determined that we have 1 operating segment and 1 reportable segment.

Fair Value Measurements

The accounting guidance establishes a framework for measuring fair value and expanded disclosures about fair value measurements. The guidance applies to all assets and liabilities that are measured and reported on a fair value basis. This enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The guidance requires that each asset and liability carried at fair value be classified into one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The carrying amounts related to cash and cash equivalents, accounts receivable, income tax receivable, accounts payable and accrued liabilities approximate fair value.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

Fair Value Measurements on a Recurring Basis. We had no material remeasurements of such assets or liabilities to fair value during ~~either of~~ the three orand nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

Financial Assets and Liabilities. At ~~both~~ September 30, ~~2021~~2022, the fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes (each of which is defined in Note 6, Debt) was approximately $269.9 million, $839.2 million and $404.8 million, respectively. At December 31, ~~2020,~~2021, the ~~gross~~fair value of our outstanding Term Loan Facility, Secured Notes and Unsecured Notes was approximately $277.0 million, $957.4 million and $494.0 million, respectively. The carrying amount of our outstanding ~~debt~~Mortgage Notes and Construction Loan (each of which is defined in Note 6, Debt) at September 30, 2022 and December 31, 2021 approximates fair value. The fair value of our debt is based on the amount of future cash flows discounted using rates we would currently be able to realize for similar instruments of comparable maturity. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. For more information regarding our debt, see Note 6, Debt.

Table of Contents

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Fair Value Measurements on a Nonrecurring Basis. Assets and liabilities that are measured at fair value on a nonrecurring basis primarily relate to our long-lived assets, goodwill and intangible 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.

During both the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we determined that certain projects were no longer deemed viable for construction, and that the previously capitalized site development costs associated with these projects were impaired. Accordingly, as it relates to these long-lived assets, we recognized impairment charges of ~~$0.7~~$0.2 million and ~~$9.9~~$0.7 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~we recognized impairment charges of $2.5~~$0.2 million and ~~$16.9~~$2.5 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Fair value remeasurements are based on significant unobservable inputs (Level 3). Fixed asset fair values are primarily derived using a discounted cash flow (“DCF”) model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally include our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate.

3. Supplemental Balance Sheet and Cash Flow Information

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

September 30,
2021 December 31,
2020
Property held for sale $ — $ 49,686
Construction contract receivables 5,645 12,398
Deferred membership origination costs 4,177 7,212
Prepaid expenses 25,392 17,935
Prepaid expenses and other current assets $ 35,214 $ 87,231

~~Deferred IPO Costs.~~ Prepaid expenses and other current assets at September 30, 2021 include deferred IPO costs totaling approximately $2.2 million. These deferred costs primarily consist of legal, accounting, and other fees relating to the Company’s IPO. With the consummation of the IPO in October 2021, these deferred offering costs will be netted against the related IPO proceeds and recognized during the fourth quarter as a reduction in Additional paid-in capital on our consolidated balance sheet.


	September 30, 2022		December 31, 2021
Property held for sale	$	4,988	$	—
Construction contract receivables	8,106		14,949
Deferred membership origination costs	972		3,150
Prepaid expenses	30,763		30,784
Prepaid expenses and other current assets	$	44,829	$	48,883

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Real estate taxes	Real estate taxes	$	33,814	$	31,015	Real estate taxes	$	39,170	$	32,955
Accrued interest	Accrued interest	41,673		15,010		Accrued interest	31,846		35,006
Payroll liabilities	Payroll liabilities	29,146		17,136		Payroll liabilities	27,133		23,243
Utilities	Utilities	7,774		5,379		Utilities	9,945		7,022
Self-insurance accruals	Self-insurance accruals	24,963		22,444		Self-insurance accruals	20,303		18,921
Corporate accruals	Corporate accruals	24,711		24,123		Corporate accruals	32,772		24,741
Dividends payable		16,414		—
Current maturities of finance lease liabilities	Current maturities of finance lease liabilities	1,383		1,171		Current maturities of finance lease liabilities	921		1,374
Other	Other	3,825		1,397		Other	5,367		4,658
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	183,703	$	117,675	Accrued expenses and other current liabilities	$	167,457	$	147,920

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)

~~Loss per Share~~

Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. The numerator in the diluted loss per share calculation is derived by adding the effect of assumed common stock conversions to loss available to common stockholders. The denominator in the diluted loss per share calculation is derived by adding shares of common stock deemed to be potentially dilutive to the weighted average number of shares of common stock outstanding during the period. Potentially dilutive securities that are subject to performance or market conditions are considered contingently issuable shares for purposes of calculating diluted loss per share. Accordingly, these contingently issuable shares are excluded from the computation of diluted loss per share until the performance or market conditions have been met. Other potentially dilutive securities that do not involve contingently issuable shares are also excluded from the computation of diluted loss per share if their effect is antidilutive.

For both the three and nine months ended September 30, 2021 and 2020, our potentially dilutive securities include stock options, all of which are subject to performance conditions that were not met as of the end of each respective period. Accordingly, the contingently issuable shares associated with our stock options are excluded from the computation of diluted loss per share for both the three and nine months ended September 30, 2021 and 2020. For both the three and nine months ended September 30, 2021, our potentially dilutive securities also include unvested restricted stock units, outstanding shares of Series A convertible participating preferred stock (“Series A Preferred Stock”) and unvested restricted Series A Preferred Stock. Due to the net loss that we recognized during both the three and nine months ended September 30, 2021, the potentially dilutive shares of common stock associated with our unvested restricted stock units, outstanding shares of Series A Preferred Stock and unvested restricted Series A Preferred Stock were determined to be antidilutive and, therefore, are excluded from the computation of diluted loss per share for both the three and nine months ended September 30, 2021.

~~The following table sets forth the calculation of basic and diluted loss per share for both the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Net loss $ (45,442) $ (93,647) $ (274,599) $ (276,304)
Dividends accrued on Series A Preferred Stock (6,126) — (16,414) —
Loss available to common stockholders $ (51,568) $ (93,647) $ (291,013) $ (276,304)
Weighted average common shares outstanding—basic and diluted 145,196 145,196 145,196 145,118
Loss per share—basic and diluted $ (0.36) $ (0.64) $ (2.00) $ (1.90)

~~The following is a summary of potential shares of common stock that were excluded from the computation of diluted loss per share for both the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Stock options 24,118 21,252 24,118 21,252
Unvested restricted stock units 610 — 610 —
Outstanding shares of Series A Preferred Stock 5,430 — 5,430 —
Unvested restricted Series A Preferred Stock 500 — 500 —
Potential common shares excluded from diluted loss per share 30,658 21,252 30,658 21,252

For more information regarding our Series A Preferred Stock and unvested restricted Series A Preferred Stock, see Note 8, Mezzanine Equity and Note 9, Stockholders’ Equity. For more information regarding our stock options and unvested restricted stock units, see Note 9, Stockholders’ Equity.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

3. Supplemental Cash Flow Information

Decreases (increases) in operating assets and increases (decreases) in operating liabilities are as follows:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Accounts receivable	Accounts receivable	$	(3,604)	$	6,149	Accounts receivable	$	(6,056)	$	(3,604)
Center operating supplies and inventories	Center operating supplies and inventories	(3,836)		6,063		Center operating supplies and inventories	(3,140)		(3,836)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(3,243)		9,965		Prepaid expenses and other current assets	2,166		(3,243)
Income tax receivable	Income tax receivable	4,372		2,348		Income tax receivable	3,533		4,372
Other assets	Other assets	1,950		4,491		Other assets	638		1,950
Accounts payable	Accounts payable	17,709		10,890		Accounts payable	2,069		17,709
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	60,270		(3,636)		Accrued expenses and other current liabilities	19,954		60,270
Deferred revenue	Deferred revenue	(16,777)		(3,776)		Deferred revenue	(1,467)		(16,777)
Other liabilities	Other liabilities	773		12,602		Other liabilities	(3,642)		773
Changes in operating assets and liabilities	Changes in operating assets and liabilities	$	57,614	$	45,096	Changes in operating assets and liabilities	$	14,055	$	57,614

Additional supplemental cash flow information is as follows:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Net cash paid for income taxes, net of refunds received (received from income tax refunds, net of taxes paid)		$	221	$	(32,510)
Net cash paid for income taxes, net of refunds received						Net cash paid for income taxes, net of refunds received	$	3,628	$	221
Cash payments for interest, net of capitalized interest	Cash payments for interest, net of capitalized interest	82,228		76,213		Cash payments for interest, net of capitalized interest	82,607		82,228
Capitalized interest	Capitalized interest	2,476		3,719		Capitalized interest	11,228		2,476
Non-cash activity:						Non-cash activity:
Issuance of Series A Preferred Stock (as defined in Note 10, Income (Loss) Per Share) in connection with the extinguishment of a related party secured loan						Issuance of Series A Preferred Stock (as defined in Note 10, Income (Loss) Per Share) in connection with the extinguishment of a related party secured loan	—		108,591

See Note 7, Leases, for supplemental cash flow information associated with our lease arrangements for ~~both~~ the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021.

4. Goodwill and Intangibles

The goodwill balance was $1,233.2 million at both September 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

Intangible assets consisted of the following:


		September 30, 2021							September 30, 2022
		Gross		Accumulated Amortization		Net			Gross		Accumulated Amortization		Net
Intangible Assets:
Trade name	Trade name	$	163,000	$	—	163,000		Trade name	$	163,000	$	—	$	163,000
Member relationships		62,100		(62,100)		—
Other	Other	15,029		(4,425)		10,604		Other	16,735		(6,243)		10,492
Total intangible assets	Total intangible assets	$	240,129	$	(66,525)	$	173,604	Total intangible assets	$	179,735	$	(6,243)	$	173,492


	December 31, 2021
	Gross		Accumulated Amortization		Net
Trade name	$	163,000	$	—	$	163,000
Other	16,327		(5,086)		11,241
Total intangible assets	$	179,327	$	(5,086)	$	174,241

December 31, 2020
Gross Accumulated Amortization Net
Intangible Assets:
Trade name $ 163,000 $ — $ 163,000
Member relationships 62,100 (62,100) —
Other 5,252 (3,833) 1,419
Total intangible assets $ 230,352 $ (65,933) $ 164,419

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

During the nine months ended September 30, 2021, we acquired the assets associated with an outdoor bicycling event for approximately $10.2 million, of which approximately $1.1 million had yet to be paid as of September 30, 2021. The transaction was accounted for as an asset acquisition and the entire purchase price was allocated to an intangible asset associated with a license to use a recreation area for the staging of the event, which expires in April 2031. Other intangible assets at September 30, 2022 and December 31, 2021 ~~includes this~~include a facility license as well as trade names and customer relationships associated with our race registration and timing businesses. ~~Other intangible assets at December 31, 2020 consists solely~~

Table of ~~the trade names and customer relationships associated with our race registration and timing businesses.~~Contents

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Amortization expense associated with intangible assets for ~~both~~ the three months ended September 30, 2022 and 2021 was $0.3 million and ~~2020 was~~ $0.2 million, respectively, and was ~~$0.6~~$1.2 million and ~~$3.6~~$0.6 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Amortization expense associated with intangible assets is included in Depreciation and amortization in our condensed consolidated statements of operations.

There were no goodwill or intangible asset impairment charges recorded during the three and nine months ended September 30, 2022 and 2021.

5. Revenue

Revenue associated with our membership dues, enrollment fees, and certain services from our in-center businesses is recognized over time as earned. Revenue associated with products and services offered in our cafes and spas, as well as through e-commerce, is recognized at a point in time. The following is a summary of revenue, by major revenue stream, that we recognized during the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Membership dues and enrollment fees	Membership dues and enrollment fees	$	261,033	$	169,612	$	653,584	$	490,151	Membership dues and enrollment fees	$	335,717	$	261,033	$	916,895	$	653,584
In-center revenue	In-center revenue	110,967		58,737		280,106		214,768		In-center revenue	144,278		110,967		390,603		280,106
Total center revenue	Total center revenue	372,000		228,349		933,690		704,919		Total center revenue	479,995		372,000		1,307,498		933,690
Other revenue	Other revenue	13,040		2,681		23,835		14,991		Other revenue	16,386		13,040		42,404		23,835
Total revenue	Total revenue	$	385,040	$	231,030	$	957,525	$	719,910	Total revenue	$	496,381	$	385,040	$	1,349,902	$	957,525

The timing associated with the revenue we recognized during the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 is as follows:


		Three Months Ended September 30, 2021						Three Months Ended September 30, 2020							Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
		Center Revenue		Other Revenue		Total Revenue		Center Revenue		Other Revenue		Total Revenue			Center Revenue		Other Revenue		Total Revenue		Center Revenue		Other Revenue		Total Revenue
Goods and services transferred over time	Goods and services transferred over time	$	324,350	$	13,040	$	337,390	$	201,174	$	2,681	$	203,855	Goods and services transferred over time	$	419,758	$	16,386	$	436,144	$	324,350	$	13,040	$	337,390
Goods and services transferred at a point in time	Goods and services transferred at a point in time	47,650		—		47,650		27,175		—		27,175		Goods and services transferred at a point in time	60,237		—		60,237		47,650		—		47,650
Total Revenue		$	372,000	$	13,040	$	385,040	$	228,349	$	2,681	$	231,030
Total revenue														Total revenue	$	479,995	$	16,386	$	496,381	$	372,000	$	13,040	$	385,040

The timing associated with the revenue we recognized during the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 is as follows:


		Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020							Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
		Center Revenue		Other Revenue		Total Revenue		Center Revenue		Other Revenue		Total Revenue			Center Revenue		Other Revenue		Total Revenue		Center Revenue		Other Revenue		Total Revenue
Goods and services transferred over time	Goods and services transferred over time	$	813,425	$	23,835	$	837,260	$	618,003	$	14,991	$	632,994	Goods and services transferred over time	$	1,137,643	$	42,404	$	1,180,047	$	813,425	$	23,835	$	837,260
Goods and services transferred at a point in time	Goods and services transferred at a point in time	120,265		—		120,265		86,916		—		86,916		Goods and services transferred at a point in time	169,855		—		169,855		120,265		—		120,265
Total Revenue		$	933,690	$	23,835	$	957,525	$	704,919	$	14,991	$	719,910
Total revenue														Total revenue	$	1,307,498	$	42,404	$	1,349,902	$	933,690	$	23,835	$	957,525

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 ~~as a result of~~for fees collected in advance for membership dues, enrollment fees, personal training and other center services offerings, as well as our media and athletic events. ~~Total contract~~Contract liabilities at September 30, ~~2021~~2022 and ~~2020~~December 31, 2021 were ~~$30.8~~$34.4 million and ~~$50.3~~$35.9 million, respectively.

Table of Contents

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

Contract liabilities that will be recognized within one year are classified as ~~current liabilities and are included in Deferred~~deferred revenue in our condensed consolidated balance ~~sheets, the balance of which was $28.2 million and $45.8 million~~sheets. Deferred revenue at September 30, ~~2021~~2022 and ~~2020, respectively. These balances~~December 31, 2021 was $32.3 million and $33.9 million, respectively, and consists primarily ~~consist~~ of prepaid membership dues, personal training and other in-center services, and enrollment fees. The ~~$17.6~~$1.6 million decrease ~~in these contract liabilities~~ was primarily driven by deferred registrations received in prior periods for athletic events that took place in the ~~usage of membership dues credits that we gave to~~current period.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

~~members during 2020 as a result of center closures. Also, deferred revenue associated with enrollment fees and center services offerings decreased as a result of our center closures in 2020.~~

Contract liabilities that will be recognized in a future period greater than one year are classified as ~~long-term liabilities and are included in~~a component of Other liabilities in our condensed consolidated balance ~~sheets, the balance of which was $2.6 million and $4.5 million~~sheets. Long-term contract liabilities at September 30, ~~2021~~2022 and ~~2020, respectively. These balances~~December 31, 2021 were $2.1 million and $2.0 million, respectively, and consist primarily ~~consist~~ of deferred enrollment fees.~~The $1.9 million decrease in these contract liabilities was primarily driven by our center closures during 2020.~~

6. Debt

Debt consisted of the following:

September 30, 2021 December 31, 2020
Term Loan Facility, maturing December 2024 $ 843,625 $ —
Prior Term Loan Facility, retired January 2021 — 1,471,584
Prior Revolving Credit Facility, retired January 2021 — 94,000
Secured Notes, maturing January 2026 925,000 —
Unsecured Notes, maturing April 2026 475,000 —
2023 Notes, retired February 2021 — 450,000
Secured loan—related parties, retired January 2021 — 101,503
Mortgage notes, various maturities (1)
151,244 167,872
Other debt 4,289 4,289
Fair value adjustment 1,981 2,469
Total debt 2,401,139 2,291,717
Less unamortized debt discounts and issuance costs (37,798) (19,121)
Total debt less unamortized issuance costs 2,363,341 2,272,596
Less current maturities (31,841) (139,266)
Long-term debt, less current maturities $ 2,331,500 $ 2,133,330

~~(1) Mortgage notes~~ ~~collateralized by certain related real estate and buildings, due through 2027 at a weighted average interest rate of 4.69% and 4.68% at September 30, 2021 and December 31, 2020, respectively.~~

~~Refinancing Transactions~~

During the nine months ended September 30, 2021, Life Time, Inc., an indirect, wholly-owned subsidiary of Life Time Group Holdings, Inc., as the borrower and issuer, as applicable, together with certain other wholly-owned subsidiaries: (i) refinanced in full the then outstanding balances associated with our previous term loan facility (the “Prior Term Loan Facility”) and our prior revolving credit facility (the “Prior Revolving Credit Facility”) through net cash proceeds Life Time, Inc. received from a new term loan facility (the “Term Loan Facility”) that matures in December 2024 as well as the issuance of senior secured notes (the “Secured Notes”) that mature in January 2026; (ii) refinanced in full our previous senior unsecured notes (the “2023 Notes”) through proceeds Life Time, Inc. received from the issuance of new senior unsecured notes (the “Unsecured Notes”) that mature in April 2026; and (iii) converted our then existing related party secured loan into Series A Preferred Stock.


	September 30, 2022		December 31, 2021
Term Loan Facility, maturing December 2024	$	273,625	$	273,625
Revolving Credit Facility, maturing December 2026	—		—
Secured Notes, maturing January 2026	925,000		925,000
Unsecured Notes, maturing April 2026	475,000		475,000
Mortgage Notes, various maturities	123,579		145,572
Construction Loan, maturing February 2026	8,657		—
Other debt	4,122		4,122
Fair value adjustment	1,327		1,818
Total debt	1,811,310		1,825,137
Less unamortized debt discounts and issuance costs	(21,016)		(25,891)
Total debt less unamortized debt discount and issuance costs	1,790,294		1,799,246
Less current maturities	(15,046)		(23,527)
Long-term debt, less current maturities	$	1,775,248	$	1,775,719

Senior Secured Credit Facility

In June 2015, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a senior secured credit facility with a group of lenders led by Deutsche Bank AG as the administrative agent. On January 22, 2021, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into an eighth amendment to the credit agreement governing our senior secured credit agreement (the ~~“Amended Senior Secured Credit Facility”~~“Credit Agreement”). Pursuant to such eighth amendment to the ~~Amended Senior Secured~~ Credit ~~Facility,~~Agreement, Life Time, Inc. and such other ~~subsidiaries:~~subsidiaries, among other things, (i) entered into ~~the Term~~a new term loan facility (the “Term Loan ~~Facility~~ Facility”) and incurred new term loans in an aggregate principal amount of $850.0 ~~million;~~million and (ii) ~~paid off~~extended the ~~then outstanding balances associated~~maturity on the vast majority of commitments under the revolving portion of our senior secured credit facility (the “Revolving Credit Facility” and together with the ~~Prior~~ Term Loan Facility, the “Credit Facilities”). On December 2, 2021, Life Time, Inc. and certain of our other wholly-owned subsidiaries entered into a ninth amendment to the ~~Prior~~Credit Agreement. Pursuant to such ninth amendment, Life Time, Inc. and such other subsidiaries increased the commitments under the Revolving Credit ~~Facility;~~Facility to $475.0 million and ~~(iii)~~ extended the maturity of ~~$325.2 million of~~ the ~~$357.9 million Prior~~ Revolving Credit Facility to December 2, 2026, except that the maturity will be: (a) September 22, 2024 if we have not refinanced or amended the Term Loan Facility in a manner set forth in such amendment by such date; (b) October 16, 2025 if we have at least $100.0 million remaining outstanding on the senior secured notes (the ~~“Revolving Credit Facility”~~“Secured Notes”). that mature in January 2026 on such date; and (c) January 14, 2026 if we have at least $100.0 million remaining outstanding on the senior unsecured notes (the “Unsecured Notes”) that mature in April 2026 on such date.

