
	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
Stock options	6,533	6,060	6,272	25,139
Restricted stock units	872	2,658	872	2,786
Potential common shares excluded from the weighted average share calculations	7,405	8,718	7,144	27,925

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~~

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~~ 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 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 month~~s ended September 30, 2021, the Company granted approximately 3.2 million stock options under the 2015 Equity Plan, of which approximately 1.1 million were granted to executives and approximately 2.1 million were granted to non-executive service providers. These options have a ten-year contractual term from the date of grant. The exercise prices and terms of these awards were determined and approved by our board of directors or a committee thereof. 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 was calculated using the Black-Scholes option pricing model. The following weighted average assumptions were used in determining the fair value 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 the three and nine months ended September 30, 2021 and 2020. As of September 30, 2021, unrecognized share-based compensation expense related to stock options was approximately ~~$347.8 million~~. The estimated fair value associated with each outstanding option will be recognized as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met. A significant portion of the $347.8 million unrecognized share-based compensation expense as of September 30, 2021 is associated with stock options that were granted prior to 2021. Each of these options shall become fully vested and exercisable immediately prior to the 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 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 increase in Additional paid-in capital on our condensed consolidated balance sheet. As of September 30, 2021, all of the 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 and nine months ended September 30, 2021 was $1.8 million and $2.9 million, respectively. Share-based compensation expense associated with restricted stock units 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 restricted stock units was approximately ~~$6.6 million~~. The estimated fair value associated with each outstanding restricted stock unit 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 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.

~~Restricted Series A Preferred Stock~~

~~For information regarding the restricted Series A Preferred Stock award that was granted to our CEO during the nine months ended September 30, 2021, see Note 8, Mezzanine Equity.~~

~~Stockholder Note Receivable~~

In August 2021, we entered into an agreement pursuant to which the outstanding balance owed under the stockholder note receivable was cancelled. The cancellation of the $15.0 million outstanding principal balance associated with the loan was accounted for as an equity transaction, and the Stockholder note receivable and Additional paid-in capital balances recognized on our condensed consolidated balance sheet were each reduced by $15.0 million. ~~The income tax benefit of approximately~~ ~~$3.6 million~~ ~~associated with the stockholder note receivable cancellation was recognized as an increase in both Income tax receivable and Additional paid-in capital on our condensed consolidated balance sheet.~~

10. 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 the spread of COVID-19. On March 15, 2021, certain of the Life Time Parties filed a First Amended Complaint in the Action adding claims against Zurich under a Builders’ Risk policy related to the suspension of multiple construction ~~projects. 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. Subsequent Events

In preparing the accompanying condensed consolidated financial statements, we have evaluated the period from September 30, ~~2021~~2023 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”~~forward-looking statements within the meaning of federal securities regulations. Forward-looking statements in this discussion and analysis include, but are not limited to, our plans, strategies and prospects, both business and financial, including our financial outlook, possible or assumed future actions, ~~strategies, both~~opportunities for growth and margin expansion, improvements to our balance sheet and leverage, capital expenditures, consumer demand, industry and economic trends, business ~~and financial,~~strategies, events or 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,~~“believes,” ~~“expects,~~“assumes,” “expects,” “anticipates,” “intends,” ~~“projects,~~“continues,” ~~“estimates,~~“projects,” “predicts,” “estimates,” “plans,” ~~“may~~“potential,” “may increase,” “may result,” “will result,” “may fluctuate,” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” ~~“may,~~“foreseeable,” “may,” and “could”as well as the negative version of these words or similar terms and phrases are generally forward-looking in nature and not historical facts. 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 beliefs and assumptions 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 and ~~wellness industry; competition in the health~~lease obligations, risks relating to our human capital, risks relating to legal compliance and ~~wellness industry; our inability~~risk management and 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, 2022 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.Additionally, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, investments or other strategic transactions we may make.

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, or to publicly announce any update or revision to, any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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~~for 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.

~~Business~~

Table of Contents

Business and Strategy

Life Time, the “Healthy Way of Life ~~Company,~~Company,” is a leading lifestyle brand offering premium health, fitness and wellness experiences to a ~~community~~community of ~~over 1.3~~approximately 1.5 million ~~individual~~individual members, who together ~~comprise~~comprise more than ~~750,000~~830,000 memberships, as of September 30, ~~2021.~~2023. 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~~ 170centers—distinctive, resort-like athletic country club destinations—across 2931 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~~approximately 17 million square feet in the aggregate. As of September 30, 2021 we had 12 new centers under construction and we believe we have significant opportunities to continue expanding our portfolio of premium centers with 10 or more planned new centers annually for the foreseeable future in increasingly affluent markets. We offer ex~~pansive~~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 37,000 Life Time team members, including over ~~7,500~~9,700 certified fitness professionals, ranging from personal trainers to studio performers.

Our members are highly engaged and draw inspiration from the experiences and community we have created. The value our members place on our community is reflected in the continued strength and growth of our average revenue per center membership and the visits to our athletic country clubs. Our average revenue per center membership and the visits to our clubs for the nine months ended

September 30, 2023

were $2,095 and 78 million, respectively, as compared to $1,885 and 65 million, respectively, for the nine months ended September 30, 2022. 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 revenue for 20 consecutive years, prior to the impact of the COVID-19 pandemic. As of December 31, 2019, December 31, 2020 and September 30, 2021,~~ our ~~recurring~~annual membership dues ~~represented 63%, 69%~~ and ~~68%, respectively, of our~~in-center revenue.

Our total 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% and 29%, respectively, of our total revenue. Between 2015 and 2019, we grew our average Center revenue ~~per membership from $1,883~~increased to $2,172, a testament to 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$1,608.3 million for the nine months ended September 30, ~~2021. As we have delivered these premium experiences, we have strategically increased~~2023 as compared to $1,307.5 million for the nine months ended September 30, 2022. We believe it will continue to grow as our new ~~join membership prices across most of our~~ centers ~~in early 2021. We believe~~ramp to expected performance, 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 membership to continue to increase as we acquire more new members, increase legacy member pricing and open new centers in desirable locations across the country and we continue to execute on our strategic initiatives discussed below. Our new centers on average have taken three to four years to ramp to expected performance. As of September 30, 2023, we had 27 centers open for less than three years. We are also expanding the number of our centers using an asset-light model that targets increasingly affluent ~~markets.~~markets with higher income members, higher average annual revenue per center membership and higher returns on invested capital. As we open these new centers in more affluent markets, we believe our average revenue per center membership will naturally increase. We believe we have significant opportunities to continue expanding our portfolio of premium centers in an asset-light manner with plans for 22 to 24 new centers over 2023 and 2024. While we have shifted our new center growth strategy to pursue more asset-light opportunities that include leases with tenant improvement allowances and existing center takeovers with lower capital required, as of September 30, 2023, we had eight new centers under construction, with $285 million of growth capital expenditures already invested into these new centers that have yet to open. We believe the combined dynamic of our ramping new centers and the future growth that we have not yet realized from the quicker turnaround center takeovers plus the capital expenditures already invested in our centers under construction creates a strong tailwind for the continued growth of our total Center revenue.

Coming out of the COVID-19 pandemic, we believe that we have built a healthier and stronger business model. Our initial focus on center recovery has produced strong results in member engagement and increasing memberships, visits and Center revenue. We have also been able to expand margins by significantly improving the efficiency of our club operations and corporate office. We also expect to benefit from the greater flow through of our increased revenue and from new members joining at higher membership dues rates.

We ~~offer a variety of convenient month-to-month~~have also implemented several strategic initiatives that are driving revenue, engagement and memberships ~~with no long-term contracts. We define memberships 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, demographic nature, population density, 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.

Wewe continue to ~~evolve~~elevate and broaden our ~~premium lifestyle brand in ways that~~member experiences and allow our members to ~~more easily and regularly~~ integrate health, fitness and wellness into their ~~lives. We continue to enhance~~lives with greater ease and frequency. These strategic initiatives include pickleball, Dynamic Personal Training, Dynamic Stretch, small group training such as Alpha, GTX and Ultra Fit, and our ARORA community focused on members aged 55 years and older, where we have experienced a significant increase in our unique participants or total sessions. Additionally, our enhanced digital platform ~~to deliver~~is delivering a true omni-channel experience for our ~~members. Our Life Time Digital offering delivers~~members, including live streaming fitness classes, remote goal-based personal training, nutrition and weight loss support and curated award-winning health, fitness and wellness content. ~~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, including our integrated digital app, in order to strengthen our relationships with our members and more comprehensively address their health, fitness and wellness needs so that they can remain engaged and connected with Life Time at any time or place.