Upon the exercise of an accordion feature and subject to certain conditions, borrowings under the ~~Amended Senior Secured~~ Credit ~~Facility~~Facilities may be increased ~~up to an additional~~ ~~$400.0 million~~ ~~(plus additional amounts that may be added upon the satisfaction of certain financial tests)~~ subject, in certain cases, to meeting a first lien net leverage ratio. ~~Our ability to increase our borrowings under the Amended Senior Secured~~The Credit ~~Facility using this accordion feature is restricted during the Covenant Modification Period (as defined in “—Debt~~

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

~~Covenants” below). The Amended Senior Secured Credit Facility is~~Facilities are secured by a first priority lien (on a pari-passu basis with the Secured Notes described below) on substantially all of our assets.

~~The net cash proceeds Life Time, Inc. received under the Term Loan Facility, as well as from the Secured Notes, were used to: (i) refinance~~

Table of Contents

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in full the then outstanding balances associated with the Prior Term Loan Facility and the Prior Revolving Credit Facility (details of which are described under “—Term Loan Facility” and “—Revolving Credit Facility,” respectively); (ii) pay debt issuance and original issue discount costs associated with each of these financing transactions (details of which are described in “—Debt Discounts and Issuance Costs” below); and (iii) strengthen our balance sheet by adding to our cash position.thousands except per share data)

Term Loan Facility

~~At both December 31, 2020 and January 22, 2021 (the effective date of the refinancing), the Prior Term Loan Facility balance was~~ ~~$1,471.6 million. Under the Term Loan Facility, Life Time, Inc. incurred new term loans in an aggregate principal amount of~~ ~~$850.0 million~~, of which $507.6 million represents cash proceeds received and $342.4 million represents the cashless portion of the Prior Term Loan Facility that was rolled over into the Term Loan Facility. On January 22, 2021, we used the net cash proceeds received from the Term Loan Facility, as well as a portion of the net proceeds received from the Secured Notes, to pay off the remaining $1,129.2 million Prior Term Loan Facility balance.

The $850.0 million Term Loan Facility, ~~amortizes~~which matures in December 2024, initially amortized at 0.25% quarterly, ~~resulting in~~which required us to make three mandatory quarterly principal repayments of approximately $2.1 million ~~and matures~~during the year ended December 31, 2021. On October 13, 2021, we used a portion of net proceeds we received in ~~December 2024.~~connection with the IPO to pay down $575.7 million (including a $5.7 million prepayment penalty) of our Term Loan Facility. As a result of the pay down, we are no longer required to make quarterly principal payments on the Term Loan Facility prior to its maturity. At September 30, ~~2021,~~2022, the Term Loan Facility loan balance was ~~$843.6~~$273.6 million, with interest due at intervals ranging from 30 to 180 days at interest rates ranging from ~~the London Interbank Offered Rate (“LIBOR”)~~LIBOR plus 4.75% or base rate plus 3.75%, in either case subject to a 1.00% rate floor.

Revolving Credit Facility

~~The Prior~~Our Revolving Credit Facility ~~provided~~provides for a $357.9 million revolver. At December 31, 2020 and January 22, 2021 (the effective date of the refinancing), the Revolving Credit Facility balance was $94.0 million and $109.0 million, respectively. Under the Revolving Credit Facility, we extended the maturity of $325.2 million of the $357.9$475.0 million revolver ~~to September 2024. The remaining $32.7 million non-extended portion of our Revolving Credit Facility~~and matures in ~~August 2022. On January 22, 2021, we used a portion of the net proceeds we received from the~~December 2026, or earlier as detailed above under “—Senior Secured ~~Notes to pay off the then outstanding $109.0 million Prior Revolving~~ Credit ~~Facility balance.~~

Facility.” At September 30, ~~2021,~~2022, there were no outstanding borrowings on the Revolving Credit Facility and there were ~~$40.1~~$31.7 million of outstanding letters of credit, resulting in total revolver availability ~~subject to a $100.0~~of $443.3 million,~~minimum liquidity requirement (see “—Debt Covenants” below), of $217.8 million, of~~ which ~~$185.1 million~~was available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.25% or base rate plus 3.25%~~, while interest on the remaining $32.7 millionwas available at intervals ranging from 30 to 180 days at LIBOR plus 3.00% or base rate plus 2.00%~~.

The weighted average interest rate and debt outstanding under the Revolving Credit Facility for the nine months ended September 30, ~~2021 was 3.83%~~2022 was 4.97% and ~~$12.1~~$43.1 million, respectively. The highest month-end balance during that same period was ~~$40.0~~$100.0 million.

Secured Notes

On January 22, 2021, Life Time, Inc. issued the Secured Notes in an aggregate principal amount of $925.0 million. These notes mature in January 2026 and interest only payments are due semi-annually in arrears at 5.75%. Life Time, Inc. has the option to call the Secured Notes, in whole or in part, on one or more occasions, beginning on January 15, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to January 15, 2023, Life Time, Inc. may redeem up to 40.00% of the aggregate principal amount of the Secured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 105.75% of the principal amount of the Secured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Secured Notes and the related guarantees are our senior secured obligations and are secured on a first-priority basis by security interests inon substantially all of our assets. ~~As of September 30, 2021, $925.0 millionremained outstanding on the Secured Notes.~~

Unsecured Notes

In June 2015, Life Time, Inc. issued the 2023 Notes in the original principal amount of $450.0 million, which were scheduled to mature in June 2023. At both December 31, 2020 and February 5, 2021, $450.0 million~~remained outstanding on the notes.~~ On February 5, 2021, Life Time, Inc. ~~refinanced the 2023 Notes through the issuance by Life Time, Inc. of~~issued the Unsecured Notes in the original principal amount of $475.0 million. The Unsecured Notes mature in April 2026 and interest only payments are due semi-annually in arrears at 8.00%. ~~The proceeds from the Unsecured Notes were used to: (i) redeem in full the then outstanding 2023 Notes balance of $450.0 million~~and satisfy and discharge our obligations thereunder; (ii) pay debt issuance costs associated with the issuance of the Unsecured Notes (details of which are described in “—Debt Discounts and Issuance Costs” below); and (iii) strengthen our balance sheet by adding to our cash position.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

Life Time, Inc. has the option to redeem the Unsecured Notes, in whole or in part, on one or more occasions, beginning on February 1, 2023, subject to the payment of a redemption price that includes a call premium that varies depending on the year of redemption. In addition, at any time prior to February 1, 2023, Life Time, Inc. may redeem up to 40.00% of the aggregate principal amount of the Unsecured Notes outstanding with the net proceeds of certain equity offerings by us at a redemption price equal to 108.00% of the principal amount of the Unsecured Notes, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The Unsecured Notes and the related guarantees are our general senior unsecured obligations and will rank equally in right of payment with all of our existing and future senior indebtedness without giving effect to collateral arrangements.

Mortgage Notes

Certain of our subsidiaries have entered into mortgage facilities with various financial institutions (collectively, the “Mortgage Notes”), which are collateralized by certain of our related real estate and buildings, including one of our corporate headquarters properties. The Mortgage Notes have varying maturity dates from February 2024 through August 2027 and carried a weighted average interest rate of 4.72% and 4.70% at September 30, 2022 and December 31, 2021, respectively. Payments of principal and interest on each of the Mortgage Notes are payable monthly on the first business day of each month. The Mortgage Notes contain customary affirmative covenants, including but not limited to, payment of property taxes, granting of lender access to inspect the properties, maintenance of the properties, providing financial statements, providing estoppel certificates and lender consent to leases. The Mortgage Notes also contain various customary negative covenants, including, but not limited to, restrictions on transferring the property, change in control of the borrower and changing the borrower’s business or principal place of business. As of September 30, ~~2021, $475.0 million~~2022, we were

Table of Contents~~remained outstanding on~~

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands except per share data)

either in compliance in all material respects with the ~~Unsecured Notes.~~covenants associated with the Mortgage Notes or the covenants were not applicable.

~~Secured Loan—Related Parties~~

~~On June 24, 2020, we closed on an approximate $101.5 million~~secured loan (the “Related Party Secured Loan”) from an investor group that was comprised solely of our stockholders or their affiliates. The Related Party Secured Loan was scheduled to mature in June 2021. During the nine months ended September 30, ~~2021, interest expense~~2022, we closed on a sale-leaseback transaction that included certain properties that served as collateral for one of ~~approximately $0.7~~the Mortgage Notes. Accordingly, we used a portion of the net cash proceeds we received from the sale-leaseback transaction to pay off in full the then outstanding principal balance of $4.6 million~~was recognized on this secured loan.~~

~~On January 11, 2021, Life Time Group Holdings, Inc. and certain of its subsidiaries and the investor group~~ associated with this Mortgage Note. For more information regarding the Related Party Secured Loan (or their assignees) entered into a contribution agreement (the “Contribution Agreement”) pursuant to which we converted the total amount of outstanding principal and accrued interest (up though and including January 22, 2021) under the Related Party Secured Loan into Series A Preferred Stock. Effective January 22, 2021, the total outstanding principal and accrued interest balance of approximately $108.6 million~~was conveyed by the investor group to us and we issued, on a dollar-for-dollar basis, to the investor group approximately 5.4 millionshares of Series A Preferred Stock with an estimated fair value of $149.6 million. For accounting purposes, because the fair value of the Series A Preferred Stock~~sale-leaseback transactions that was issued exceeded the carrying value of the outstanding principal and accrued interest balance associated with the Related Party Secured Loan that was extinguished, we recognized a $41.0 million debt extinguishment loss, which is included in Interest expense, net of interest income in our condensed consolidated statement of operations forwere consummated during the nine months ended September 30, ~~2021. For more information regarding the Series A Preferred Stock that was issued in connection with this transaction,~~2022, see Note ~~8, Mezzanine Equity.~~7, Leases.

Construction Loan

On January 22, 2021, we closed on a construction loan (the “Construction Loan”) providing up to $28.0 million to partially finance the construction of a Life Time Living location. The Construction Loan has a maturity date of February 15, 2026 and is collateralized by the property. Borrowings under the Construction Loan bear interest at a variable annual rate of no less than 4.80%. Interest only payments are due monthly beginning April 15, 2022 and continuing through February 15, 2024. Beginning March 15, 2024, based on the principal balance due as of February 15, 2024, monthly principal and interest installment payments will be due in an amount sufficient to fully amortize the principal balance at maturity. At September 30, 2022, there were $8.7 million of outstanding borrowings on the Construction Loan. There were no outstanding borrowings as of December 31, 2021.

Debt Discounts and Issuance Costs

~~In connection~~Unamortized debt discounts and issuance costs associated with the Term Loan Facility, Secured Notes, ~~and~~ Unsecured Notes ~~we incurred debt discounts~~ and ~~issuance costs totaling approximately $44.4~~Construction Loan of $21.0 million ~~during the nine months ended September 30, 2021. In our condensed consolidated balance sheets, we recognize,~~ and present unamortized debt discounts and issuance costs associated with non-revolving debt as a deduction from the face amount of related indebtedness. Accordingly, as it relates to these debt instruments, unamortized debt discounts and issuance costs of $37.8$25.9 million are included in Long-term debt, net of current portion on our ~~September 30, 2021~~ condensed consolidated balance ~~sheet.~~

~~In connection with the Prior Term Loan Facility, the 2023 Notes~~sheets at September 30, 2022 and ~~the Related Party Secured Loan, we had incurred debt discounts and issuance costs totaling $78.6 million. At~~ December 31, 2020, unamortized debt discounts and issuance costs of $19.1 million are included in Long-term debt, net of current portion on our December 31, 2020 condensed consolidated balance sheet. In connection with the extinguishment of these debt instruments during the nine months ended September 30, 2021, previously unamortized debt discounts and issuance costs were written off. Accordingly, as it relates to these extinguished debt instruments, we recognized $18.3 million of debt discount and issuance cost write-offs during the nine months ended September 30, 2021, which are included in Interest expense, net of interest income in our condensed consolidated statement of operations for the nine months ended September 30, 2021.respectively.

In connection with both the Revolving Credit Facility and the Prior Revolving Credit Facility, we have incurred total debt issuance costs of $7.4 million, of which $0.8 million were incurred during the nine months ended September 30, 2021. As of the January 22, 2021 effective date associated with the Amended Senior Secured Credit Facility, the borrowing capacity (i.e., the product of the remaining term and the maximum available credit) associated with the Revolving Credit Facility was greater than the borrowing capacity associated with the Prior Revolving Credit Facility. Accordingly, the debt issuance costs incurred in connection with the Revolving Credit Facility, as well as the unamortized portion of the debt issuance costs associated with the Prior Revolving Credit Facility, will be amortized over the term of the Revolving Credit Facility. We recognize and present unamortized issuance costs associated with revolving debt arrangements as an asset. Accordingly, unamortizedUnamortized revolver-related debt issuance costs of ~~$1.7~~$3.3 million and ~~$1.3~~$4.0 million ~~respectively,~~ are included in Other assets on our condensed consolidated balance sheets at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

Debt Covenants

We are required to comply with certain affirmative and restrictive covenants under our ~~Amended Senior Secured~~ Credit ~~Facility,~~Facilities, Secured Notes and Unsecured Notes. We are also required to comply with a first lien net leverage ratio covenant under the ~~revolving portion of our Amended Senior Secured Credit Facility. However, our Amended Senior Secured~~Revolving Credit Facility, includes a covenant modification period (the “Covenant Modification Period”) ending on the earlier of (i) January 1, 2022 or (ii) the date we provide notice of our intention to terminate the Covenant Modification Period. During the Covenant Modification Period, we are not obligated to comply with the first lien net leverage ratio covenant; however, we are required to maintain a minimum liquidity balance of $100.0 million, which ~~is tested monthly.~~

Effective as of the end of the first fiscal quarter following the Covenant Modification Period and continuing throughout the remaining term of our Amended Senior Secured Credit Facility, we will be requiredrequires us to maintain a first lien net leverage ratio, if ~~30%~~30.00% or more of the

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

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). During the first three quarterly test periods ~~following the Covenant Modification Period,~~of 2022, certain financial measures used in the calculation of the first lien net leverage ratio will be calculated on a pro forma basis by annualizing the respective financial measures recognized during those test periods.

As of September 30, 2022, we were either in compliance in all material respects with the covenants under the Credit Facilities, or the covenants were not applicable.

Future Maturities of Long-Term Debt

Aggregate annual future maturities of long-term debt, excluding unamortized discounts, issuance costs and fair value adjustments, at September 30, ~~2021~~2022 were as follows:


October 2021 through September 2022		$	31,841
October 2022 through September 2023	October 2022 through September 2023	28,252		October 2022 through September 2023	$	15,046
October 2023 through September 2024	October 2023 through September 2024	72,682		October 2023 through September 2024	64,033
October 2024 through September 2025	October 2024 through September 2025	830,825		October 2024 through September 2025	286,140
October 2025 through September 2026	October 2025 through September 2026	1,413,281		October 2025 through September 2026	1,421,714
October 2026 through September 2027				October 2026 through September 2027	19,953
Thereafter	Thereafter	22,277		Thereafter	3,097
Total future maturities of long-term debt	Total future maturities of long-term debt	$	2,399,158	Total future maturities of long-term debt	$	1,809,983

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)

7. Leases

Lease Cost

Lease cost included in our condensed consolidated statements of operations for the three months ended September 30, ~~2021~~2022 and ~~2020~~2021 consisted of the following:


		Three Months Ended September 30,				Classification in Condensed Consolidated Statements of Operations		Three Months Ended September 30,				Classification in Condensed Consolidated Statements of Operations
		2021		2020				2022		2021
Lease cost:	Lease cost:						Lease cost:
Operating lease cost	Operating lease cost	50,987		46,644		Rent	Operating lease cost	$	60,761	$	50,987	Rent
Short-term lease cost	Short-term lease cost	281		338		Rent	Short-term lease cost	610		281		Rent
Variable lease cost	Variable lease cost	1,245		557		Rent	Variable lease cost	1,842		1,245		Rent
Finance lease cost:	Finance lease cost:						Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	380		652		Depreciation and amortization	Amortization of right-of-use assets	336		380		Depreciation and amortization
Interest on lease liabilities	Interest on lease liabilities	42		43		Interest expense, net of interest income	Interest on lease liabilities	22		42		Interest expense, net of interest income
Total lease cost	Total lease cost	$	52,935	$	48,234		Total lease cost	$	63,571	$	52,935

Lease cost included in our condensed consolidated statements of operations for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 consisted of the following:

Nine Months Ended
September 30, Classification in Condensed
Consolidated Statements of Operations
2021 2020
Lease cost:
Operating lease cost 150,475 136,760 Rent
Short-term lease cost 747 928 Rent
Variable lease cost 3,330 782 Rent
Finance lease cost:
Amortization of right-of-use assets 1,119 1,925 Depreciation and amortization
Interest on lease liabilities 140 143 Interest expense, net of interest income
Total lease cost $ 155,811 $ 140,538

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~


	Nine Months Ended September 30,				Classification in Condensed Consolidated Statements of Operations
	2022		2021
Lease cost:
Operating lease cost	$	173,670	$	150,475	Rent
Short-term lease cost	1,485		747		Rent
Variable lease cost	4,011		3,330		Rent
Finance lease cost:
Amortization of right-of-use assets	1,026		1,119		Depreciation and amortization
Interest on lease liabilities	79		140		Interest expense, net of interest income
Total lease cost	$	180,271	$	155,811

Operating and Finance Lease Right-of-Use Assets and Lease Liabilities

Operating and finance lease right-of-use assets and lease liabilities were as follows:


		September 30, 2021		December 31, 2020		Classification on Condensed Consolidated Balance Sheet		September 30, 2022		December 31, 2021		Classification on Condensed Consolidated Balance Sheets
Lease right-of-use assets:	Lease right-of-use assets:						Lease right-of-use assets:
Operating leases	Operating leases	1,864,246		1,708,597		Operating lease right-of-use assets	Operating leases	$	2,148,828	$	1,864,528	Operating lease right-of-use assets
Finance leases (1)	Finance leases (1)	2,325		2,295		Other assets	Finance leases (1)	1,180		2,073		Other assets
Total lease right-of-use assets	Total lease right-of-use assets	$	1,866,571	$	1,710,892		Total lease right-of-use assets	$	2,150,008	$	1,866,601
Lease liabilities:	Lease liabilities:						Lease liabilities:
Current	Current						Current
Operating leases	Operating leases	44,137		49,877		Current maturities of operating lease liabilities	Operating leases	$	50,746	$	46,315	Current maturities of operating lease liabilities
Finance leases	Finance leases	1,383		1,171		Accrued expenses and other current liabilities	Finance leases	921		1,374		Accrued expenses and other current liabilities
Non-Current	Non-Current						Non-Current
Operating leases	Operating leases	1,902,784		1,738,393		Operating lease liabilities, net of current portion	Operating leases	2,206,753		1,909,883		Operating lease liabilities, net of current portion
Finance leases	Finance leases	1,007		1,202		Other liabilities	Finance leases	298		757		Other liabilities
Total Lease liabilities		$	1,949,311	$	1,790,643
Total lease liabilities							Total lease liabilities	$	2,258,718	$	1,958,329

(1) Finance lease right-of-use assets were reported net of accumulated amortization of ~~$2.1~~$2.8 million and ~~$1.2~~$2.4 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~Operating Lease Right-of-Use Assets and Liabilities Associated with Unrelated Third Party Leases~~

Table of Contents

In connection with leases with unrelated third parties that commenced during the nine months ended September 30, 2021, we recognized operating lease right-of-use assets and lease liabilities of $203.7 million and $194.0 million, respectively, on our condensed consolidated balance sheet. In connection with modified leases that were remeasured during the nine months ended September 30, 2021, we recognized a net decreaseLIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in ~~operating lease right-of-use assets and lease liabilities, each of which totaled $5.4 million, on our condensed consolidated balance sheet.~~thousands except per share data)

~~Finance Lease Right-of-Use Assets and Liabilities Associated with Unrelated Third Party Leases~~

In connection with leases with unrelated third parties that commenced during the nine months ended September 30, 2021, we recognized finance lease right-of-use assets and lease liabilities, each of which totaled $1.2 million, on our condensed consolidated balance sheet.