Table of Contents

We ~~are~~ also ~~expanding~~continue to expand our “Healthy Way of Life” ecosystem in response to the desire of our ~~members’ desire~~members 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. Life Time Work members also have the ability to receive access to all of our resort-like athletic country club destinations across the United States and Canada. Additionally, ~~we opened~~ our ~~first~~ Life Time Living ~~location~~locations offer luxury wellness-oriented residences, also in ~~2021, another asset-light extension~~close proximity to one of our ~~“Healthy Way~~athletic country clubs. As of ~~Life” ecosystem, which offers luxury wellness-oriented residences.~~September 30, 2023, we had 13 Life Time Work and three Life Time Living locations open and operating. Our Life Time Living offering is generating interest from new property developers and presenting opportunities for new center development that were not previously available to us. As we expand our footprint with new centers and nearby work and living spaces, as well as strengthen our digital capabilities, we expect to continue to grow our omni-channel platform to support the “Healthy Way of Life” journey of our members.

Macroeconomy

We continue to monitor the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates, labor and supply chain issues, as well as a potential economic recession. More than two years of elevated inflation has impacted our expenses and capital expenditures in several areas, including wages, construction costs and other operating expenses, and thus pressured our margin performance. Despite this headwind that has shown signs of easing, we have experienced growth in our revenue and margins as discussed above. The rising interest rate environment has also increased the cost of our Term Loan Facility and Revolving Credit Facility and may result in increased cap rates and delays on future sale-leaseback transactions. We continue to explore sale-leaseback transactions but are being selective on whether to execute any additional sale-leasebacks in the current macroeconomic environment given our ability to add new centers through asset-light opportunities and our improved cash flow. We will continue to monitor the macroeconomic environment, but we believe that our business is resilient and has performed well historically during different economic cycles including during a recession.

Non-GAAP Financial Measures

This discussion and analysis includes certain financial measures that are not presented in accordance with ~~the~~ generally accepted accounting principles in the United States (“GAAP”), including Adjusted net income (loss), Adjusted net income (loss) per common share, 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 net income (loss) and Adjusted EBITDA as an important performance ~~metric~~metrics for the Company. ~~In addition, free cash flow before growth~~

Adjusted Net Income (Loss)

We define Adjusted net income (loss) as net income (loss) excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital ~~expenditures is an important liquidity metric we use~~transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to ~~evaluate our ability to make principal payments on our indebtedness and to fund our capital expenditures and working capital requirements.~~COVID-19, less the tax effect of these adjustments.

Adjusted EBITDA

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

Management uses Adjusted net income (loss) and Adjusted EBITDA to evaluate the Company’s performance. We believe that Adjusted net income (loss) and Adjusted EBITDA ~~is an~~are important ~~metric~~metrics for management, investors and analysts as ~~it removes~~they remove the impact of items that we do not believe are indicative of our core operating performance and allows for consistent comparison of our operating results over time and relative to our peers. We use Adjusted net income (loss) and Adjusted EBITDA to supplement GAAP measures of performance in evaluating the effectiveness of our business strategies and to establish annual budgets and forecasts. We also use Adjusted EBITDA or variations thereof to establish short-term incentive compensation for management.

Table of Contents

~~Free Cash Flow Before Growth Capital Expenditures~~

~~We define free cash flow before growth capital expenditures as~~Adjusted net ~~cash provided by (used in) operating activities less center maintenance capital expenditures~~income (loss) 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 operating activities as a measure of our liquidity~~ and may not be comparable to other similarly titled measures of other businesses. Adjusted ~~EBITDA~~net income (loss) and ~~free cash flow before growth capital expenditures~~Adjusted EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of our operating results ~~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~~net income (loss) and ~~free cash flow before growth capital expenditures~~Adjusted EBITDA only for supplemental purposes. See our condensed consolidated financial statements included elsewhere in this report for our GAAP results.

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~~2023 and ~~2020.~~2022. The following information has been presented consistently for all periods presented.

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
($ in thousands, except for Average Center revenue per center membership data)
Membership Data
Center memberships 668,310 572,811 668,310 572,811
Digital On-hold memberships 85,045 234,381 85,045 234,381
Total memberships 753,355 807,192 753,355 807,192
Revenue Data
Membership dues and enrollment fees 70.2% 74.3% 70.0% 69.5%
In-center revenue 29.8% 25.7% 30.0% 30.5%
Total Center revenue 100.0% 100.0% 100.0% 100.0%
Membership dues and enrollment fees $ 261,033 $ 169,612 $ 653,584 $ 490,151
In-center revenue 110,967 58,737 280,106 214,768
Total Center revenue $ 372,000 $ 228,349 $ 933,690 $ 704,919
Average Center revenue per center membership (1)
$ 555 $ 349 $ 1,554 $ 929
Comparable center sales (2)
58.7% (55.0)% 29.9% (52.2)%
Center Data
Net new center openings (3)
2 — 6 2
Total centers (end of period) (3)
155 148 155 148
Total center square footage (end of period) (4)
15,300,000 14,700,000 15,300,000 14,700,000
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) %
Adjusted EBITDA (6)
$ 47,031 $ (12,437) $ 32,277 $ (44,934)
Adjusted EBITDA margin (6)
12.2 % (5.4) % 3.4 % (6.2) %
Center operations expense $ 231,996 $ 165,572 $ 625,322 $ 515,350
Pre-opening expenses (7)
633 721 5,304 5,208
Rent 52,513 47,539 154,552 138,470
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)
Free cash flow before growth capital expenditures (9)
(38,633) (31,567) (99,458) (145,266)

Table of Contents


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
	($ in thousands, except for Average Center revenue per center membership data)
Membership Data
Center memberships	784,331			728,729			784,331			728,729
Digital On-hold memberships	45,708			47,273			45,708			47,273
Total memberships	830,039			776,002			830,039			776,002

Revenue Data
Membership dues and enrollment fees	71.8%			69.9%			71.7%			70.1%
In-center revenue	28.2%			30.1%			28.3%			29.9%
Total Center revenue	100.0%			100.0%			100.0%			100.0%

Membership dues and enrollment fees	$	407,903		$	335,717		$	1,152,506		$	916,895
In-center revenue	160,499			144,278			455,773			390,603
Total Center revenue	$	568,402		$	479,995		$	1,608,279		$	1,307,498

Average Center revenue per center membership (1)	$	722		$	660		$	2,095		$	1,885
Comparable center revenue (2)	11.4%			25.6%			16.6%			35.7%

Center Data
Net new center openings (3)	6			3			9			5
Total centers (end of period) (3)	170			156			170			156
Total center square footage (end of period) (4)	16,700,000			15,600,000			16,700,000			15,600,000

GAAP and Non-GAAP Financial Measures
Net income (loss)	$	7,915		$	24,732		$	52,379		$	(15,519)
Net income (loss) margin (5)	1.4		%	5.0		%	3.2		%	(1.1)		%
Adjusted net income (loss) (6)	$	26,684		$	(11,535)		$	91,139		$	(66,832)
Adjusted net income (loss) margin (6)	4.6		%	(2.3)		%	5.5		%	(5.0)		%
Adjusted EBITDA (7)	$	142,981		$	70,975		$	399,123		$	174,697
Adjusted EBITDA margin (7)	24.4		%	14.3		%	24.1		%	12.9		%
Center operations expense	$	319,401		$	295,253		$	896,113		$	814,383
Pre-opening expenses (8)	$	1,477		$	5,350		$	6,146		$	9,296
Rent	$	69,225		$	63,213		$	203,196		$	179,166
Non-cash rent expense (open properties) (9)	$	8,409		$	6,762		$	25,662		$	14,850
Non-cash rent expense (properties under development) (9)	$	861		$	4,907		$	1,238		$	12,454

(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~~revenue 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.