Remaining Lease Terms and Discount Rates

The weighted-average remaining lease terms and discount rates associated with our operating and finance lease liabilities at September 30, ~~2021~~2022 were as follows:


			September 30, ~~2021~~2022
Weighted-average remaining lease term (1)
Operating leases			18.0 years
Finance leases			~~2.2~~1.4 years
Weighted-average discount rate
Operating leases			~~7.98%~~8.23%
Finance leases			~~6.42%~~6.06%

(1) The weighted-average remaining lease term associated with our operating and finance lease liabilities does not include all of the optional renewal periods available to us under our current lease arrangements. Rather, the weighted-average remaining lease term only includes periods covered by an option to extend a lease if we are reasonably certain to exercise that option.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

Sale-Leaseback Transactions

~~Sale-Leaseback Transactions with Unrelated Third Parties~~

~~Duri~~ngDuring the nine months ended September 30, ~~2021,~~2022, we entered into ~~two~~and consummated sale-leaseback transactions involving ~~two~~nine properties with two unrelated third parties. Under these transactions, we sold ~~property~~nine properties with a combined net book value of ~~$86.1~~$285.6 million for ~~$76.0~~$375.0 million, which was reduced by transaction costs of ~~$2.0~~$1.5 million, for net cash proceeds of ~~$74.0~~$373.5 million. The estimated fair value of the properties sold was ~~$85.5~~$385.1 million. ~~Sale-leaseback transactions with unrelated third parties are accounted for at fair value.~~ Accordingly, the aggregate sales price associated with these arrangements was increased ~~for accounting purposes,~~ by ~~a total of $9.5~~$10.1 million, which resulted in the recognition of ~~an aggregate loss~~a gain of ~~$2.6~~$98.0 million on these transactions. This ~~net loss~~gain is included in Other operating (income) expense in our condensed consolidated ~~statement~~statements of operations for the nine months ended September 30, 2021. The leases, each of which has been classified as an operating lease, each has an initial term of 25 years and includes 6 renewal options of five years each. The $9.5 million increase in the aggregate sales price associated with these sale-leaseback transactions was accounted for as prepaid rent, which was recognized as a non-cash increase in the aggregate operating lease right-of-use asset balance associated with these properties.operations.

Supplemental Cash Flow Information

Supplemental cash flow information associated with our operating and finance leases is as follows:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	137,942	$	87,924	Operating cash flows from operating leases	$	146,366	$	137,942
Operating cash flows from finance leases	Operating cash flows from finance leases	140		143		Operating cash flows from finance leases	79		140
Financing cash flows from finance leases	Financing cash flows from finance leases	1,133		1,034		Financing cash flows from finance leases	1,043		1,133

Non-cash information:	Non-cash information:					Non-cash information:
Right-of-use assets obtained in exchange for initial lease liabilities:	Right-of-use assets obtained in exchange for initial lease liabilities:					Right-of-use assets obtained in exchange for initial lease liabilities:
Operating leases	Operating leases	194,021		145,384		Operating leases	316,071		194,021
Finance leases	Finance leases	1,150		2,021		Finance leases	142		1,150
Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities:	Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities:					Right-of-use asset adjustments recognized as a result of the remeasurement of existing lease liabilities:
Operating leases	Operating leases	(5,357)		36,865		Operating leases	7,366		(5,357)
Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions	Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions	9,500		19,310		Non-cash increase in operating lease right-of-use assets associated with below-market sale-leaseback transactions	10,090		9,500

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)

Maturities of Operating and Finance Lease Liabilities

The maturities associated with our operating and finance lease liabilities at September 30, ~~2021~~2022 are as follows:


		Operating leases		Finance leases		Total			Operating Leases		Finance Leases		Total
October 2021 through September 2022		$	184,947	1,493		186,440
October 2022 through September 2023	October 2022 through September 2023	195,386		874		196,260		October 2022 through September 2023	$	220,452	$	964	$	221,416
October 2023 through September 2024	October 2023 through September 2024	203,040		167		203,207		October 2023 through September 2024	235,766		262		236,028
October 2024 through September 2025	October 2024 through September 2025	205,024		—		205,024		October 2024 through September 2025	238,287		43		238,330
October 2025 through September 2026	October 2025 through September 2026	208,241		—		208,241		October 2025 through September 2026	241,690		2		241,692
October 2026 through September 2027								October 2026 through September 2027	242,275		1		242,276
Thereafter	Thereafter	2,803,049		—		2,803,049		Thereafter	3,316,891		—		3,316,891
Total lease payments	Total lease payments	3,799,687		2,534		3,802,221		Total lease payments	4,495,361		1,272		4,496,633
Less: Imputed interest	Less: Imputed interest	1,852,766		144		1,852,910		Less: Imputed interest	2,237,862		53		2,237,915
Present value of lease liabilities	Present value of lease liabilities	$	1,946,921	$	2,390	$	1,949,311	Present value of lease liabilities	$	2,257,499	$	1,219	$	2,258,718

8. Stockholders’ Equity

2021 Equity Incentive Plan

In connection with the IPO and effective October 6, 2021, we adopted the 2021 Incentive Award Plan (the “2021 Equity Plan”), under which we may grant cash and equity-based incentive awards to our employees, consultants and directors. The maximum number of shares of our common stock available for issuance under the 2021 Equity Plan is equal to the sum of (i) approximately 14.5 million shares of our common stock, (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 4% of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year and (B) such lesser amount as determined by our board of directors, and (iii) the approximately 1.0 million shares of our common stock that were available for issuance under the 2015 Equity Plan as of October 6, 2021. Effective January 1, 2022, the number of shares of our common stock available for issuance under the 2021 Equity Plan increased by approximately 7.7 million shares pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence. Additionally, the number of shares of our common stock available for issuance under the 2021 Equity Plan may increase with respect to awards under the 2015 Equity Plan and any other prior equity incentive plans of the Company or its predecessor which are forfeited or lapse unexercised and which following the effective date of the 2021 Equity Plan are not issued under such prior plan; provided, however, no more than 14.5 million shares may be issued upon the exercise of incentive stock options. The share reserve formula under the 2021 Equity Plan is intended to provide us with the continuing ability to grant equity awards to eligible employees, directors and consultants for the ten-year term of the 2021 Equity Plan.

As of September 30, 2022, approximately 19.1 million shares were available for future awards to employees and other eligible participants under the 2021 Equity Plan.

2021 Employee Stock Purchase Plan

In connection with the IPO and effective October 6, 2021, we adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at periodic intervals, with their accumulated payroll deductions. The ESPP consists of two components: an Internal Revenue Service (“IRS”) Code section 423 (“Section 423”) component, which is intended to qualify under Section 423 of the IRS Code and a non-Section 423 component, which need not qualify under Section 423 of the IRS Code. The aggregate number of shares of our common stock that has initially been reserved for issuance under the ESPP is equal to (i) approximately 2.9 million shares of our common stock, and (ii) an annual increase on the first day of each year beginning in 2022 and ending in and including 2031, equal to the lesser of (A) 1% of the aggregate number of shares of our common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of our shares of common stock as determined by our board of directors; provided that in no event will more than 29.0 million shares of our common stock be available for issuance under the Section 423 component of the ESPP. Our board of directors determined that no additional shares would become available under the ESPP as of January 1, 2022 pursuant to the evergreen feature described in part (ii) of the immediately preceding sentence. Our board of directors or the compensation committee will have authority to interpret the terms of the ESPP and determine eligibility of participants.

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)

~~8. Mezzanine Equity~~

~~Mezzanine equity consists~~The ESPP will permit participants to purchase common stock through payroll deductions of ~~Series A Preferred Stock. The following table summarizes~~up to 15% of their eligible compensation, which includes a participant’s gross base compensation for services to us. On the ~~changes in mezzanine equity for the nine months ended September 30, 2021:~~

Preferred Stock
Shares Amount
Balance at January 1, 2021 — $ —
Issuance of Series A Preferred Stock 5,430 149,585
Issuance of restricted Series A Preferred Stock (1)
500 —
Share-based compensation associated with restricted Series A Preferred Stock (1)
— 4,035
Balance at September 30, 2021 5,930 $ 153,620

~~(1)During the nine months ended September 30, 2021, the Company~~first trading day of each offering period, each participant will automatically be granted ~~0.5 million~~an option to purchase shares of ~~restricted Series A Preferred Stock~~our common stock. The option will expire at the end of the applicable offering period and will be exercised on each purchase date during such offering period to the extent of the payroll deductions accumulated during the offering period. We expect to have consecutive offering periods of approximately six months in length commencing on each June 1 and December 1 during the term of the ESPP. The purchase price for a share of our ~~CEO. At September 30, 2021, the 0.5 million~~common stock will be 90% of the fair market value of a share on the enrollment date for such offering period or on the purchase date, whichever is lower, and subject to adjustment by our board of directors or compensation committee. Participants may voluntarily end their participation in the ESPP prior to the end of the applicable offering period and will be paid their accrued payroll deductions that have not yet been used to purchase shares of ~~restricted Series A Preferred Stock associated with this award were issued and outstanding however, all~~common stock. Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the ~~shares remained unvested. During~~option purchase price, subject to the certain participation limitations. Participation will end automatically upon a participant’s termination of employment. No offering periods commenced under the ESPP during the three and nine months ended September 30, ~~2021, we recognized share-based compensation expense associated with this restricted Series A Preferred~~ 2022.

Stock award of $2.3 million and $4.0 million, respectively, the offset for which was recognized as an increase in mezzanine equity. Share-based compensation expense associated with this restricted Series A Preferred Stock award is included in General, administrative and marketing in our condensed consolidated statements of operations. Share-based compensation expense associated with this award is recognized over the vesting period based on the grant date fair value per share. For more information regarding this restricted Series A Preferred Stock award, see “—Restricted Series A Preferred Stock” below.

~~Series A Preferred Stock~~

~~Authorization and Designation~~

On January 11, 2021, our board of directors adopted and approved an amendment to the Certificate of Incorporation for Life Time Group Holdings, Inc., which (i) increased the amount of authorized shares of common stock, $0.01 par value per share, from 170.0 million to 200.0 million; and (ii) authorized 25.0 million shares of preferred stock, $0.01 par value per share. Also on January 11, 2021, our board of directors authorized 12.0 million shares of Series A Preferred Stock of Life Time Group Holdings, Inc., $0.01 par value per share. The rights, preferences, privileges, qualifications, restrictions and limitations relating to the Series A Preferred Stock were set forth in the Certificate of Designations (“COD”), which the Company filed with the Secretary of State of the State of Delaware on January 22, 2021.

~~Voting Rights~~

~~Holders of Series A Preferred Stock were only entitled to vote on matters specifically related to the Series A Preferred Stock.~~

~~Dividend Rights~~

From and after the issue date, on each anniversary of the issue date, each share of Series A Preferred Stock was to accrue additional shares of Series A Preferred Stock as a paid-in-kind (“PIK”) dividend on the Liquidation Preference (defined in “—Liquidation Rights” below) in effect at the anniversary date at rate of 15.0% per annum. The PIK dividends were cumulative and compounded annually to the extent that they had not been paid by the Company. Accrued PIK dividends were payable, at the option of the Company, in either cash from any source of funds legally available or additional shares of Series A Preferred Stock. The holders of Series A Preferred Stock were entitled to participate in any dividends or distributions on our common stock or other junior stock of the Company on an as-if-converted basis (assuming full conversion of all outstanding shares of Series A Preferred Stock).

~~Liquidation Rights~~

The Series A Preferred Stock ranked senior to the Company’s common stock or other junior capital stock, with respect to dividend rights and rights on the distribution of assets, in the event of a change of control (“COC”) or any liquidation, winding up of dissolution of the business of the Company, whether voluntary or involuntary (a “Deemed Liquidation Event”). Upon the occurrence of a Deemed Liquidation Event, each holder of shares of Series A Preferred Stock was entitled to receive, for each share, out of assets of the Company legally available for distribution to stockholders or, in the case of a COC, out of the consideration payable to stockholders or the Company in such COC, a preferential amount equal to the greater of (i) the $20.00 per share issue price plus the amount of any accrued dividends (including accrued PIK shares) on such shares of Series A Preferred Stock (“Liquidation Preference”) and (ii) the per share amount of all cash, securities or other property to be distributed in respect of the common stock of the Company that such holder of Series A Preferred Stock would have been entitled to receive had the holder converted such Series A Preferred Stock into shares of common stock of the Company (“Deemed Conversion”), subject to certain adjustments set forth in the COD (details of which are described in “—Conversion Price Adjustments” below). All preferential amounts to be paid to the holders of Series A Preferred Stock in connection with a Deemed

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

Liquidation Event would be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of the Company to the holders of the Company’s common stock or any other junior stock.

~~Conversion Rights~~

Upon the (i) consummation of an initial public offering, (ii) consummation of a Qualifying Private Sale (“QPS”) or (iii) election of holders of at least 75% of the then outstanding shares of Series A Preferred Stock, each of the outstanding shares of Series A Preferred was to automatically convert (“Automatic Conversion”) into a number of shares of common stock of the Company equal to the Liquidation Preference, subject to certain adjustments set forth in the COD (details of which are described in “—Liquidation Preference Adjustments” below), divided by the $20.00 issue price, subject to certain adjustments set forth in the COD (“Conversion Price”) (details of which are described in “—Conversion Price Adjustments” below).

~~Liquidation Preference Adjustments~~

In the event of an Automatic Conversion or a Deemed Conversion of shares of Series A Preferred Stock into common shares of the Company, the accrued dividends on such shares of Series A Preferred Stock were to be (a) reduced to zero, in the event that the fair value of each share of the Company’s common stock into which such share of Series A Preferred Stock is convertible would equal or exceed the sum of (i) the Liquidation Preference (assuming, for this purpose, that the accrued dividends included in this amount shall not have been reduced to zero) and (ii) any cash dividends paid in respect of such share of Series A Preferred Stock, or (b) reduced to such amount as would provide each holder of such shares of Series A Preferred Stock the 15.0% annual dividend rate from the issue date to the conversion date, in the event that the fair value of each share of the Company’s common stock into which such share of Series A Preferred Stock is convertible exceeds the $20.00 initial price per share but is less than the sum of (i) the Liquidation Preference (assuming, for this purpose, that the accrued dividends included in this amount shall not have been reduced) and (ii) any cash dividends paid in respect of such share of Series A Preferred Stock.

~~Conversion Price Adjustments~~

The Conversion Price, as defined in the COD, means the $20.00 issue price, subject to anti-dilution adjustments; provided, however, that (i) with respect to any shares of Series A Preferred Stock that are converted into the Company’s common stock upon the consummation of an initial public offering, the Conversion Price shall equal the lesser of (a) the $20.00 issue price and (b) the initial public offering price, as applicable, and (ii) with respect to any shares of Series A Preferred Stock that are converted into the Company’s common stock upon the consummation of a QPS, the Conversion Price share equal the lesser of (a) the $20.00 issue price and (b) the price per share paid by the third party purchased in such transaction, as applicable.

~~Mandatory Redemption~~

On July 22, 2026 (the “Redemption Date”), the Company would be required to redeem any and all outstanding shares of Series A Preferred stock, from any source of funds legally available for such purpose at a price per share equal to the Liquidation Preference in respect of the redeemed shares.

~~Series A Preferred Stock Issuance~~

The fair value of the 5.4 million shares of Series A Preferred Stock that the Company issued, as well as the 0.5 million shares associated with the restricted Series A Preferred Stock award that the Company granted to our CEO, during the nine months ended September 30, 2021 was estimated using an as-converted value plus risky put option model. The put option value was estimated using the Black-Scholes option pricing model. Primary assumptions used in determining the estimated issuance date fair value of the Series A Preferred Stock include: the estimated equity value associated with the then outstanding common stock of Life Time Group Holdings, Inc., a strike price of $20.00 per share, PIK dividend yield rate of 15.0%, expected term of 1.0 years, volatility rate of 65.00% and a risk-free rate of 0.08%. For more information regarding the Contribution Agreement and issuance of the Series A Preferred Stock, see Note 6, Debt. For more information regarding the restricted Series A Preferred Stock, see “—Restricted Series A Preferred Stock” below).

~~Restricted Series A Preferred Stock~~Options

During the second quarter of 2021, in lieu of the vast majority of cash compensation for our CEO for 2021, the Company granted an award of 0.5 million shares of restricted Series A Preferred Stock to our CEO, 50% of which vests on each anniversary of the grant date with 100% full vesting on the date that is ~~180 days~~nine after an initial underwritten public offering. Effective as of the grant date, our CEO has all of the rights of a stockholder with respect to these 0.5 million outstanding shares of restricted Series A Preferred Stock, including the right to receive PIK share or cash dividends. Immediately prior to the granting of this equity award, we had recognized an accrued compensation liability of approximately $1.6 million associated with our CEO’s 2021 compensation. For accounting purposes, the settlement of this $1.6 million accrued compensation liability through issuance of the restricted Series A Preferred Stock award was recognized as a decrease in Accrued expenses and other current liabilities and an increase in Additional paid-in capital on our condensed consolidated balance sheet. As of months ended September 30, ~~2021, all of the restricted Series A Preferred Stock shares subject to this award were both unvested and outstanding.~~

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

~~Share-based compensation expense associated with this restricted Series A Preferred Stock award will be recognized over the vesting period based on the grant date fair value per share, reduced by the~~ ~~$1.6 million~~ of compensation expense associated with the accrued compensation liability that had previously been recognized. During the three and nine months ended September 30, 2021, we recognized share-based compensation expense associated with this restricted Series A Preferred Stock award of $2.3 million and $4.0 million, respectively, the offset for which was recognized as an increase in Mezzanine equity on our condensed consolidated balance sheet (details of which are described in “—Mezzanine Equity Classification” below). Share-based compensation expense associated with this restricted Series A Preferred Stock award is included in General, administrative and marketing in our condensed consolidated statements of operations. As of September 30, 2021, unrecognized share-based compensation expense related to this restricted Series A Preferred Stock award was approxim~~ately $8.1 million. The~~ estimated fair value associated with this restricted Series A Preferred Stock award will be recognized as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met. With the consummation of the IPO, previously unrecognized share-based compensation expense associated with this restricted Series A Preferred Stock award will be recognized effective with the date that is 180 days after the effective date associated with such initial public offering. For more information on share-based compensation, see Note 9, Stockholders’ Equity.