Table of Contents

(3) Net new center openings ~~are~~is calculated as 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. AsDuring the third quarter of 2023, we opened six centers. During the nine months ended September 30, ~~2021, all of our 155~~2023, we opened 10 centers ~~were open.~~and closed one center.

(4) Total center square footage (end of period) reflects the aggregate fitness square footage, which we use as a metric for evaluating the efficiencies of a center as of the end of the period. The square footage figures exclude areas used for tennis courts, outdoor swimming pools, outdoor play areas and stand-alone Work, Sport and Swim locations. 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 net income (loss) as a supplemental measure of our performance. We define Adjusted net income (loss) as net income (loss) excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19, less the tax effect of these adjustments.

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

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($ in thousands)	2023		2022		2023		2022
Net income (loss)	$	7,915	$	24,732	$	52,379	$	(15,519)
Share-based compensation expense (a)	14,858		5,803		37,029		33,214
COVID-19 related expenses (b)	93		354		339		937
Loss (gain) on sale-leaseback transactions (c)	12,672		(48,583)		13,431		(98,167)
Capital transaction costs (d)	—		—		—		255

Asset impairments (e)	5,340		—		6,620		—
Other (f)	(405)		1,172		(5,191)		1,021
Taxes (g)	(13,789)		4,987		(13,468)		11,427
Adjusted net income (loss)	$	26,684	$	(11,535)	$	91,139	$	(66,832)

Income (loss) per common share:
Basic	$	0.04	$	0.13	$	0.27	$	(0.08)
Diluted	$	0.04	$	0.12	$	0.26	$	(0.08)
Adjusted income (loss) per common share:
Basic	$	0.14	$	(0.06)	$	0.47	$	(0.35)
Diluted	$	0.13	$	(0.06)	$	0.45	$	(0.35)
Weighted-average common shares outstanding:
Basic	196,146		193,918		195,404		193,364
Diluted	204,298		198,381		203,954		193,364

(a) Share-based compensation expense recognized during the three and nine months ended September 30, 2023 was associated with stock options, restricted stock units, our employee stock purchase plan (“ESPP”) that launched on December 1, 2022, and liability classified awards related to our short-term incentive plan in 2023. Share-based compensation expense recognized during the three and nine months ended September 30, 2022 was associated with stock options, restricted stock and restricted stock units. The majority of this expense in 2022 was associated with awards that were fully vested and became exercisable on April 4, 2022 in connection with the expiration of the lock-up period following our IPO.

(b) Represents the incremental expenses we recognized related to the COVID-19 pandemic. We adjust for these expenses as they do not represent expenses associated with our normal ongoing operations. We believe that adjusting for these expenses provides a more accurate and consistent representation of our actual operating performance from period to period. For the three months ended September 30, 2023 and the three and nine months ended September 30, 2022, COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich. For the nine months ended September 30, 2023, COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich, partially offset by a subsidy for our Canadian operations. For more information regarding this claim, see Note 10, Commitments and Contingencies, to our condensed consolidated financial statements in this report.

(c) We adjust for the impact of losses and gains on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations. For details on the loss on sale-leaseback transactions that we recognized during the nine months ended September 30, 2023, see “Sale-Leaseback Transactions” within Note 7, Leases, to our condensed consolidated financial statements in this report.

Table of Contents

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

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

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

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

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

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

The following table provides a reconciliation of net ~~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)	2023		2022		2023		2022
Net loss		$	(45,442)	$	(93,647)	$	(274,599)	$	(276,304)
Net income (loss)										Net income (loss)	$	7,915	$	24,732	$	52,379	$	(15,519)
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)~~	33,075		27,696		96,249		84,732
Benefit from income taxes		(11,981)		(28,079)		(58,867)		(99,096)
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	5,815		3,401		18,200		(3,456)
Depreciation and amortization	Depreciation and amortization	57,977		61,359		177,005		188,483		Depreciation and amortization	63,618		56,400		180,067		171,680
Share-based compensation expense(a)	Share-based compensation expense(a)	4,078		—		6,959		—		Share-based compensation expense(a)	14,858		5,803		37,029		33,214
COVID-19 related expenses ~~(b)~~(a)	COVID-19 related expenses ~~(b)~~(a)	(221)		17,029		(410)		49,312		COVID-19 related expenses ~~(b)~~(a)	93		354		339		937
Loss (gain) on sale-leaseback transactions ~~(c)~~(a)	Loss (gain) on sale-leaseback transactions ~~(c)~~(a)	2,227		—		3,057		(3,078)		Loss (gain) on sale-leaseback transactions ~~(c)~~(a)	12,672		(48,583)		13,431		(98,167)
Capital transaction costs ~~(d)~~(a)	Capital transaction costs ~~(d)~~(a)	588		39		588		96		Capital transaction costs ~~(d)~~(a)	—		—		—		255
Legal settlements (e)		(44)		313		(44)		345
Other (f)		—		(418)		2,444		(416)
Asset impairments (a)										Asset impairments (a)	5,340		—		6,620		—

Other (a)										Other (a)	(405)		1,172		(5,191)		1,021
Adjusted EBITDA	Adjusted EBITDA	$	47,031	$	(12,437)	$	32,277	$	(44,934)	Adjusted EBITDA	$	142,981	$	70,975	$	399,123	$	174,697

(a) ~~For~~See the ~~nine months ended September 30, 2021, we incurred a non-cash expense of $41.0 million related~~corresponding footnotes to the extinguishment of our related party secured loan. In June 2020, we closed on an approximate $101.5 million secured loan from an investor group comprised solely of our stockholders or their affiliates. The secured loan carried an interest rate of 12.0% and was scheduled to maturetable 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.note 6 immediately above.

(b) Represents the incremental net (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 the three and nine months ended September 30, 2021 consist primarily 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 behalf of our employees, and $2.0 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. 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.

~~(c) 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.~~

~~(d) Represents one-time costs related to capital transactions, including debt and equity offerings that are non-recurring in nature.~~

(e) 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) Includes costs associated with large corporate restructuring charges, executive level involuntary terminations 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)~~(8) Represents non-capital expenditures associated with opening new centers ~~which~~that 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)~~(9) Reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments.

~~(9) Free cash flow before growth capital expenditures, a non-GAAP financial measure, is calculated as net cash provided by (used in)~~Non-cash rent expense for our open properties represents non-cash expense associated with properties that were 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
September 30, September 30,
($ in thousands) 2021 2020 2021 2020
Net cash used in operating activities $ (2,283) $ (11,789) $ (15,322) $ (56,165)
Center maintenance capital expenditures (18,078) (4,823) (43,045) (29,075)
Corporate capital expenditures (18,272) (14,955) (41,091) (60,026)
Free cash flow before growth capital expenditures $ (38,633) $ (31,567) $ (99,458) $ (145,266)
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.

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,~~“COVID-19” or “the pandemic,” such as when we describe the “impact of COVID-19” on our operations, we mean the coronavirus-related orders issued by governmental authorities affecting our operations and/or the presence of coronavirus in our centers, including COVID-19 positive members or team members.

~~While~~

Table of Contents

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~~meet various governmental requirements and restrictions. Our centers ~~as governmental authorities permitted. As of June 30, 2020, September 30, 2020, December 31, 2020, March 31,~~were also impacted in 2021 June 30, 2021, 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~~Delta variant and ~~related restrictions. For instance, during~~then again later in 2021 and into 2022 with 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.~~ Omicron variant. The performance of our centers ~~after we were able to re-open them~~ has 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. improved significantly as our centers have ramped back from the adverse impacts of COVID-19.

We have experienced a slightly faster recovery in our membership dues revenue compared to our in-center ~~revenue as our centers have re-opened.~~revenue. We expect membership dues revenue to remain a higher percentage of our total revenue for at least the near term.

Leverage

We are focused on improving the ratio of our net debt to Adjusted EBITDA, or our leverage ratio. We define net debt as the current and long-term portion of our debt, excluding unamortized debt discounts and issuance costs and fair value adjustments, less cash and cash equivalents. Our leverage ratio was elevated due in part to the adverse impacts of COVID-19, which required us to incur additional debt and significantly reduced our Adjusted EBITDA. We have significantly improved our leverage ratio in the ~~near term~~first nine months of 2023 and ~~return~~believe that we can continue to ~~more historical levels over time. While~~improve our leverage ratio as our profitability improves and we ~~are encouraged by the trends~~continue to strengthen our balance sheet.