~~Mezzanine Equity Classification~~

We applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”), in order to determine the appropriate accounting for both the Series A Preferred Stock that the Company issued, as well as the restricted Series A Preferred Stock award that the Company granted to our CEO, during the nine months ended September 30, 2021. Based on our analysis, we determined that these shares of Series A Preferred Stock (i) do not meet any of the conditions that would require liability accounting, (ii) are more akin to an equity-like host and (iii) do not contain any embedded features that require bifurcation. Also, because these shares of Series A Preferred Stock are (x) redeemable upon the occurrence of certain Deemed Liquidation Events that are not solely within the Company’s control; and (y) required to be redeemed at a determinable price on the Redemption Date, we determined that the carrying value of the Series A Preferred Stock that the Company issued, as well the offset to the recognized share-based compensation expense associated with the restricted Series A Preferred Stock award, is required to be classified as temporary mezzanine equity on our September 30, 2021 condensed consolidated balance sheet. Accordingly, the issuance date fair value of ~~$149.6 million~~ ~~associated with the~~ ~~5.4 million~~ shares of Series A Preferred Stock that the Company issued during the nine months ended September 30, 2021 was recognized as an increase in Mezzanine equity on our September 30, 2021 condensed consolidated balance sheet. Also, the offset to the ~~$4.0 million~~ of share-based compensation expense associated with the restricted Series A Preferred Stock award that we recognized during the nine months ended September 30, 2021 was recognized as an increase in Mezzanine equity on our September 30, 2021 condensed consolidated balance sheet.

~~At September 30, 2021, the outstanding shares of Series A Preferred Stock were not redeemable, and we determined that it was not probable that these shares would become redeemable.~~

~~Accrued Dividends~~

~~At September 30, 2021, PIK dividend shares totaling approximately~~ ~~0.6 million~~ shares had accrued on the outstanding Series A Preferred Stock and the underlying shares associated with the restricted Series A Preferred Stock award. At September 30, 2021, the estimated fair value of these PIK dividend shares was approximately ~~$16.4 million~~. Based on the applicable accounting guidance, because the PIK dividend feature is discretionary, each accrued PIK share is required to be measured on the basis of its fair value on the commitment date, which is generally the dividend accrual date. Accordingly, we recognized the $16.4 million estimated fair value of the accrued PIK dividends as a non-cash increase in Accrued expenses and other current liabilities and a decrease in Additional paid-in capital on our September 30, 2021 condensed consolidated balance sheet.

~~9. Stockholders’ Equity~~

~~Authorized Common Stock~~

For information on the increase in the amount of authorized shares of common stock of Life Time Group Holdings, Inc. during the nine months ended September 30, 2021, see “Series A Preferred Stock—Authorization and Designation” under Note 8, Mezzanine Equity.

~~Share-Based Compensation~~

~~Equity Incentive Plan~~

On October 6, 2015, our board of directors adopted the LTF Holdings, Inc. 2015 Equity Incentive Plan (as amended, the “2015 Equity Plan”). During the nine months ended September 30, 2021, our board of directors and stockholders approved an amendment to the 2015 Equity Plan. Pursuant to the amendment, the 2015 Equity Plan provided for the issuance of up to approximately 30.6 million shares of our common stock, plus an annual increase on the first day of each calendar year beginning on January 1, 2022, and ending on and including January 1, 2025, by a number equal to 1.5% of the fully diluted shares of our common stock outstanding on the last day of the immediately preceding fiscal year; provided, that no annual increase shall occur on or after the Company (or its successor) becomes a publicly listed company.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

On June 6, 2019, we launched a voluntary stock option purchase offer (the “Offer”) whereby, subject to certain conditions and limitations, we offered eligible holders (not including our CEO) of qualifying stock options under the 2015 Equity Plan (“Covered Options”) the right to sell up to a certain number of vested Covered Options back to us. The Offer terminated on July 3, 2019. In connection with the Offer, we purchased approximately 1.6 million Covered Options. Effective with the purchase date, the 1.6 million Covered Options were cancelled, thereby removing these shares from the number of shares available for future grants under the 2015 Equity Plan.

~~As of September 30, 2021, approximately~~ ~~1.0~~ ~~million shares were available for future stock-based award grants to employees and other eligible participants under the 2015 Equity Plan.~~

~~Stock Options~~

~~Summary of Stock Option Activity~~

~~Stock option activity for the nine months ended September 30, 2021 is as follows:~~

Shares Weighted Average
Exercise Price
Outstanding as of December 31, 2020 21,119 $ 11.00
Granted 3,189 19.32
Forfeited (190) 17.41
Outstanding as of September 30, 2021 $ 24,118 12.05
Exercisable as of September 30, 2021 $ — —

~~During the nine months ended September 30, 2021,~~ the Company granted approximately ~~3.2~~1.0 million stock ~~options~~option awards under the ~~2015~~2021 Equity ~~Plan, of which approximately 1.1 million were granted to executives and approximately 2.1 million were granted to non-executive service providers.~~Plan. These options have a ~~ten-year~~10-year contractual term from the date of ~~grant. The exercise pric~~grant and vest in ~~es and terms~~four ratable annual installments on each of ~~these awards were determined and approved by our board~~the first four anniversaries of ~~directors~~the grant date, subject to continuous employment or ~~a committee thereof.~~service from the grant date through the applicable vesting date. The exercise price associated with each of these awards is not less than the fair market value per share of our common stock ~~as determined by our board of directors or a committee thereof,~~ at the time of grant.

~~Of the~~ ~~1.1 million~~ ~~options granted to executives during the nine months ended September 30, 2021, 50% are time vesting options and 50% are performance vesting options. The time vesting options vest in~~ ~~four~~ ~~equal installments on each of the first~~ ~~four~~ anniversaries of the first calendar day of the month in which the grant date occurred, subject to continuous employment from the grant date through the applicable vesting date. All or a portion of the performance vesting options shall vest only upon the attainment of certain targets for the twelve month period commencing on January 1, 2021 and ending on December 31, 2021, as defined in the underlying option agreements, subject to continuous employment from the grant date through the membership dues revenue determination date. Both the time vesting and performance vesting options shall become exercisable on the occurrence of the first measurement date to occur following the grant date, which is generally defined to include the date of a change in control, the first date following the expiration of the lock-up period applicable to the optionee related to an initial public offering, or death or disability, all as defined and subject to the terms and conditions in the underlying option agreements.

~~The~~ ~~2.1 million~~ ~~stock options that were granted to non-executive team members during the nine months ended September 30, 2021 are time vesting options, which vest in four equal installments on each of the first~~ ~~four~~ anniversaries of the first calendar day of the month in which the grant date occurred, subject to continuous employment from the grant date through the applicable vesting date. These options shall become exercisable on the effective date associated with the first measurement date (as described immediately above) to occur following the grant date.

~~Unless otherwise determined by the administrator of the 2015 Equity Plan, with respect to the~~ ~~3.2 million~~ stock options that the Company granted during the nine months ended September 30, 2021: (i) upon an option holder’s termination of services for any reason, any portion of an option that has not become vested on or prior to the termination date shall be forfeited on such date and shall not thereafter become vested or exercisable, and (ii) upon an involuntary termination by the Company for cause (as defined in the underlying option agreement), any portion of an option that has become vested on or prior to the termination date shall be forfeited on such date and shall not thereafter become exercisable.

~~At September 30, 2021, options to purchase approximately~~ ~~24.1 million~~ shares of our common stock were outstanding. At September 30, 2021, there were no options exercisable because the option exercisability provisions of the underlying stock option agreements were not met.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

~~Fair Value of Stock Option Awards~~

The fair value of the ~~approximately~~ ~~3.2 million~~ ~~stock~~ options granted during the nine months ended September 30, ~~2021~~2022 was calculated using the Black-Scholes option pricing model. ~~The following weighted average assumptions were used in determining the fair value~~Approximately 0.2 million and 0.3 million of ~~these options:~~

Nine Months Ended September 30, 2021
Dividend yield 0.00%
Risk-free interest rate (1)
0.94%
Expected volatility (2)
60.00%
Expected term of options (in years) (3)
6.12
Fair Value $ 10.71

~~(1)The risk-free rate is based on the U.S. treasury yields, in effect at the time of grant or modification, corresponding with the expected term of the options.~~

~~(2)Expected volatility is based on historical volatilities for a time period similar to that of the expected term of the options.~~

~~(3)Expected term of the options is based on probability and expected timing of market events leading to option exercise.~~

~~Share-Based Compensation Expense Associated with Stock Options~~

~~No share-based compensation expense associated with~~ stock options ~~was recognized for~~were exercised during the three and nine months ended September 30, ~~2021~~2022, respectively. No stock options were exercised during the three and ~~2020.~~nine months ended September 30, 2021. As of September 30, ~~2021,~~2022, options to purchase approximately 25.1 million shares of our common stock were outstanding, of which approximately 21.8 million were exercisable.

Share-based compensation expense associated with stock options for the three months ended September 30, 2022 was $2.7 million, of which $0.2 million, $2.4 million and $0.1 million is included in Center operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations. Share-based compensation expense associated with stock options for the nine months ended September 30, 2022 was $17.4 million, of which $1.5 million, $15.4 million and $0.5 million is included in Center operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations. No share-based compensation expense related to stock options was recognized during the three and nine months ended September 30, 2021. As of September 30, 2022, unrecognized share-based compensation expense related to stock options was approximately $20.1 million, which is expected to be recognized over a weighted average remaining period of 2.9 years.

Restricted Stock Units~~$347.8~~

During the nine months ended September 30, 2022, the Company granted approximately 1.6 million~~. The estimated fair value associated~~ restricted stock unit awards under the 2021 Equity Plan, of which approximately 1.3 million are time vesting awards and approximately 0.3 million are time vesting awards with ~~each outstanding option will be recognized as share-based compensation expense if and when~~a performance qualifier. Of the ~~related recognition conditions, for accounting purposes, are met.~~ ~~A significant portion of the $347.8~~1.6 million ~~unrecognized share-based compensation expense as of September 30, 2021 is associated with~~restricted stock ~~options~~unit awards that were granted ~~prior~~during the nine months ended September 30, 2022, approximately 1.5 million vest in fourratable annual installments, approximately 0.1 million vest in two ratable annual installments and less than 0.1 million vest in approximately one annual installment, in each case subject to continuous employment or service from the grant date through the applicable vesting date. The majority of the awards that vest in two ratable annual installments were granted to executives as part of their incentive compensation for 2021, which had been recognized as an accrued compensation liability at December 31, 2021. ~~Each~~The fair value of these ~~options shall become fully vested and exercisable immediately prior~~restricted stock unit awards issued to ~~the~~executives was approximately $0.5 million. Accordingly, effective ~~date associated~~ with the first measurement date (as described in “—Summary of Stock Option Activity” above for all stock options other than those granted to our CEO, which stock options held by our CEO become fully vested and exercisable immediately prior to the effective date associated with a change of control or an initial public offering (notwithstanding any lock-up period)) to occur after the grant date. Accordingly, upon the consummation of the first measurement date to occur after the grant date associated with ~~each of~~ these options, previously unrecognized share-based compensation expense associated with the vested portion of the then-outstanding options will be recognized as of the effective date associated with such measurement date.

~~Restricted Stock Units~~

Beginning on March 15, 2020, our CEO decided to forego 100% of his base salary for the remainder of 2020. During the second quarter of 2021, our compensation committee, in consultation with our CEO and our board of directors, established a new compensation program for our CEO. Under the new program, in light of the foregone salary and bonuses in 2020, the compensation committee determined to grant our CEO an equity award of approximately ~~0.5 million~~ restricted stock units, ~~50% of which vests on each anniversary of the grant date with 100% full vesting on the date that is 180 days after an initial underwritten public offering. At December 31, 2020,~~ we ~~had~~ recognized ~~an accrued compensation liability of approximately $2.2~~a $0.5 million associated with our CEO’s 2020 compensation. For accounting purposes, the settlement of this $2.2 million accrued compensation liability through the issuance of the restricted stock units was recognized as a decrease in Accrued expenses and other current liabilities and an a $0.5 million increase in Additional paid-in capital on our condensed consolidated balance ~~sheet. As of~~sheets. At September 30, ~~2021, all of the~~2022, approximately 2.8 million restricted stock units ~~subject to this award~~ were ~~both unvested and~~ outstanding.

~~Also during the second quarter of 2021, our compensation committee granted approximately~~ ~~0.1 million~~ restricted stock units to certain of our non-CEO executives and a new director, 50% of which vests on each anniversary of the grant date and, for the grants to our non-CEO executives, 100% full vesting occurs effective on the date that is 180 days after an initial underwritten public offering. As of September 30, 2021, all of the restricted stock units subject to these awards were both unvested and outstanding.

~~Share-Based Compensation Expense Associated with Restricted Stock Units~~

Share-based compensation expense associated with the restricted stock units that were granted to our CEO and non-CEO executives will be recognized over the vesting period based on the grant date fair value per share of ~~$19.32~~. The expense measurement associated with the restricted stock units granted to our CEO will be reduced by the $2.2 million of compensation expense associated with the accrued compensation liability that had previously been recognized. Share-based compensation expense associated with restricted stock units that were granted to our new director will be recognized on a straight-line basis evenly over the vesting period.

~~LIFE TIME GROUP HOLDINGS~~, ~~INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands except per share data)~~

Share-based compensation expense associated with restricted stock units for the three months ended September 30, 2022 was $3.1 million, of which $0.4 million, $2.6 million and $0.1 million is included in Center operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations. Share-based compensation expense associated with restricted stock units for the nine months ended September 30, 2022 was $10.8 million, of which $0.9 million, $9.7 million and $0.2 million is included in Center

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)

operations, General, administrative and marketing and Other operating (income) expense, respectively, in our condensed consolidated statements of operations. Share-based compensation expense associated with restricted stock units for the three months ended September 30, 2021 was $1.8 million, all of which is included in General, administrative and ~~$2.9 million, respectively.~~marketing in our condensed consolidated statements of operations. Share-based compensation expense associated with restricted stock units for the nine months ended September 30, 2021 was $2.9 million, all of which is included in General, administrative and marketing in our condensed consolidated statements of operations. As of September 30, ~~2021,~~2022, unrecognized share-based compensation expense related to restricted stock units was approximately ~~$6.6~~$35.3 million,~~. The estimated fair value associated with each outstanding restricted stock unit will~~ which is expected to be recognized ~~as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met. With the consummation~~over a weighted average remaining period of the IPO, previously unrecognized share-based compensation expense associated with the then-outstanding restricted stock units granted to our CEO and non-CEO executives will be recognized effective with the date that is 180 days after the effective date associated with such initial public offering.3.1 years.

Restricted Series A Preferred Stock

~~For information regarding~~Share-based compensation expense associated with a restricted Series A convertible participating preferred stock (“Series A Preferred Stock”) award for the three and nine months ended September 30, 2021 was $2.3 million and $4.0 million, respectively, all of which is included in General, administrative and marketing in our condensed consolidated statements of operations. Upon the consummation of the IPO, the shares of restricted Series A Preferred Stock associated with this award automatically converted into shares of restricted common stock. As of the conversion date, all share-based compensation expense related to this award of restricted Series A Preferred Stock had been recognized. No share-based compensation expense related to restricted Series A Preferred Stock was recognized during the three and nine months ended September 30, 2022.

Restricted Common Stock

Share-based compensation expense associated with the shares of restricted common stock that were issued upon the automatic conversion of the restricted Series A Preferred Stock, ~~award that~~as noted immediately above in “—Restricted Series A Preferred Stock,” for the nine months ended September 30, 2022 was ~~granted~~ $5.0 million, all of which is included in General, administrative and marketing in our condensed consolidated statements of operations. These restricted shares were fully vested as of April 4, 2022, and there is no unrecognized share-based compensation expense related to ~~our CEO~~these shares. No share-based compensation expense related to restricted common stock was recognized during the three and nine months ended September 30, 2021.

9. Income Taxes

For the three months ended September 30, 2022, the provision for income taxes was $3.4 million. For the nine months ended September 30, 2022, the benefit from income taxes was $3.5 million. The effective tax rate was 12.1% and 18.2% for these same periods, respectively. For the three and nine months ended September 30, 2021, ~~see Note 8, Mezzanine Equity.~~

~~Stockholder Note Receivable~~

~~In August 2021, we entered into an agreement pursuant~~the benefit from income taxes was $12.0 million and $58.9 million, respectively. The effective tax rate was 20.9% and 17.7% for these same periods, respectively. The effective tax rate applied to ~~which~~our pre-tax income for the ~~outstanding balance owed under~~three months ended September 30, 2022 is lower than our federal statutory rate of 21% and reflects a decrease in the ~~stockholder note receivable was cancelled. The cancellation of the $15.0 million outstanding principal balance~~projected valuation allowance associated with ~~the loan was accounted for as an equity transaction, and the Stockholder note receivable and Additional paid-in capital balances recognized on~~certain of our ~~condensed consolidated balance sheet were each reduced~~deferred tax assets, partially offset by ~~$15.0 million.~~ ~~The income tax benefit of approximately~~ ~~$3.6 million~~deductibility limitations associated with ~~the stockholder note receivable cancellation was recognized as~~executive compensation and an increase in ~~both Income~~the state income tax ~~receivable~~provision. The effective tax rate applied to our pre-tax loss for the ninemonths ended September 30, 2022 is lower than our federal statutory rate of 21% and reflects deductibility limitations associated with executive compensation, partially offset by a decrease in the projected valuation allowance associated with certain of our deferred tax assets.

Management regularly evaluates the future realization of deferred tax assets and ~~Additional paid-in capital~~provides a valuation allowance, if considered necessary, based on such evaluation. As part of the evaluation, management has evaluated taxable income in carryback years, future reversals of taxable temporary differences, feasible tax planning strategies and future expectations of income. Based upon this analysis, a decrease to the valuation allowance of $4.5 million and $3.4 million was recorded during the three and nine months ended September 30, 2022, respectively, to adjust our ~~condensed consolidated balance sheet.~~net deferred tax assets to an amount that is more likely than not to be realized.

10. Income (Loss) Per Share

For the three and nine months ended September 30, 2022, our potentially dilutive securities include stock options and restricted stock units. For the three and nine months ended September 30, 2021, our potentially dilutive securities include stock options, restricted stock units, outstanding shares of Series A Preferred Stock and unvested restricted Series A Preferred Stock. Due to the net loss that we recognized during the nine months ended September 30, 2022 and the three and nine months ended September 30, 2021, the potentially dilutive shares of common stock associated with these equity-based securities were determined to be antidilutive and, therefore, are excluded from the computation of diluted loss per share for the nine months ended September 30, 2022 and the three and nine months ended September 30, 2021.