Investment in Business

We have continued to invest in our business to elevate and broaden our member experiences and drive additional revenue per center membership, including improving our in-center services and products, such as pickleball, Dynamic Personal Training, Dynamic Stretch, small group training and our ARORA community, introducing new types of ~~increased vaccination rates, reduced COVID-19 infections~~memberships, providing concierge-type member services and ~~hospitalizations~~expanding our omni-channel offerings. Elevating our member experiences requires investment in our team members, programs, products, services and ~~reduced operating restrictions in many of the regions where~~centers. These investments may impact our centers operate, the full extent of the impact of COVID-19, including the Delta variant, 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,short-term results of operations ~~liquidity~~ and cash flows ~~is uncertain at this time.~~

~~Operations~~

Asas our investments in our business may be made more quickly than we achieve additional revenue per center membership. While we remain focused on providing exceptional experiences to our members and growing our revenue, we are also focused on center and overhead support efficiencies given our recovery of ~~September 30, 2021, all~~membership dues and a significant portion of our ~~155 centers were open. As~~center memberships.

Impact of ~~September 30, 2021, total memberships were 753,355, a decrease of 20.7% compared~~Our Asset-light, Flexible Real Estate Strategy on Rent Expense

Our asset-light, flexible real estate strategy has allowed us to 950,183 at March 31, 2020. Center memberships were 668,310, a decrease of 21.1% compared to 847,161 at March 31, 2020. Digital On-hold memberships were 85,045, a decrease of 17.4% compared to 103,022 at March 31, 2020.

~~We continue to monitor governmental orders regarding the operations~~expand our business by leveraging operating leases and sale-leaseback transactions, among other asset-light opportunities. Approximately 66% of our centers are now leased, including approximately 89% of our new centers opened since 2015, 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, the timing of sale-leaseback transactions and terms of the leases for the new centers or sale-leaseback transactions.

Macroeconomic Trends

We have been monitoring the macroeconomic environment and its impact on our business, including with respect to inflation, interest rates, labor and supply chain issues, as well as ~~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 of variants of the COVID-19 virus, including the Delta variant.~~potential economic recession. See “—Overview—Macroeconomy” for additional information.

We also expect our centers and in-center businesses will continue to be impacted differently based upon considerations such as their 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, we are seeing an increase in Center memberships and center utilization in various regions where government restrictions have been lifted.Share-Based Compensation

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.

~~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,~~2023, 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 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 to refinance our debt, complete the IPO and strengthen 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. 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 may be developments outside of 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, results of operations or cash flows in the future.

~~Share-Based Compensation~~

~~As of September 30, 2021, total unrecognized~~recognized share-based compensation expense associated with stock options, restricted ~~Series A Preferred Stock~~stock units, our ESPP that launched on December 1, 2022 and liability classified awards related to our short-term incentive plan in 2023, totaling approximately $37.0 million. During the nine months ended September 30, 2022, we recognized share-based compensation expense associated with stock options, restricted stock and restricted stock units ~~was $362.5~~totaling approximately $33.2 million. The ~~estimated fair value~~majority of this expense in 2022 was associated with ~~each~~awards that were fully vested and became exercisable on April 4, 2022 in connection with the expiration of the ~~applicable share-based compensation awards outstanding at~~ ~~September 30, 2021~~ ~~will be recognized as share-based compensation expense if and when the related recognition conditions, for accounting purposes, are met.~~ ~~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.~~lock-up period following our IPO.

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

Table of Contents

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.~~analyses and sale-leaseback arrangements. 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 d~~uring both the three and nine months ended September 30, 2021 and 2020, 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 million and $9.9 million for the three months ended September 30, 2021 and 2020, respectively, and we recognized impairment charges of $2.5 million and $16.9 million for the nine months ended September 30, 2021 and 2020, 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, 2022 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.