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 table sets forth the calculation of basic and diluted income (loss) per share for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	24,732	$	(45,442)	$	(15,519)	$	(274,599)
Dividends accrued on Series A Preferred Stock	—		(6,126)		—		(16,414)
Income (loss) available to common stockholders	$	24,732	$	(51,568)	$	(15,519)	$	(291,013)

Weighted-average common shares outstanding – basic	193,918		145,196		193,364		145,196
Dilutive effect of stock-based compensation awards	4,463		—		—		—
Weighted-average common shares outstanding – diluted	198,381		145,196		193,364		145,196

Income (loss) per common share – basic	$	0.13	$	(0.36)	$	(0.08)	$	(2.00)
Income (loss) per common share – diluted	$	0.12	$	(0.36)	$	(0.08)	$	(2.00)

The following is a summary of potential shares of common stock that were antidilutive and excluded from the weighted average share computations for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Stock options	6,060	24,118	25,139	24,118
Restricted stock units	2,658	610	2,786	610
Outstanding shares of Series A Preferred Stock	—	5,430	—	5,430
Unvested restricted Series A Preferred Stock	—	500	—	500
Potential common shares excluded from the weighted average share calculations	8,718	30,658	27,925	30,658

11. 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~~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~~threatened 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. This~~ projects. The parties are currently in discovery. The Action is subject to many uncertainties, and the outcome of the matter is not predictable with any assurance.

Other ~~Litigation~~

We are also engaged in other proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to court rulings, negotiations between affected parties and governmental intervention. We establish reserves for matters that are probable and estimable in amounts we believe are adequate to cover reasonable adverse judgments. Based upon the information available to us and discussions with legal counsel, it is our opinion that the outcome of the various legal actions and claims that are incidental to our business will not have a material adverse impact on our consolidated financial position, results of operations or cash flows. Such matters are subject to many uncertainties, and the outcomes of individual matters are not predictable with assurance.

~~11.~~

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)

12. Subsequent Events

In preparing the accompanying condensed consolidated financial statements, we have evaluated the period from September 30, ~~2021~~2022 through the date the condensed consolidated financial statements were issued for material subsequent events. ~~With the exception of the subsequent events disclosed in Note 1, Nature of Business and Basis of Consolidation and Presentation, there~~There have been no other such events or transactions during this time which would have a material effect on the condensed consolidated financial statements and therefore would require recognition or disclosure.

Table of Contents

ITEM 2. ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Certain statements in this discussion and analysis are “forward-looking statements” within the meaning of federal securities regulations. Forward-looking statements in this discussion and analysis include, but are not limited to, our plans, possible or assumed future actions, strategies and prospects, both business and financial, including our financial outlook, events and results of ~~operations and prospects.~~operations. Generally, forward-looking statements are not based on historical facts but instead represent only our current beliefs and assumptions regarding future events. All forward-looking statements are, by nature, subject to risks, uncertainties and other factors. This discussion and analysis does not purport to identify factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements. You should understand that forward-looking statements are not guarantees of performance or results and are preliminary in nature. Statements preceded by, followed by or that otherwise include the words “believe,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans,” “may increase,” “may result,” “will result,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may,” and “could” are generally forward-looking in nature and not historical facts. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking. ~~Factors~~

The forward-looking statements contained in this discussion and analysis are based on management’s current expectations and are not guarantees of future performance. The forward-looking statements are subject to various risks, uncertainties, assumptions or changes in circumstances that ~~could cause actual~~are difficult to predict or quantify. Actual results tomay differ materially from ~~those forward-looking statements included in this discussion~~these expectations due to numerous factors, many of which are beyond our control, including risks relating to our business operations and ~~analysis include, but are not limited~~competitive and economic environment, risks relating to our brand, risks relating to the impacts of COVID-19 or other future pandemics on our operations, members, employees, vendors, service providers, business and cash flows; our ability to attract and retain members; a deterioration in the quality or reputationgrowth of our ~~brand or the health~~business, risks relating to our technological operations, risks relating to our capital structure, risks relating to our human capital, risks relating to legal compliance and ~~wellness industry; competition in the health~~risk management, risks relating to our financial performance and ~~wellness industry; our inability~~risks relating to anticipate and satisfy consumer preferences and shifting views of health and wellness; events such as severe weather conditions, natural disasters, global pandemics or health crises, hostilities and social unrest, among others; disruptions in the operationsownership of our ~~centers;~~common stock and the other important factors discussed under the caption “Risk Factors” in the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1~~10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) and as such risk factors may be updated from time to time in our periodic filings with the SEC that are accessible on ~~September 13, 2021 (File No. 333-259495)~~the SEC’s website at www.sec.gov. Since it is not possible to foresee all such factors, these factors should not be considered as complete or exhaustive. Consequently, we caution investors not to place undue reliance on any forward-looking statements, as no forward-looking statement can be guaranteed, and actual results may vary materially.

All ~~forward looking~~forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. ~~Forward looking~~Forward-looking statements speak only as of the date of this report. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Overview

Initial Public Offering

On October 12, 2021, Life Time Group Holdings, Inc. consummated its initial public offering (“IPO”) of 39.0 million shares of its common stock 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. The shares of its common stock began trading on The New York Stock Exchange under the symbol “LTH” on October 7, 2021. A registration statement on Form S-1 relating to the offering of these securities was declared effective by the SEC on October 6, 2021. Additionally, on November 1, 2021, Life Time Group Holdings, Inc. consummated the sale of nearly 1.6 million additional shares of its 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.

Table of Contents

Business

Life Time, the “Healthy Way of Life Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a community of ~~over 1.3~~more than 1.4 million individual members, who together comprise more than ~~750,000~~776,000 memberships, as of September 30, ~~2021.~~2022. Since our founding ~~nearly~~over 30 years ago, we have sought to continuously innovate ways for our members to lead healthy and happy lives by offering them the best places, programs and performers. We deliver high-quality experiences through our omni-channel physical and digital ecosystem that includes more than 150 centers—distinctive, resort-like athletic country club destinations—across 29 states in the United States and one province in Canada. Our track record of providing differentiated experiences to our members has fueled our strong, long-term financial performance. In 2019, prior to the COVID-19 pandemic, we generated $1.9 billion of revenue. In 2020, which was impacted by the COVID-19 pandemic, we generated $0.9 billion of revenue, and in the nine months ended September 30, 2021, we generated nearly $1.0 billion of revenue.

Our luxurious athletic ~~centers,~~country clubs, which are located in both affluent suburban and urban locations, total more than 15 million square feet in the aggregate. As of September 30, ~~2021~~2022, we had 1217 new centers under construction and we believe we have significant opportunities to continue expanding our portfolio of premium centers with ~~10 or more~~12 planned new centers ~~annually~~ for ~~the foreseeable future~~2022 and 11new centers planned for 2023 in increasingly affluent markets. 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 premium service ~~offering is~~offerings are delivered by ~~approximately 29,000~~over 32,000 Life Time team members, including over ~~7,500 certified~~8,700 fitness professionals, ranging from personal trainers to studio performers. Our members are highly engaged and draw inspiration from the experiences and community we have created. Our center memberships increased from 649,373 at December 31, 2021 to 728,729 at September 30, 2022 as the trend of diminishing negative impacts from COVID-19 has continued

We believe that no other company in the United States delivers the same quality and breadth of health, fitness and wellness experiences asthat we deliver, which ~~has~~ enabled us to consistently grow ~~total~~our annual membership dues and in-center revenue for 20 consecutive years, prior to the impact of the COVID-19 pandemic. ~~As of December 31, 2019, December 31, 2020~~We have been focused on returning to consistent annual growth in our membership dues and in-center revenue. For the nine months ended September 30, 2022 and 2021, our recurring membership dues and enrollment fees represented ~~63%, 69%~~70.1% and ~~68%~~70.0%, respectively, of our total Center revenue, while our in-center revenue, consisting of Life Time Training, LifeCafe, LifeSpa, Life Time Swim and Life Time Kids, among other services, represented ~~34%, 29%~~29.9% and ~~29%~~30.0%, respectively, of our total Center revenue. ~~Between 2015 and 2019, we grew our~~Our average ~~Center~~ revenue per center membership ~~from $1,883~~increased to ~~$2,172, a testament~~$1,885 for the nine months ended September 30, 2022 compared to $1,554 for the nine months ended September 30, 2021, which demonstrates the significant value that our members place on engaging with Life Time. While average Center revenue per membership fell to $1,317 in 2020, we have seen a strong rebound in 2021, with $1,554 in average Center revenue per membership during the nine months ended September 30, 2021. As we ~~have~~ delivered ~~these~~and continued to enhance and broaden the premium experiences for our members, we have strategically increased our ~~new join~~ membership ~~prices~~dues across most of our ~~centers in early 2021.~~new and existing centers. We believe we can continually refine our pricing as we deliver exceptional experiences and find the optimal balance among the number of memberships per center, the member experience and maximizing our return for each center. We expect average revenue per ~~membership and average monthly dues per~~center membership to continue to increase compared to the same period in the prior year as we acquire ~~more~~ new members ~~increase legacy member pricing~~ and open new centers in increasingly affluent markets.

We offer a variety of convenient month-to-month memberships with no long-term contracts. We define memberships for our centers in two ways: Center memberships and Digital On-hold memberships. A Center membership is defined as one or more adults, ~~14 years of age or older,~~ plus any juniors under the age of 14. Our base memberships provide individuals general access (with some amenities excluded) to a selected home center and all centers with the same or a lower base monthly dues rate. Our optimized pricing for a Center membership is determined center-by-center based on a variety of factors, including geography, ~~competition,~~market presence, demographic nature, population density, competition, initial investment in the center and available services and amenities. Digital On-hold memberships do not provide access to our centers and are for those members who want to maintain certain member benefits including our Life Time Digital membership and the right to convert to a Center membership without paying enrollment fees.

Table of Contents

We continue to evolve our premium lifestyle brand in ways that elevate and broaden our member experiences and allow our members to more easily and regularly integrate health, fitness and wellness into their lives. For example, we are offering new types of Center memberships and communities, including our signature membership that includes unlimited small group training and priority registrations, and our ARORA community focused on members aged 55 years and older. We also continue to enhance our digital platform to deliver a true omni-channel experience for our members. Our Life Time Digital offering delivers live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content. ~~Through an agreement with Apple®, we also provide Apple Fitness+ to our members, which gives our members expanded content and wellness data monitoring on the go.~~ 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 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. Elevating our member experiences and delivering a connected and digital environment 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 see the returns on our investments.

We ~~are~~ also ~~expanding~~continue to expand our “Healthy Way of Life” ecosystem in response to our members’ desire to more 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.~~environment. Life Time Work members also generally receive access to all of our ~~resort-like~~resort-like athletic destinations across the United States and Canada. At September 30, 2022, 10 Life Time Work locations were open and operating. Additionally, we opened our first two Life Time Living ~~location in 2021,~~locations, another asset-light extension of our “Healthy Way of Life” ecosystem, which ~~offers~~offer luxury wellness-oriented residences. 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 have continued to actively 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. The inflation rate continues to be elevated in 2022, which has had an impact on our expenses in several areas, including wages, construction costs and other operating expenses. These inflationary impacts have resulted in pressure on our margin performance and an increase in our capital expenditures. The rising interest rate environment has also increased the cost of our Term Loan Facility and Revolving Credit Facility and may result in increased cap rates on future sale-leaseback transactions. We anticipate the remainder of fiscal year 2022 will continue to be a dynamic macroeconomic environment, including elevated levels of inflation and interest rates. We remain focused on providing exceptional experiences to our members, while also focusing on center efficiencies and expense control given our recovery of a significant portion of our center memberships and membership dues.

Non-GAAP Financial Measures

This discussion and analysis includes certain financial measures that are not presented in accordance with the generally accepted accounting principles in the United States (“GAAP”), including Adjusted EBITDA and free cash flow before growth capital expenditures and ratios related thereto. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, these non-GAAP financial measures should be read in conjunction with our financial statements prepared in accordance with GAAP. The reconciliations of the Company’s non-GAAP financial measures to the corresponding GAAP measures should be carefully evaluated. We use Adjusted EBITDA as an important performance metric for the Company. In addition, free cash flow before growth capital expenditures is an important liquidity metric we use to evaluate our ability to make principal payments on our indebtedness and to fund our capital expenditures and working capital requirements.

Table of Contents

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)~~(gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19.

Management uses Adjusted EBITDA to evaluate the Company’s performance. We believe that Adjusted EBITDA is an important metric for management, investors and analysts as it removes the impact of items that we do not believe are indicative of our core operating performance and allows for consistent comparison of our operating results over time and relative to our peers. We use Adjusted 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.

Free Cash Flow Before Growth Capital Expenditures

We define free cash flow before growth capital expenditures as net cash provided by (used in) operating activities less center maintenance capital expenditures and corporate capital expenditures. We believe free cash flow before growth capital expenditures 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 before growth capital expenditures to be a key indicator of our liquidity and we present this metric to our board of directors. Additionally, we believe free cash flow before growth capital expenditures is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. We also believe that investors, analysts and rating agencies consider free cash flow before growth capital expenditures as a useful means of measuring our ability to make principal payments on our indebtedness and evaluating our liquidity, and management uses this measurement for one or more of these purposes.

Adjusted EBITDA and free cash flow before growth capital expenditures 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 (used in) operating activities as a measure of our liquidity and may not be comparable to other similarly titled measures of other businesses. Adjusted EBITDA and free cash flow before growth capital expenditures 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. ~~Some of these limitations include that:~~

•~~these measures do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;~~

•~~not all of these measures reflect changes in, or cash requirements for, our working capital needs;~~

•~~these measures do not reflect the cash requirements necessary to make principal payments on our indebtedness;~~

•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and not all of these measures reflect cash requirements for such replacements;

•non-cash compensation is and will remain a key element of our overall long-term incentive compensation package, although we exclude it as an expense when evaluating our ongoing operating performance for a particular period; and

•~~these measures do not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations.~~

Furthermore, we compensate for the limitations described above by relying primarily on our GAAP results and using Adjusted EBITDA and free cash flow before growth capital expenditures only for supplemental purposes. See our condensed consolidated financial statements included elsewhere in this report for our GAAP results.

Table of Contents

Non-GAAP Measurements and Key Performance Indicators

We prepare and analyze various non-GAAP performance metrics and key performance indicators to assess the performance of our business and allocate ~~resources. We analyze these key performance indicators to assess the performance of our business and allocated~~ resources. For more information regarding our non-GAAP performance metrics, see “—Non-GAAP Financial Measures” above. These are not measurements of our financial performance under GAAP and should not be considered as alternatives to any other performance measures derived in accordance with GAAP.

Set forth below are certain GAAP and non-GAAP measurements and key performance indicators for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. The following information has been presented consistently for all periods presented.


		Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
		2021			2020			2021			2020				2022			2021			2022			2021
		($ in thousands, except for Average Center revenue per center membership data)													($ in thousands, except for Average Center revenue per center membership data)
Membership Data	Membership Data													Membership Data
Center memberships	Center memberships	668,310			572,811			668,310			572,811			Center memberships	728,729			668,310			728,729			668,310
Digital On-hold memberships	Digital On-hold memberships	85,045			234,381			85,045			234,381			Digital On-hold memberships	47,273			85,045			47,273			85,045
Total memberships	Total memberships	753,355			807,192			753,355			807,192			Total memberships	776,002			753,355			776,002			753,355

Revenue Data	Revenue Data													Revenue Data
Membership dues and enrollment fees	Membership dues and enrollment fees	70.2%			74.3%			70.0%			69.5%			Membership dues and enrollment fees	69.9%			70.2%			70.1%			70.0%
In-center revenue	In-center revenue	29.8%			25.7%			30.0%			30.5%			In-center revenue	30.1%			29.8%			29.9%			30.0%
Total Center revenue	Total Center revenue	100.0%			100.0%			100.0%			100.0%			Total Center revenue	100.0%			100.0%			100.0%			100.0%

Membership dues and enrollment fees	Membership dues and enrollment fees	$	261,033		$	169,612		$	653,584		$	490,151		Membership dues and enrollment fees	$	335,717		$	261,033		$	916,895		$	653,584
In-center revenue	In-center revenue	110,967			58,737			280,106			214,768			In-center revenue	144,278			110,967			390,603			280,106
Total Center revenue	Total Center revenue	$	372,000		$	228,349		$	933,690		$	704,919		Total Center revenue	$	479,995		$	372,000		$	1,307,498		$	933,690

Average Center revenue per center membership (1)	Average Center revenue per center membership (1)	$	555		$	349		$	1,554		$	929		Average Center revenue per center membership (1)	$	660		$	555		$	1,885		$	1,554
Comparable center sales (2)	Comparable center sales (2)	58.7%			(55.0)%			29.9%			(52.2)%			Comparable center sales (2)	25.6%			58.7%			35.7%			29.9%

Center Data	Center Data													Center Data
Net new center openings (3)	Net new center openings (3)	2			—			6			2			Net new center openings (3)	3			2			5			6
Total centers (end of period) (3)	Total centers (end of period) (3)	155			148			155			148			Total centers (end of period) (3)	156			155			156			155
Total center square footage (end of period) (4)	Total center square footage (end of period) (4)	15,300,000			14,700,000			15,300,000			14,700,000			Total center square footage (end of period) (4)	15,600,000			15,300,000			15,600,000			15,300,000

GAAP and Non-GAAP Financial Measures	GAAP and Non-GAAP Financial Measures													GAAP and Non-GAAP Financial Measures
Net loss		$	(45,442)		$	(93,647)		$	(274,599)		$	(276,304)
Net loss margin (5)		(11.8)		%	(40.5)		%	(28.7)		%	(38.4)		%
Net income (loss)														Net income (loss)	$	24,732		$	(45,442)		$	(15,519)		$	(274,599)
Net income (loss) margin (5)														Net income (loss) margin (5)	5.0		%	(11.8)		%	(1.1)		%	(28.7)		%
Adjusted EBITDA (6)	Adjusted EBITDA (6)	$	47,031		$	(12,437)		$	32,277		$	(44,934)		Adjusted EBITDA (6)	$	70,975		$	47,031		$	174,697		$	32,277
Adjusted EBITDA margin (6)	Adjusted EBITDA margin (6)	12.2		%	(5.4)		%	3.4		%	(6.2)		%	Adjusted EBITDA margin (6)	14.3		%	12.2		%	12.9		%	3.4		%
Center operations expense	Center operations expense	$	231,996		$	165,572		$	625,322		$	515,350		Center operations expense	$	295,253		$	231,996		$	814,383		$	625,322
Pre-opening expenses (7)	Pre-opening expenses (7)	633			721			5,304			5,208			Pre-opening expenses (7)	$	5,350		$	633		$	9,296		$	5,304
Rent	Rent	52,513			47,539			154,552			138,470			Rent	$	63,213		$	52,513		$	179,166		$	154,552
Non-cash rent expense (8)		5,327			8,181			11,546			34,489
Net cash used in operating activities		(2,283)			(11,789)			(15,322)			(56,165)
Non-cash rent expense (open properties) (8)														Non-cash rent expense (open properties) (8)	$	6,762		$	2,161		$	14,850		$	3,824
Non-cash rent expense (properties under development) (8)														Non-cash rent expense (properties under development) (8)	$	4,907		$	3,166		$	12,454		$	7,722
Net cash provided by (used in) operating activities														Net cash provided by (used in) operating activities	$	44,995		$	(2,283)		$	125,320		$	(15,322)
Free cash flow before growth capital expenditures (9)	Free cash flow before growth capital expenditures (9)	(38,633)			(31,567)			(99,458)			(145,266)			Free cash flow before growth capital expenditures (9)	$	7,359		$	(38,633)		$	5,506		$	(99,458)

Table of Contents

(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.

(2) We measure the results of our centers based on how long each center has been open as of the most recent measurement period. We include a center, for comparable center sales purposes, beginning on the first day of the 13th full calendar month of the center’s operation, in order to assess the center’s growth rate after one year of operation.

(3) Net new center openings are the number of centers that opened for the first time to members during the period, less any centers that closed during the period. Total centers (end of period) is the number of centers operational as of the last day of the period. As of September 30, ~~2021,~~2022, all of our ~~155~~156 centers were open.

(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. These figures are approximations.

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

(6) 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, ~~gain (loss)~~(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.

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

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Net loss		$	(45,442)	$	(93,647)	$	(274,599)	$	(276,304)
Net income (loss)										Net income (loss)	$	24,732	$	(45,442)	$	(15,519)	$	(274,599)
Interest expense, net of interest income (a)	Interest expense, net of interest income (a)	39,849		30,967		176,144		95,724		Interest expense, net of interest income (a)	27,696		39,849		84,732		176,144
Benefit from income taxes		(11,981)		(28,079)		(58,867)		(99,096)
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	3,401		(11,981)		(3,456)		(58,867)
Depreciation and amortization	Depreciation and amortization	57,977		61,359		177,005		188,483		Depreciation and amortization	56,400		57,977		171,680		177,005
Share-based compensation expense(b)	Share-based compensation expense(b)	4,078		—		6,959		—		Share-based compensation expense(b)	5,803		4,078		33,214		6,959
COVID-19 related expenses (b)		(221)		17,029		(410)		49,312
Loss (gain) on sale-leaseback transactions (c)		2,227		—		3,057		(3,078)
COVID-19 related expenses (credits) (c)										COVID-19 related expenses (credits) (c)	354		(221)		937		(410)
(Gain) loss on sale-leaseback transactions (d)										(Gain) loss on sale-leaseback transactions (d)	(48,583)		2,227		(98,167)		3,057
Capital transaction costs ~~(d)~~(e)	Capital transaction costs ~~(d)~~(e)	588		39		588		96		Capital transaction costs ~~(d)~~(e)	—		588		255		588
Legal settlements ~~(e)~~(f)	Legal settlements ~~(e)~~(f)	(44)		313		(44)		345		Legal settlements ~~(e)~~(f)	—		(44)		—		(44)
Other ~~(f)~~(g)	Other ~~(f)~~(g)	—		(418)		2,444		(416)		Other ~~(f)~~(g)	1,172		—		1,021		2,444
Adjusted EBITDA	Adjusted EBITDA	$	47,031	$	(12,437)	$	32,277	$	(44,934)	Adjusted EBITDA	$	70,975	$	47,031	$	174,697	$	32,277

(a)For the nine months ended September 30, 2021, we incurred a non-cash expense of $41.0 million related to the extinguishment of ~~our~~a related party secured ~~loan. In June 2020, we closed on an approximate $101.5~~loan and $18.3 million ~~secured loan from an investor group comprised solely~~related to the write-off of debt discounts and issuances costs in connection with the extinguishment of our ~~stockholders~~prior term loan facility, senior unsecured notes and the related party secured loan.

(b) Share-based compensation expense recognized during the three and nine months ended September 30, 2022 is associated with stock options, restricted stock and restricted stock units. Share-based compensation expense recognized during the three and nine months ended September 30, 2021 was associated with restricted stock and restricted stock units. No share-based compensation expense was recognized during the three and nine months ended September 30, 2021 related to stock options because the vesting and exercisability of stock options granted by the Company up through September 30, 2021 was contingent upon the occurrence of a change of control or ~~their affiliates. The secured loan carried~~ an interest rate of 12.0% and was scheduled to mature in June 2021. In January 2021, we extinguished the secured loan plus accrued interest with a book value of $108.6 million by converting the loan into approximately 5.4 million shares of our Series A Preferred Stock, which had a fair value of $149.6 million, as determined by an independent third party valuation, at the time of conversion. Accordingly, we booked a $41.0 million loss upon conversion.initial public offering.

~~(b)~~(c) Represents the incremental net expenses (credits) ~~expenses~~ we recognized related to the COVID-19 pandemic. We adjust for these costs as they do not represent costs associated with our normal ongoing operations. We believe that adjusting for these costs provides a more accurate and consistent representation of our actual operating performance from period to period. ~~The net credits we recognized during~~For the three and nine months ended September 30, 2022, COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich. For more information regarding this claim, see Note 11, Commitments and Contingencies, to our condensed consolidated financial statements in this report. For the three and nine months ended September 30, 2021, ~~consist~~COVID-19 related credits primarily consisted of the recovery of certain qualifying expenses ~~recovered~~ under the CARES Act, partially offset by COVID-19 legal-related costs. For the three months ended September 30, 2020, COVID-19 related expenses consisted of $9.5 million for project cost write-offs for sites no longer deemed viable as a result of the economic downturn caused by COVID-19, $5.5 million for the employee portion of health care coverage which is normally paid by employees but was paid by us during this period on behalfcosts in pursuit of our ~~employees, and $2.0 million~~claim against Zurich.

Table of emergency leave and non-working payroll, which includes subsequent recovery of certain expenses under the CARES Act, severance and charitable contributions made to support our employees who were directly impacted by COVID-19. For the nine months ended September 30, 2020, COVID-19 related expenses consisted of $14.6 million for project cost write-offs for sites no longer deemed viable as a result of the economic downturn caused by COVID-19, $12.0 million for the employee portion of health care coverage which is normally paid by employees but was paid by us during this period on behalf of our employees, and $22.7 million of emergency leave and non-working payroll, which includes subsequent recovery of certain expenses under the CARES Act, severance and charitable contributions made to support our employees who were directly impacted by COVID-19.Contents

~~(c)~~(d) We adjust for the impact of gains or losses on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations. For details on the gain on sale-leaseback transactions in the three and nine months ended September 30, 2022, see “Sale-Leaseback Transactions” within Note 7, Leases, to our condensed consolidated financial statements in this report.

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

~~(e)~~(f) We adjust for the impact of large class action and unusual legal settlements paid or recoveries received. These are non-recurring in nature and do not reflect costs associated with our normal ongoing operations.

~~(f)~~(g) Includes costs associated with ~~large corporate restructuring charges, executive level involuntary terminations~~incremental expenses related to a winter storm that resulted in historical freezing temperatures affecting our Texas region in 2021, severance and other transactions which are unusual and non-recurring in nature. For the nine months ended September 30, 2021, other expenses consisted of $1.6 million of incremental expenses related to a winter storm resulting in historical freezing temperatures affecting our Texas region, and $0.8 million of executive level severance.

(7) Represents non-capital expenditures associated with opening new centers, which are incurred prior to the commencement of a new center opening. The number of centers under construction or development, the types of centers and our costs associated with any particular center opening can vary significantly from period to period.

(8) Reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments.Non-cash rent expense for our open properties represents non-cash expense associated with properties that were operating at the end of each period presented. 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.

(9) Free cash flow before growth capital expenditures, a non-GAAP financial measure, is calculated as net cash provided by (used in) operating activities less center maintenance capital expenditures and corporate capital expenditures.

The following table provides a reconciliation from net cash provided by (used in) operating activities to free cash flow before growth capital expenditures:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021		2022		2021
Net cash used in operating activities		$	(2,283)	$	(11,789)	$	(15,322)	$	(56,165)
Net cash provided by (used in) operating activities										Net cash provided by (used in) operating activities	$	44,995	$	(2,283)	$	125,320	$	(15,322)
Center maintenance capital expenditures	Center maintenance capital expenditures	(18,078)		(4,823)		(43,045)		(29,075)		Center maintenance capital expenditures	(22,462)		(18,078)		(57,915)		(43,045)
Corporate capital expenditures	Corporate capital expenditures	(18,272)		(14,955)		(41,091)		(60,026)		Corporate capital expenditures	(15,174)		(18,272)		(61,899)		(41,091)
Free cash flow before growth capital expenditures	Free cash flow before growth capital expenditures	$	(38,633)	$	(31,567)	$	(99,458)	$	(145,266)	Free cash flow before growth capital expenditures	$	7,359	$	(38,633)	$	5,506	$	(99,458)

Factors Affecting the Comparability of our Results of Operations

Impact of COVID-19 on our Business

OnOverview

In March ~~11,~~ 2020, the World Health Organization declared the outbreak of ~~a novel coronavirus that causes~~ COVID-19 as a pandemic, ~~and recommended containment and mitigation measures worldwide. On March 13, 2020,~~ the United States declared a National Public Health Emergency ~~with respect to COVID-19. On March 16, 2020, in compliance with~~and we closed all of our centers based on orders and advisories from federal, state and local governmental authorities regarding ~~COVID-19, we closed all of our centers.~~COVID-19. Throughout this report, including this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when we refer to “COVID-19,” 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.

~~While~~We re-opened our first center on May 8, 2020, and continued to re-open our centers ~~were closed,~~ as state and local governmental authorities permitted, subject to operating processes and protocols that we developed in consultation with an epidemiologist (MD/PhD) with a wide range of experience in clinical, occupational and environmental medicine, we developed processes and protocols for the operation of our centers in the COVID-19 environment. These protocols, which have varied at our centers across the United States and Canada, have included physical distancing, restricting certain equipment and amenities, occupancy limits, required appointments, touchless interactions, facial coverings, cleaning, sanitation, hygiene, air circulation and filtering, screening, contact tracing and educational awareness. We may take further actions as government authorities require or recommend or as we determine to be in the interests of our members, team members, vendors and service providers, including in response to emerging variants of the COVID-19 virus, such as the Delta variant. We continue to refine these processes and protocols as we operate in the evolving COVID-19 environment.

~~On May 8, 2020, we re-opened our first center in Oklahoma City, Oklahoma. With a focus on providing~~provide a healthy and clean environment for our members and team members ~~we continued~~ and to ~~re-open our centers as~~meet various governmental ~~authorities permitted. As of June 30, 2020, September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021,~~requirements and September 30, 2021 we had 105, 148, 141, 151, 150 and 155 of our centers opened, respectively. However, many of our centers remained closed or were required to be closed again after re-opening for some period of time during each of these quarters as a result of the COVID-19 pandemic and related restrictions. ~~For instance, during the three months ended June 30, 2020, September 30, 2020 and December 31, 2020, 149, 43 and 31 of our centers, respectively, were closed for some period of time.~~ The performance of our centers ~~after we were able to re-open them~~ has improved significantly with that improvement having varied depending on various factors, including how early we were able to re-open them, ~~in 2020,~~ whether we were required to close them again, their geographic location and applicable governmental restrictions. The performance of our centers was also impacted in 2021 as a result of the Delta variant and then again later in 2021 and into 2022 with the Omicron variant.

Table of Contents

We have experienced a slightly faster recovery in our membership dues revenue compared to our in-center ~~revenue as our centers have re-opened.~~revenue. We expect membership dues revenue to remain a higher percentage of our total revenue in the near term and return to more historical levels over time. ~~While we are~~We continue to be encouraged by our improved business performance and the ~~trends of increased vaccination rates, reduced COVID-19 infections and hospitalizations and reduced operating restrictions in many of the regions where our centers operate,~~diminishing negative impacts from COVID-19; however, the full extent of the impact of COVID-19, including ~~the Delta variant,~~any new variants and any resulting operating restrictions, remains uncertain and is dependent on future developments that cannot be accurately predicted at this time. ~~Considering this uncertainty, the extent of the impact of COVID-19 on our financial position, results of operations, liquidity and cash flows is uncertain at this time.~~

Operations

As of September 30, ~~2021,~~2022, all of our ~~155~~156 centers were ~~open. As of September 30, 2021,~~open and our total memberships were ~~753,355, a decrease~~776,002, an increase of ~~20.7%~~3.0% compared to ~~950,183~~753,355 at ~~March 31, 2020.~~September 30, 2021. Center memberships were ~~668,310, a decrease~~728,729, an increase of ~~21.1%~~9.0% compared to ~~847,161~~668,310 at ~~March 31, 2020.~~September 30, 2021. Digital On-hold memberships were ~~85,045,~~47,273, a decrease of ~~17.4%~~44.4% compared to ~~103,022~~85,045 at ~~March 31, 2020.~~September 30, 2021.

As the first nine months of 2022 have progressed, we have experienced a significant decrease in the COVID-19 related restrictions on our operations. While we are still utilizing certain of the processes we implemented to provide a healthy and clean environment for our members and team members, we are no longer subject to the stricter requirements such as face coverings, vaccine mandates or negative test results. We will continue to monitor governmental orders regarding the operations of our centers, as well as our center operating processes and protocols. ~~We expect we may need to continue to adjust such processes and protocols as facts and circumstances change, including as a result~~

The rates of ~~variants of the COVID-19 virus, including the Delta variant.~~

~~We also expect~~recovery for our centers and in-center businesses ~~will continue to be impacted~~have progressed differently based upon considerations such as their ~~geographic~~geographic location, vaccination rates, impacts of variants, applicable government restrictions and guidance, and team member and member sentiment with respect to our center operating processes and protocols and working in and/or using our centers. ~~For example,~~While this uneven performance may continue, we are ~~seeing~~hopeful that as we continue to emerge from the COVID-19 pandemic and more time passes since the restrictive operating requirements have been lifted, our performance will begin to improve across the country and we will continue to see an increase in Center memberships and center ~~utilization in various regions where government restrictions have been lifted.~~

Given increasing demand for online engagement with consumers, we have increased our focus on delivering a digitized in-center experience through our omni-channel ecosystem. In December 2020, we expanded our Digital membership offering, bringing our “Healthy Way of Life” programs, services and content to consumers virtually. This omni-channel experience is designed to deliver health, fitness and wellness where, when and how members want it by offering online reservations registrations, virtual training, live streaming and on-demand classes, virtual events and more.utilization.

Cash Flows and Liquidity

In response to the impact of COVID-19 on our business, we took swift cash management actions to reduce our operating costs and preserve liquidity. These actions included: initially furloughing over 95% of our employees; undertaking two corporate restructuring events to right size overhead relative to the current business; initially suspending virtually all construction capital spending; negotiating rent reductions and deferrals with many of our landlords; evaluating the CARES Act and receiving the employee retention credit, the deferment of the employer’s portion of social security tax payments and the various income tax-related benefits; and completing sale-leaseback transactions associated with six properties.

During the nine months ended September 30, 2021, we refinanced a significant portion of our outstanding debt. Specifically, we: (i) refinanced in full the outstanding balances associated with our then existing senior secured credit facility as well as our then existing senior unsecured notes; and (ii) converted our related party secured loan into Series A Preferred Stock. Additionally, we completed sale-leaseback transactions associated with two properties. For information regarding the refinancing actions we took during the nine months ended September 30, 2021, see Note 6, Debt, to our unaudited condensed consolidated financial statements included elsewhere in this report. For more information regarding the sale-leaseback transactions that were consummated during the nine months ended September 30, 2021, see Note 7, Leases, to our unaudited condensed consolidated financial statements included elsewhere in this report.

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 intend to use the remaining net proceeds from the IPO, along with the additional net proceeds of approximately $27.1 million from the sale of the additional 1.6 million shares of common stock pursuant to the partial exercise by the underwriters of their over-allotment option, for general corporate purposes.

Although there is uncertainty related to the full impact of COVID-19 on our financial position, results of operations, liquidity and cash flows, ~~much of which is dependent on the length and severity of the pandemic and the related measures taken,~~ we believe that the combination of our current cash position, our availability under the Revolving Credit Facility, the ~~recent~~ actions we have taken with respect to ~~refinance~~ our debt ~~complete the IPO~~ and ~~strengthen~~equity and strengthening our balance sheet, as well as the actions we have taken to reduce our cash outflows, leave us well-positioned to manage our ~~business through this pandemic.~~business. If our available liquidity were not sufficient to meet our operating and debt service obligations as they come due, we would need to pursue alternative arrangements through additional debt ~~additional sale-leaseback transactions~~ or equity financing to meet our cash requirements. There can be no assurance that any such financing would be available on commercially acceptable terms, or at all.

~~There~~We also intend to continue to explore sale-leaseback transactions. During the nine months ended September 30, 2022, we completed sale-leaseback transactions associated with nine properties for aggregate gross proceeds of $375.0 million. For more information regarding the sale-leaseback transactions that were consummated during the nine months ended September 30, 2022, see Note 7, Leases, to our condensed consolidated financial statements included elsewhere in this report.

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 introducing new types of memberships, providing concierge-type member services, expanding our omni-channel offerings and improving our in-center services and products. Elevating our member experiences requires investment in our team members, programs, products, services and centers. These investments may ~~be developments outside of~~impact our control requiring us to adjust our operating plan, including additional required center closures. As such, given the dynamic nature of our current operating environment, we cannot reasonably estimate the impacts of COVID-19 on our financial position,short-term results of operations orand 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, we are also focusing on center efficiencies and expense control given our recovery of a significant portion of our center memberships and membership dues.

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

Our asset-light, flexible real estate strategy has allowed us to expand our business by leveraging operating leases and sale-leaseback transactions. Approximately 64% of our centers are now leased, including approximately 92% of our new centers opened within the ~~future.~~last five years, versus a predominantly owned real estate strategy prior to 2015. Rent expense, which includes both cash and non-cash rent expense, will continue to increase as we lease more centers and will therefore impact the comparability of our results of operations. The impact of these increases is dependent upon the timing of our centers under development and the center openings and terms of the leases for the new centers or sale-leaseback transactions.

Table of Contents

Macroeconomic Trends

We have been actively 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. See “—Overview—Business” for additional information.

Share-Based Compensation

~~As of~~During the nine months ended September 30, ~~2021, total unrecognized~~2022, we recognized share-based compensation expense associated with stock options, restricted ~~Series A Preferred Stock~~stock and restricted stock units ~~was $362.5~~totaling approximately $33.2 million. ~~The estimated fair value~~During the nine months ended September 30, 2021, we recognized share-based compensation expense associated with ~~each of the applicable~~restricted stock and restricted stock units totaling approximately $7.0 million. No share-based compensation ~~awards outstanding at~~expense related to stock options was recognized during the nine months ended September 30, 2021~~will be recognized as share-based compensation expense if~~, because the vesting and ~~when~~exercisability of stock options granted by the ~~related recognition conditions, for accounting purposes, are met.~~Company up through AsSeptember 30, 2021 was contingent upon the occurrence of a ~~result~~change of ~~the consummation of the IPO, a significant portion of this total unrecognized share-based compensation expense amount will be recognized during the fourth quarter of 2021.~~control or an initial public offering.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the United States (“GAAP”)~~GAAP requires us 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. Ultimate results could differ from those estimates. In recording transactions and balances resulting from business operations, we use estimates based on the best information available. We revise the recorded estimates when better information is available, facts change or we can determine actual amounts. These revisions can affect operating results.

Management has evaluated the development and selection orof our critical accounting policies and estimates used in the preparation of the Company’s unaudited condensed consolidated financial statements and related notes and believes these policies to be reasonable and appropriate. Certain of these policies involve a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position, and are, therefore, discussed as critical. Our most significant estimates and assumptions that materially affect the ~~Company's~~Company’s unaudited condensed consolidated financial statements involve difficult, subjective or complex judgments which management used while performing goodwill, indefinite-lived intangible and long-lived asset impairment analyses. Given the additional effects from the COVID-19 pandemic, these estimates can be more challenging, and actual results could differ materially from our estimates. As it relates to the long-lived asset impairment analyses that we have performed during both the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we determined that certain projects were no longer deemed viable for construction, and that the ~~previously-capitalized~~previously capitalized site development costs associated with these projects were impaired. Accordingly, as it relates to these long-lived assets, we recognized impairment charges of ~~$0.7~~$0.2 million and ~~$9.9~~$0.7 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~we recognized impairment charges of $2.5~~$0.2 million and ~~$16.9~~$2.5 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

More information on all of our significant accounting policies can be found in Note 2, “Summary of Significant Accounting Policies” to our audited consolidated financial statements included in the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1~~10-K for the year ended December 31, 2021 filed with the ~~SEC on September 13, 2021 (File No. 333-259495)~~SEC. ~~and the section of such~~ ~~Registration Statement on Form S-1~~ ~~entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations.”~~ There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in such ~~Registration Statement~~Annual Report on Form ~~S-1.~~10-K.

Table of Contents

Results of Operations

Three Months Ended September 30, ~~2021~~2022 Compared to Three Months Ended September 30, ~~2020~~2021

The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the three months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended September 30,									Three Months Ended September 30,
						As a Percentage of Total Revenue									As a Percentage of Total Revenue
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Center revenue	Center revenue	$	372,000	$	228,349	96.6	%	98.8	%	Center revenue	$	479,995	$	372,000	96.7	%	96.6	%
Other revenue	Other revenue	13,040		2,681		3.4	%	1.2	%	Other revenue	16,386		13,040		3.3	%	3.4	%
Total revenue	Total revenue	385,040		231,030		100.0	%	100.0	%	Total revenue	496,381		385,040		100.0	%	100.0	%
Operating expenses:	Operating expenses:									Operating expenses:
Center operations	Center operations	231,996		165,572		60.3	%	71.7	%	Center operations	295,253		231,996		59.5	%	60.3	%
Rent	Rent	52,513		47,539		13.6	%	20.6	%	Rent	63,213		52,513		12.7	%	13.6	%
General, administrative and marketing	General, administrative and marketing	45,304		32,204		11.8	%	13.9	%	General, administrative and marketing	57,139		45,304		11.5	%	11.8	%
Depreciation and amortization	Depreciation and amortization	57,977		61,359		15.1	%	26.6	%	Depreciation and amortization	56,400		57,977		11.4	%	15.1	%
Other operating		14,796		15,152		3.8	%	6.5	%
Other operating (income) expense										Other operating (income) expense	(31,358)		14,796		(6.3)	%	3.8	%
Total operating expenses	Total operating expenses	402,586		321,826		104.6	%	139.3	%	Total operating expenses	440,647		402,586		88.8	%	104.6	%
Loss from operations		(17,546)		(90,796)		(4.6)	%	(39.3)	%
Income (loss) from operations										Income (loss) from operations	55,734		(17,546)		11.2	%	(4.6)	%
Other (expense) income:	Other (expense) income:									Other (expense) income:
Interest expense, net of interest income	Interest expense, net of interest income	(39,849)		(30,967)		(10.3)	%	(13.4)	%	Interest expense, net of interest income	(27,696)		(39,849)		(5.5)	%	(10.3)	%
Equity in earnings of affiliate		(28)		37		—	%	—	%
Equity in earnings (loss) of affiliate										Equity in earnings (loss) of affiliate	95		(28)		—	%	—	%
Total other expense	Total other expense	(39,877)		(30,930)		(10.3)	%	(13.4)	%	Total other expense	(27,601)		(39,877)		(5.5)	%	(10.3)	%
Loss before income taxes		(57,423)		(121,726)		(14.9)	%	(52.7)	%
Benefit from income taxes		(11,981)		(28,079)		(3.1)	%	(12.2)	%
Net loss		$	(45,442)	$	(93,647)	(11.8)	%	(40.5)	%
Income (loss) before income taxes										Income (loss) before income taxes	28,133		(57,423)		5.7	%	(14.9)	%
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	3,401		(11,981)		0.7	%	(3.1)	%
Net income (loss)										Net income (loss)	$	24,732	$	(45,442)	5.0	%	(11.8)	%

Total revenue. The ~~$154.0~~$111.3 million increase in Total revenue for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 reflects the continued improvement of our operations after the adverse ~~economic impact that~~impacts of COVID-19, which has been supported by our ~~center closures had on~~strategic investments in our business, ~~during~~ the ~~three months ended September 30, 2020 and the timing of the subsequent reopening of our centers, as well as~~ pricing initiatives we have implemented at the majority of our centers ~~during~~since the ~~three months ended September 30,~~third quarter of 2021, which have resulted in higher average Center membership dues being charged ~~to new members~~ during the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020.~~2021, as well as the opening of three and five new centers during the three and nine months ended September 30, 2022, respectively.

With respect to the ~~$143.6~~$108.0 million increase in Center revenue for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020:~~2021:

•~~63.6%~~69.2% was from membership dues and enrollment fees, which increased ~~$91.4~~$74.7 million for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020.~~2021. This increase reflects the ~~adverse economic impact that~~improvement in our ~~center closures,~~Center memberships, which ~~resulted from COVID-19, had on our business during the three months ended~~increased to 728,729 as of September 30, ~~2020 and the timing~~2022 from 668,310 as of ~~the subsequent reopening of our centers, as well as pricing initiatives we implemented at the majority of our centers during the three months ended~~ September 30, 2021 ~~which have resulted in higher average Center membership dues being charged to new members~~ ~~during~~for the ~~three months ended~~ ~~September 30, 2021 as compared to~~ ~~the three months ended~~ ~~September 30, 2020~~reasons noted above for Total revenue; and

•~~36.4%~~30.8% was from in-center revenue, which increased $~~52.2~~33.3 million for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021. This increase was recognized across all of our primary in-center businesses and reflects the ~~adverse economic impact that our center closures, which resulted from COVID-19, had on our business during the three months ended~~ ~~September 30, 2020~~ ~~as well as the timing of the subsequent reopening~~higher utilization of our ~~centers.~~services by our members as our operations continue to improve after the adverse impacts of COVID-19, which has been supported by our strategic investments in our business.

Table of Contents

The $~~10.4~~3.3 million increase in Other revenue for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 was primarily driven by our athletic events business, as we ~~were able to produce several~~experienced a higher level of ~~our iconic events~~event participation during the ~~third quarter of 2021~~three months ended September 30, 2022 as compared to the ~~third quarter of 2020~~three months ended September 30, 2021 when COVID-19 ~~restrictions forced the cancellation of most of~~had reduced our ~~events~~event participation rates..

Center operations expenses. The $~~66.4~~63.3 million increase in Center operations expenses for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 was primarily driven by increased staffing requirements resulting from ~~the subsequent reopening~~increased usage of our centers and strategic investments in our business during the ~~addition~~ three months ended September 30, 2022 as compared to the three months ended September 30, 2021, the opening of ~~seven~~three and five new ~~centers.~~centers during the three and nine months ended September 30, 2022, respectively, as well as higher labor and utility costs due to inflation during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021.

Rent expense. The $~~5.0~~10.7 million increase in Rent expense for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 was primarily driven by ~~the sale leaseback of five centers occurring since~~ ~~September 30, 2020, and~~ our taking possession of ~~five sites~~nine properties since ~~September~~June 30, ~~2020~~ 2021 for future centers where we started incurring GAAP rent expense, most of which is ~~non-cash.~~non-cash, and the sale-leaseback of nine centers during the current year, five of which occurred during the three months ended September 30, 2022.

General, administrative and marketing expenses. The ~~$13.1~~$11.8 million increase in General, administrative and marketing expenses for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 was primarily driven by a ~~$4.1~~$2.2 million increase in ~~share-based compensation,~~overhead costs that was primarily labor-related to enhance and broaden our member services and experiences, a ~~$3.5~~$1.8 million increase in marketing and information technology expenses, a $1.6 million increase in share-based and incentive compensation expenses, a $1.4 million increase in public company-related expenses and a ~~$3.4~~$1.3 million increase in ~~general and administrative~~severance costs due to the return of Corporate team members who remained furloughed during the third quarter of 2020, partially offset by $2.6 million of corporate COVID-19-related expenses incurred during the three months ended ~~September 30, 2020~~.

Depreciation and amortization. The ~~$3.4~~$1.6 million decrease in Depreciation and amortization for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 consists of ~~$3.1 million and $0.3~~$1.7 million lower depreciation, ~~and~~driven by the timing of sale-leaseback transactions, partially offset by $0.1 million higher amortization ~~respectively~~.

Other operating (income) expenses. ~~The~~ ~~$0.4 million~~ ~~decrease in~~ Other operating ~~expenses~~income for the three months ended September 30, ~~2021~~2022 was $31.4 million, as ~~compar~~edcompared to Other operating expenses of $14.8 million for the three months ended September 30, ~~2020~~2021. The $46.2 million change was primarily attributable to ~~project cost write-offs recognized~~the recognition of a gain of $47.9 million on a sale-leaseback transaction associated with five properties that was completed during the three months ended September 30, ~~2020~~2022, ~~for sites that were no longer deemed viable for construction as a result of COVID-19,~~ partially offset by higher costs associated with our athletic events business, as we experienced a higher level of event participation during ~~the~~the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~, as we were able to produce several of our iconic events during the third quarter of 2021 as compared to the third quarter of 2020 when COVID-19 restrictions forced the cancellation of most of our events.2021.

Interest expense, net of interest income. The ~~$8.8~~$12.2 million ~~increase~~ decrease in Interest expense, net of interest income for the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021 ~~reflects~~was driven by a ~~relatively higher effective weighted average interest rate on an increased~~lower average level of outstanding borrowings during the three months ended September 30, ~~2021~~2022 as compared to the three months ended September 30, ~~2020~~2021.

~~Benefit from~~Provision for (benefit from) income taxes. The ~~benefit from~~provision for income taxes was ~~$12.0~~$3.4 million for the three months ended September 30, ~~2021~~2022 as compared to ~~$28.1~~the $12.0 million ~~for the three months ended~~ ~~September 30, 2020. The effective tax rate was 20.9% and 23.1% for those same periods, respectively. The change in~~ benefit from ~~income taxes was primarily attributable to a decrease in our loss before~~ income taxes for the three months ended September 30, 2021 ~~as compared~~. The effective tax rate was 12.1% and 20.9% for those same periods, respectively. The effective tax rate applied to our pre-tax income for the three months ended September 30, ~~2020,~~2022 ~~as well as~~is lower than our statutory rate of 21% and reflects a decrease in the ~~recognition during the three months ended~~ ~~September 30, 2021~~valuation allowance associated with certain of our deferred tax assets, partially offset by deductibility limitations associated with executive compensation and an increase in the ~~valuation allowance to reduce the deferred~~state income tax ~~asset associated with our state net operating loss carryforwards.~~provision.

Net ~~loss~~income (loss). As a result of the factors described above, net ~~loss decreased by~~ ~~$48.2~~income was $24.7 million for the three months ended September 30, ~~2021~~2022 as compared to a net loss of $45.4 million for the three months ended September 30, ~~2020~~2021.

Table of Contents

Nine Months Ended September 30, ~~2021~~2022 Compared to Nine Months Ended September 30, ~~2020~~2021

The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Nine Months Ended September 30,									Nine Months Ended September 30,
						As a Percentage of Total Revenue									As a Percentage of Total Revenue
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue:	Revenue:									Revenue:
Center revenue	Center revenue	$	933,690	$	704,919	97.5	%	97.9	%	Center revenue	$	1,307,498	$	933,690	96.9	%	97.5	%
Other revenue	Other revenue	23,835		14,991		2.5	%	2.1	%	Other revenue	42,404		23,835		3.1	%	2.5	%
Total revenue	Total revenue	957,525		719,910		100.0	%	100.0	%	Total revenue	1,349,902		957,525		100.0	%	100.0	%
Operating expenses:	Operating expenses:									Operating expenses:
Center operations	Center operations	625,322		515,350		65.3	%	71.6	%	Center operations	814,383		625,322		60.3	%	65.3	%
Rent	Rent	154,552		138,470		16.1	%	19.2	%	Rent	179,166		154,552		13.3	%	16.1	%
General, administrative and marketing	General, administrative and marketing	126,896		119,665		13.3	%	16.6	%	General, administrative and marketing	175,650		126,896		13.0	%	13.3	%
Depreciation and amortization	Depreciation and amortization	177,005		188,483		18.5	%	26.2	%	Depreciation and amortization	171,680		177,005		12.7	%	18.5	%
Other operating		30,660		37,412		3.2	%	5.2	%
Other operating (income) expense										Other operating (income) expense	(56,605)		30,660		(4.2)	%	3.2	%
Total operating expenses	Total operating expenses	1,114,435		999,380		116.4	%	138.8	%	Total operating expenses	1,284,274		1,114,435		95.1	%	116.4	%
Loss from operations		(156,910)		(279,470)		(16.4)	%	(38.8)	%
Income (loss) from operations										Income (loss) from operations	65,628		(156,910)		4.9	%	(16.4)	%
Other (expense) income:	Other (expense) income:									Other (expense) income:
Interest expense, net of interest income	Interest expense, net of interest income	(176,144)		(95,724)		(18.4)	%	(13.3)	%	Interest expense, net of interest income	(84,732)		(176,144)		(6.3)	%	(18.4)	%
Equity in earnings of affiliate		(412)		(206)		—	%	—	%
Equity in earnings (loss) of affiliate										Equity in earnings (loss) of affiliate	129		(412)		—	%	—	%
Total other expense	Total other expense	(176,556)		(95,930)		(18.4)	%	(13.3)	%	Total other expense	(84,603)		(176,556)		(6.3)	%	(18.4)	%
Loss before income taxes	Loss before income taxes	(333,466)		(375,400)		(34.8)	%	(52.1)	%	Loss before income taxes	(18,975)		(333,466)		(1.4)	%	(34.8)	%
Benefit from income taxes	Benefit from income taxes	(58,867)		(99,096)		(6.1)	%	(13.7)	%	Benefit from income taxes	(3,456)		(58,867)		(0.3)	%	(6.1)	%
Net loss	Net loss	$	(274,599)	$	(276,304)	(28.7)	%	(38.4)	%	Net loss	$	(15,519)	$	(274,599)	(1.1)	%	(28.7)	%

Total revenue. The ~~$237.6~~$392.4 million increase in Total revenue for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 ~~compared to the nine months ended September 30, 2020 primarily~~ reflects the continued improvement of our operations after the adverse ~~economic impact that~~impacts of COVID-19, which has been supported by our ~~center closures had on~~strategic investments in our business, ~~during~~ the ~~nine months ended September 30, 2020 and the timing of the subsequent reopening of our centers, as well as~~ pricing initiatives we have implemented at the majority of our centers ~~during~~since the ~~nine months ended September 30,~~third quarter of 2021, which have resulted in higher average Center membership dues being charged during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, as well the opening of five new ~~members~~centers during the nine months ended September 30, 2022.

With respect to the $373.8 million increase in Center revenue for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021:

•70.4% was from membership dues and enrollment fees, which increased $263.3 million for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020.~~

~~With respect~~2021. This increase reflects the improvement in our Center memberships, which increased to ~~the $228.8 million increase in Center revenue for the nine months ended~~728,729 as of September 30, 2022 from 668,310 as of September 30, 2021 ~~compared to~~for the ~~nine months ended September 30, 2020:~~reasons noted above for Total revenue; and

•~~71.4%~~29.6% was from ~~membership dues and enrollment fees,~~in-center revenue, which increased ~~$163.5~~$110.5 million for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020. This increase reflects the adverse economic impact that our center closures, which resulted from COVID-19, had on our business during the nine months ended~~ ~~September 30, 2020~~ ~~and the timing of the subsequent reopening of our centers, as well as pricing initiatives we implemented at the majority of our centers during the nine months ended~~ ~~September 30, 2021, which have resulted in higher average Center membership dues being charged to new members~~ ~~during the nine months ended~~ ~~September 30, 2021 as compared to~~ ~~the nine months ended~~ ~~September 30, 2020; and~~

•~~28.6% was from in-center revenue, which increased~~ ~~$65.3 million~~ ~~for the nine months ended~~ ~~September 30, 2021~~ ~~as compared to the nine months ended~~ ~~September 30, 2020~~.2021. This increase was recognized across all of our primary in-center businesses and reflects the ~~adverse economic impact that our center closures, which resulted from COVID-19, had on our business during the nine months ended~~ ~~September 30, 2020~~ ~~as well as the timing of the subsequent reopening~~higher utilization of our ~~centers.~~services as our operations continue to improve after the adverse impacts of COVID-19, which has been supported by our strategic investments in our business.

Table of Contents

The ~~$8.8~~$18.6 million increase in Other revenue for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was primarily driven by our athletic events business, as we experienced a higher level of event participation during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 when COVID-19 had reduced our event participation rates. Also, were able to produce ~~several~~more of our iconic events during the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 when COVID-19 restrictions forced the cancellation of ~~most~~certain of our ~~events~~events..

Center operations expenses. The ~~$109.9~~$189.1 million increase in Center operations expenses for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was ~~primarily~~ driven by increased staffing requirements resulting from ~~the subsequent reopening~~increased usage of our centers and strategic investments in our business during the ~~addition~~nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, the opening of ~~seven~~five new ~~centers.~~centers during the nine months ended September 30, 2022, as well as higher labor and utility costs due to inflation during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021.

Rent expense. The ~~$16.1~~$24.6 million increase in Rent expense for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was primarily driven by ~~the sale leaseback of five centers occurring since~~ ~~September 30, 2020, and~~ our taking possession of ~~five sites~~nine properties since ~~September~~June 30, ~~2020~~ 2021 for future centers where we started incurring GAAP rent expense, most of which is non-cash, and the sale-leaseback of nine centers during the nine months ended September 30, 2022.

General, administrative and marketing expenses. The $~~7.2~~48.8 million increase in General, administrative and marketing expenses for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was primarily driven by a $24.1 million increase in share-based and incentive compensation expenses, a $9.4 million increase in overhead costs that was primarily labor-related to enhance and broaden our member services and experiences, a $6.8 million increase in marketing and information technology expenses, a $5.0 million increase in public company-related expenses and a $0.8 million increase in severance costs. No share-based compensation expense related to stock options was recognized during the nine months ended September 30, 2021, because the vesting and exercisability of stock options granted by the Company up through September 30, 2021 was contingent upon the occurrence of a change of control or an initial public offering.

Depreciation and amortization. The $5.3 million decrease in Depreciation and amortization for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 ~~was primarily~~consists of $5.8 million lower depreciation, driven by ~~an $7.4 million increase in general and administrative costs due to~~ the ~~return~~timing of ~~Corporate team members who remained furloughed during the nine months ended~~ ~~September 30, 2020,~~ a ~~$7.0 million increase in share-based compensation, and a $4.9 million increase in marketing expenses~~, sale-leaseback transactions, partially offset by ~~$12.4~~$0.5 million ~~of corporate COVID-19-related expenses~~ higher amortization, driven by a facility license associated with an outdoor enthusiast and bicycling event that ~~were recognized~~we acquired during the ~~nine months ended~~ ~~September 30, 2020~~third quarter of 2021.

~~Depreciation and amortization~~Other operating (income) expenses. ~~The~~Other operating income for the ~~$11.5 million~~nine ~~decrease in Depreciation and amortization~~months ended September 30, 2022 was $56.6 million as compared to Other operating expenses of $30.7 million for the nine months ended September 30, ~~2021~~2021. The $87.3 million change ~~as compared to the nine months ended~~ ~~September 30, 2020~~ ~~consists of $7.7 million and $3.8 million lower depreciation and amortization, respectively.~~

~~Other operating expenses. The~~ ~~$6.7 million~~ ~~decrease in Other operating expenses for the nine months ended~~ ~~September 30, 2021~~ ~~as compared to the nine months ended~~ ~~September 30, 2020~~was primarily attributable to ~~project cost write-offs recognized~~the recognition of a gain of $98.0 million on sale-leaseback transactions associated with nine properties that were completed during the nine months ended September 30, ~~2020~~2022, ~~for sites that were no longer deemed viable for construction as a result of COVID-19,~~ partially offset by higher costs associated with our athletic events business, ~~during the nine months ended~~ ~~September 30, 2021~~ as ~~compared to the nine months ended September 30, 2020, as~~we experienced a higher level of event participation and we were able to produce ~~several~~more of our iconic events during the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~ ~~when COVID-19 restrictions forced the cancellation of most of our events.~~2021.

Interest expense, net of interest income. The ~~$80.4~~$91.4 million ~~increase~~ decrease in Interest expense, net of interest income for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was ~~primarily~~ driven by $41.0 million of non-cash expense that was recognized during the nine months ended September 30, 2021 in connection with the conversion of a related-party secured loan into Series A Preferred Stock, write-offs of debt issuance costs and original issuance discount costs ~~associated with extinguished debt instruments~~totaling $18.3 million that were ~~written off~~recognized during the nine months ended September 30, 2021~~, including a~~ ~~$41.0 million~~ in connection ~~non-cash expense recognized related to the conversion of our related party secured loan into Series A Preferred Stock. Additionally, the increase also reflects~~with extinguished debt instruments, as well as a ~~relatively higher effective weighted average interest rate on an increased~~lower average level of outstanding borrowings during the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021.

Benefit from income taxes. The benefit from income taxes was ~~$58.9~~$3.5 million for the nine months ended September 30, ~~2021~~ 2022 as compared to ~~$99.1~~$58.9 million for the nine months ended September 30, ~~2020~~2021. The effective tax rate was ~~17.7%~~18.2% and ~~26.4%~~17.7% for those same periods, respectively. The change in benefit from income taxes was primarily attributable ~~to: (i) a~~to the decrease in our loss before income taxes for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, 2021. The effective tax rate applied to our pre-tax loss for the nine months ended September 30, 2022 is lower than our statutory rate of 21% and reflects deductibility limitations associated with executive compensation, partially offset by a decrease in the projected valuation allowance associated with certain of our deferred tax assets.

Net loss. As a result of the factors described above, net loss decreased by $259.1 million for the nine months ended September 30, 2022 as compared to the nine months ended September 30, ~~2020; (ii) a~~ ~~$41.0 million loss related to the extinguishment of our related party secured loan that we recognized for GAAP purposes during the nine months ended~~ ~~September 30,~~ 2021 ~~that is not recognized for tax purposes; (iii) the recognition during the nine months ended~~ ~~September 30, 2021 of an~~ increase in the valuation allowance to reduce the deferred tax asset associated with our state net operating loss carryforwards; and (iv) the favorable federal tax rate differential from our net operating loss carryback claims filed in 2020 under the CARES Act. The favorable federal tax rate differential was due to our net operating losses generated in tax years with a federal tax rate of 21% whereas the losses were carried back to tax years with a federal tax rate of 35%.

Table of Contents

Liquidity and Capital Resources

Liquidity

Our principal liquidity needs include the development of new centers, lease requirements and debt service, ~~and lease requirements,~~ investments in our business and technology and expenditures necessary to maintain and update or enhance our centers and associated fitness ~~equipment.~~equipment and member experiences. We have primarily satisfied our historical liquidity needs with cash flow from operations, drawing on the Revolving Credit Facility and through sale-leaseback transactions.

We have taken significant ~~action~~actions to improve our liquidity. ~~See “—Impact~~During 2021, we refinanced a significant portion of ~~COVID-19 on Our Business.”~~ our outstanding debt. For information regarding the refinancing actions we took during 2021, see Note 6, Debt, to our condensed consolidated financial statements in this report. Additionally, we consummated our IPO in October 2021. During the nine months ended September 30, 2022, we completed sale-leaseback transactions associated with nine properties. In addition, we continue to explore potential sale-leaseback opportunities for a number of our properties. For more information regarding the sale-leaseback transactions that were consummated during the nine months ended September 30, 2022, see Note 7, Leases, to our condensed consolidated financial statements included in this report. 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 including through this pandemic.~~business.

As the opportunity arises or as our business needs require, we may seek to raise capital through additional debt financing or through equity financing. There can be no assurance that any such financing would be available on commercially acceptable terms, or at all. To date, we have not experienced difficulty accessing the credit and capital markets; however, volatility in these markets, particularly in light of the rising interest rate environment and any continued impacts of COVID-19, may increase costs associated with issuing debt instruments or affect our ability to access those markets, which could have an adverse impact on our ability to raise additional capital, to refinance existing debt and/or to react to changing economic and business conditions. In addition, it is possible that our ability to access the credit and capital markets could be limited at a time when we would like or need to do so.

As of September 30, ~~2021~~,2022, there were no outstanding borrowings ~~on the~~under our Revolving Credit Facility and there were ~~$40.1~~$31.7 million of outstanding letters of credit. As of September 30, ~~2021~~,2022, total cash and revolver availability was ~~$262.6~~$540.7 million, consisting of total cash and cash equivalents, exclusive of ~~$44.8~~restricted cash, of $97.4 million and total revolver availability ~~subject to a $100.0 million minimum liquidity requirement (discussed in —“Debt Covenants” below),~~ of ~~$217.8~~$443.3 million.

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

Nine Months Ended
September 30,
2021 2020
Net cash used in operating activities $ (15,322) $ (56,165)
Capital expenditures (201,741) (213,876)
Net cash used in investing activities (138,190) (62,662)
Net cash provided by financing activities 165,129 111,118


	Nine Months Ended
	September 30,
	2022		2021
Net cash provided by (used in) operating activities	$	125,320	$	(15,322)
Net cash used in investing activities	(37,480)		(138,190)
Net cash (used in) provided by financing activities	(11,708)		165,129
Effect of exchange rates on cash and cash equivalents	(700)		15
Increase in cash and cash equivalents	$	75,432	$	11,632

Operating Activities

The ~~$40.8~~$140.6 million ~~decrease~~ increase in cash ~~used in~~provided by operating activities for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was primarily the result of ~~lower~~higher profitability ~~during the nine months ended~~ ~~September 30, 2020~~ ~~as compared~~due to the ~~nine months ended~~ ~~September 30, 2021~~ ~~resulting~~recovery from the ~~adverse~~ impact ~~that~~of COVID-19 ~~has had~~ on our business.

Investing Activities

Investing activities consist primarily of purchasing real property, constructing new centers, acquisitions and purchasing new fitness equipment. In addition, we invest in capital expenditures to maintain and update our existing centers. We finance the purchase of our property and equipment through operating cash flows, proceeds from sale-leaseback transactions, construction reimbursements and draws on our Revolving Credit ~~Facility, tenant allowances and proceeds from sale-leaseback transactions.~~Facility.

The ~~$75.5~~$100.7 million ~~increase~~ decrease in cash used in investing activities for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was primarily driven by a ~~relatively~~ higher amount of proceeds that we received from ~~landlords for~~ sale-leaseback transactions, partially offset by a higher level of new center construction activity during the nine months ended September 30, ~~2020~~ 2022.

Table of Contents

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Growth capital expenditures, net of construction reimbursements (1)	$	119,670	$	43,418	$	290,132	$	117,605
Center maintenance capital expenditures	22,462		18,078		57,915		43,045
Corporate capital expenditures	15,174		18,272		61,899		41,091
Total capital expenditures	$	157,306	$	79,768	$	409,946	$	201,741

(1) Growth capital expenditures include new center land and construction, growth initiatives, major remodels of acquired centers and the purchase of previously leased centers.

The $208.2 million increase in total capital expenditures for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 ~~and proceeds we received from the sale of land held for sale during~~ ~~nine months ended~~ ~~September 30, 2020. Cash used in~~ ~~investing activities for the nine months ended~~ ~~September 30, 2021 also includes a $9.1 million payment we made in connection with the acquisition of the~~ assets associated with an outdoor bicycling event. Of the $10.2 million total purchase price associated with the acquisition of these assets, $1.1 million had yet to be paid as of September 30, 2021.

~~The following schedule reflects capital expenditures, net by type of expenditure (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Growth capital expenditures (New center land and construction, growth initiatives, major remodels of acquired centers and the purchase of previously-leased centers), net of tenant allowances $ 43,418 $ 25,806 $ 117,605 $ 124,775
Center maintenance capital expenditures 18,078 4,823 43,045 29,075
Corporate capital expenditures 18,272 14,955 41,091 60,026
Total capital expenditures, net $ 79,768 $ 45,584 $ 201,741 $ 213,876

~~The~~ ~~$12.1 million~~ ~~decrease in total capital expenditures, net for the nine months ended~~ ~~September 30, 2021~~ ~~as compared to the nine months ended~~ ~~September 30, 2020~~ was primarily driven by ~~lower~~higher growth capital expenditures for new centers, continued investments in technology and corporate capital expenditures ~~for the nine months ended~~ ~~September 30, 2021~~ ~~as compared~~related to ~~the nine months ended~~ ~~September 30, 2020, reflecting our strong operating discipline and continued effort to control expenditures, partially offset by higher center maintenance capital expenditures for the nine months ended~~ ~~September 30, 2021~~ ~~as compared to the nine months ended~~ ~~September 30, 2020, primarily driven by~~ ~~the timing of the subsequent reopening of our centers~~. Our contracts with construction subcontractors contain clauses that allow us to terminate any project. Therefore, we have the ability to cancel any project and, in the event of such a cancellation, we will only be obligated to pay for work actually performed up to the date of cancellation. Our unpaid obligations to construction subcontractors for work performed up through ~~September 30, 2021~~ ~~is recognized in Construction accounts payable on our~~ ~~September 30, 2021~~ ~~condensed consolidated balance sheet.~~

Life Time Work.

Financing Activities

~~Financing activities for the nine months ended~~ ~~September 30, 2021~~ ~~and 2020 include net proceeds from and repayments of debt, including those associated with our senior secured credit facility. In addition, financing activities for the nine months ended~~ ~~September 30, 2020~~ ~~include proceeds from equity transactions.~~

The ~~$54.0~~$176.8 million ~~increase~~ decrease in cash provided by financing activities for the nine months ended September 30, ~~2021~~2022 as compared to the nine months ended September 30, ~~2020~~2021 was primarily driven by net proceeds we received from ~~new~~ borrowings under our Term Loan Facility, Secured Notes and Unsecured Notes during the nine months ended September 30, ~~2021~~ ~~in connection with debt refinancing~~2021.

We expect to satisfy our short-term and long-term obligations through a combination of cash on hand, funds generated from operations, sale-leaseback transactions ~~partially offset by proceeds we received from~~and the ~~issuance of the Company’s common stock during the nine months ended~~ ~~September 30, 2020~~.

~~Debt Covenants~~

~~Our senior secured credit facility as well as the indentures governing~~borrowing capacity available under our outstanding senior secured notes and senior unsecured notes contain a number of covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The restrictions these covenants place on us include limitations on our ability to:

•~~incur or guarantee additional indebtedness;~~

•~~make certain investments;~~

•~~pay dividends or make distributions on our capital stock;~~

•~~sell assets, including capital stock of restricted subsidiaries;~~

•~~agree to payment restrictions affecting our restricted subsidiaries;~~

•~~consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;~~

•~~enter into transactions with our affiliates;~~

•~~incur liens; and~~

•~~designate any of our subsidiaries as unrestricted subsidiaries.~~

~~We are also required to comply with a first lien net leverage ratio covenant under the~~ Revolving Credit Facility. However, the Amended Senior Secured Credit Facility includes a covenant modification period ending on the earlier of (i) January 1, 2022 or (ii) the date we provide notice of our intention to terminate the Covenant Modification Period. During the Covenant Modification Period, we are not obligated to comply with the first lien net leverage ratio covenant; however, we are required to maintain a minimum liquidity balance of $100.0 million, which is tested monthly. As of both ~~September 30, 2021~~ ~~and December 31, 2020, we were either in compliance in all material respects with our debt covenants or the covenants were not applicable.~~

Effective as of the end of the first fiscal quarter following the Covenant Modification Period and continuing throughout the remaining term of the Revolving Credit Facility, we will be required to maintain a first lien net leverage ratio, if 30% 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). During the first three quarterly test periods following the Covenant Modification Period, certain financial measures used in the calculation of the first lien net leverage ratio will be calculated on a pro forma basis by annualizing the respective financial measures recognized during those test periods.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business that include changes in interest rates and changes in foreign currency exchange rates. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

Interest rate risk

Our cash consists primarily of an interest-bearing account at a large ~~U.S.~~United States bank with limited interest rate risk. At September 30, ~~2021,~~2022, we held no investments in marketable securities.

We incur interest at variable rates under ~~the revolving portion of~~ our ~~senior secured credit facility.~~Revolving Credit Facility. At September 30, ~~2021,~~2022, there were no outstanding borrowings on the Revolving Credit Facility and ~~there were $40.1~~$31.7 million of outstanding letters of credit, resulting in total revolver availability ~~subject to a $100.0~~of $443.3 million, which was~~minimum liquidity requirement, of $217.8 million, of which $185.1 millionwas~~ available at intervals ranging from 30 to 180 days at interest rates ranging from LIBOR plus 4.25% or base rate plus 3.25%~~, while interest on the remaining $32.7 millionwas available at intervals ranging from 30~~. Our Term Loan Facility is also subject to ~~180 days at~~variable rates of LIBOR plus ~~3.00%~~4.75% or base rate plus ~~2.00%~~3.75% and had an outstanding balance of $273.6 million at September 30, 2022.

Assuming no prepayments of the Term Loan Facility and that the Revolving Credit Facility is fully drawn (and that LIBOR is in excess of the floor rate applicable to the Term Loan Facility), each one percentage point change in interest rates would result in an approximately $7.5 million change in annual interest expense on the indebtedness under our senior secured credit facility.

Foreign currency exchange risk

We operate primarily in the United States with three centers operating in Canada. Given ~~the~~our limited amount of operations outside of the United States, fluctuations due to changes in foreign currency exchange rates would not have a material impact on our business.

Table of Contents

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.

Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act during the quarter covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are engaged in litigation or other proceedings incidental to the normal course of business, including investigations and claims regarding employment law including wage and hour and unfair labor practices; supplier, customer and service provider contract terms; products liability; and real estate. Other than as set forth in Note ~~10—~~11, Commitments and Contingencies, in Part I, Item I1 of this Quarterly Report on Form 10-Q, which is incorporated herein, there are no pending material legal proceedings to which we are a party or to which our property is subject.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under the caption “Risk Factors” in the Company’s ~~Registration Statement~~Annual Report on Form ~~S-1~~10-K for the year ended December 31, 2021 filed with the ~~Securities and Exchange Commission on September 13, 2021 (File No. 333-259495)~~SEC, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors previously disclosed in that ~~prospectus.~~Annual Report.

I~~TEM~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Use of Proceeds from Public Offering of Common Stock~~None.

On October 12, 2021, we completed the initial public offering (“IPO”) of our common stock at a price to the public of $18.00 per share. We issued and sold 40,581,192 shares of common stock in the IPO, including 1,581,192 shares of common stock issued pursuant to the partial exercise of the underwriters’ option to purchase additional shares as previously disclosed in the IPO prospectus. The shares sold in the IPO were registered under the Securities Act pursuant to the Company’s Registration Statement on Form S-1 (File No. 333-259495), which was declared effective by the SEC on October 6, 2021. Our common stock is listed on The New York Stock Exchange under the symbol “LTH.” The IPO, including the partial exercise of the underwriters’ option to purchase additional shares, generated net proceeds to us of approximately ~~$706.2~~ ~~million after deducting underwriting discounts and commissions and estimated offering expenses.~~

We used a portion of the net proceeds received by us from the IPO to repay $570.0 million in aggregate principal amount of borrowings under the Term Loan Facility, plus $4.4 million in accrued interest and a 1% prepayment penalty of $5.7 million and pay offering fees and expenses. The excess net proceeds from the offering will be used for working capital and general corporate purposes.ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. EXHIBITS

All exhibits as set forth on the Exhibit Index.

Exhibit
Number
Description of Exhibit Form File No. Exhibit Filing Date
3.1
Amended and Restated Certificate of Incorporation.
8-K 001-40887 3.1 10/12/2021
3.2
Third Amended and Restated Bylaws.
8-K 001-40887 3.2 10/12/2021
10.1
Offer Letter, dated as of August 18, 2021, by and between Bahram Akradi and Life Time, Inc.
S-1 333-259495 10.27 9/13/2021
10.2 †
Employee Non-Competition Agreement, dated as of August 18, 2021, by and between Bahram Akradi and Life Time, Inc.
S-1 333-259495 10.32 9/13/2021
31.1
Certificate of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
31.2
Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.
Furnished herewith
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.
Furnished herewith
101.INS Inline XBRL Instance Document –– the Instance Document does not appear in the interactive data file because its XBRL tags are Embedded within the Inline XBRL Document. Filed herewith
101.SCH Inline XBRL Schema Document. Filed herewith
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. Filed herewith
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. Filed herewith
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. Filed herewith
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. Filed herewith
104 Cover Page Interactive Data File –– the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith
Exhibit Index

Exhibit

Number

Description of Exhibit

Form

File No.

Exhibit

Filing Date

10.1

Employment Agreement by and between Robert Houghton and Life Time Group Holdings, Inc., effective as of August 28, 2022.

8-K

001-40887

10.1

8/29/2022

31.1

Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

31.2

Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Filed herewith

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.

Furnished herewith

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002.

Furnished herewith

101.INS

Inline XBRL Instance Document –– the Instance Document does not appear in the interactive data file because its XBRL tags are Embedded within the Inline XBRL Document.

Filed herewith

101.SCH

Inline XBRL Schema Document.

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Filed herewith

104

Cover Page Interactive Data File –– the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Filed herewith

†Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	Life Time Group Holdings, Inc.

Date: November ~~17, 2021~~9, 2022	By:	/s/ ~~Thomas E. Bergmann~~Robert Houghton
		~~Thomas E. Bergmann~~Robert Houghton
		Executive Vice President & Chief Financial Officer


Part I. FINANCIAL INFORMATION	Page
Item 1	1. Financial Statements	3
Item 22. Management	’~~Management's~~s Discussion and Analysis of Financial Condition and Results of Operations	2623
Item 3	3. Quantitative and Qualitative Disclosures About Market Risk	3937
Item 4	4. Controls and Procedures	4038
Part II. OTHER INFORMATION	4038
Item 1	1. Legal Proceedings	4038
Item 1A	1A. Risk Factors	4038
Item 2	2. Unregistered Sales of Equity Securities and Use of Proceeds	4038
Item 63. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	38
Item 6. Exhibits	4139
Signatures	40


	Preferred Stock
	Shares	Amount
Balance at January 1, 2021	—	$	—
Issuance of Series A Preferred Stock	5,430	149,585
Issuance of restricted Series A Preferred Stock (1)	500	—
Share-based compensation associated with restricted Series A Preferred Stock (1)	—	4,035
Balance at September 30, 2021	5,930	$	153,620


	Shares		Weighted Average Exercise Price
Outstanding as of December 31, 2020	21,119		$	11.00
Granted	3,189		19.32
Forfeited	(190)		17.41
Outstanding as of September 30, 2021	$	24,118	12.05
Exercisable as of September 30, 2021	$	—	—


	Nine Months Ended September 30, 2021
Dividend yield	0.00%
Risk-free interest rate (1)	0.94%
Expected volatility (2)	60.00%
Expected term of options (in years) (3)	6.12
Fair Value	$	10.71