Results of Operations

Three Months Ended September 30, ~~2021~~2023 Compared to Three Months Ended September 30, ~~2020~~2022

The following table sets forth our condensed consolidated statements of operations data (amounts in thousands) and data as a percentage of total revenue for the three months ended September 30, ~~2021~~2023 and ~~2020:~~2022:


		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			2023		2022		2023		2022
Revenue:	Revenue:									Revenue:
Center revenue	Center revenue	$	372,000	$	228,349	96.6	%	98.8	%	Center revenue	$	568,402	$	479,995	97.1	%	96.7	%
Other revenue	Other revenue	13,040		2,681		3.4	%	1.2	%	Other revenue	16,775		16,386		2.9	%	3.3	%
Total revenue	Total revenue	385,040		231,030		100.0	%	100.0	%	Total revenue	585,177		496,381		100.0	%	100.0	%
Operating expenses:	Operating expenses:									Operating expenses:
Center operations	Center operations	231,996		165,572		60.3	%	71.7	%	Center operations	319,401		295,253		54.6	%	59.5	%
Rent	Rent	52,513		47,539		13.6	%	20.6	%	Rent	69,225		63,213		11.8	%	12.7	%
General, administrative and marketing	General, administrative and marketing	45,304		32,204		11.8	%	13.9	%	General, administrative and marketing	51,668		57,139		8.8	%	11.5	%
Depreciation and amortization	Depreciation and amortization	57,977		61,359		15.1	%	26.6	%	Depreciation and amortization	63,618		56,400		10.9	%	11.4	%
Other operating		14,796		15,152		3.8	%	6.5	%
Other operating expense (income)										Other operating expense (income)	34,516		(31,358)		5.9	%	(6.3)	%
Total operating expenses	Total operating expenses	402,586		321,826		104.6	%	139.3	%	Total operating expenses	538,428		440,647		92.0	%	88.8	%
Loss from operations		(17,546)		(90,796)		(4.6)	%	(39.3)	%
Income from operations										Income from operations	46,749		55,734		8.0	%	11.2	%
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	(33,075)		(27,696)		(5.7)	%	(5.5)	%
Equity in earnings of affiliate	Equity in earnings of affiliate	(28)		37		—	%	—	%	Equity in earnings of affiliate	56		95		—	%	—	%
Total other expense	Total other expense	(39,877)		(30,930)		(10.3)	%	(13.4)	%	Total other expense	(33,019)		(27,601)		(5.7)	%	(5.5)	%
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 before income taxes										Income before income taxes	13,730		28,133		2.3	%	5.7	%
Provision for income taxes										Provision for income taxes	5,815		3,401		1.0	%	0.7	%
Net income										Net income	$	7,915	$	24,732	1.3	%	5.0	%


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


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


		Page
Part I. FINANCIAL INFORMATION	3
Item 1	1. Financial Statements	3
Item 22. Management	’~~Management's~~s Discussion and Analysis of Financial Condition and Results of Operations	2616
Item 3	3. Quantitative and Qualitative Disclosures About Market Risk	3929
Item 4	4. Controls and Procedures	4029
Part II. OTHER INFORMATION	4029
Item 1	1. Legal Proceedings	4029
Item 1A	1A. Risk Factors	4029
Item 2	2. Unregistered Sales of Equity Securities ~~and~~ , Use of ~~Proceeds~~Proceed s ,and Issuer Purchases of Equity Securities	4030
Item 63. Defaults Upon Senior Securities	30
Item 4. Mine Safety Disclosures	30
Item 5. Other Information	30
Item 6. Exhibits	4130
Signatures	31


	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


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	25,441	$	25,509
Accounts receivable, net	19,190		13,381
Center operating supplies and inventories	48,557		45,655
Prepaid expenses and other current assets	48,369		45,743
Income tax receivable	11,715		748
Total current assets	153,272		131,036
Property and equipment, net	3,074,634		2,901,242
Goodwill	1,235,359		1,233,176
Operating lease right-of-use assets	2,187,804		2,116,761
Intangible assets, net	172,422		173,404
Other assets	73,572		69,744
Total assets	$	6,897,063	$	6,625,363
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	76,138	$	73,973
Construction accounts payable	107,955		125,031
Deferred revenue	39,357		36,859
Accrued expenses and other current liabilities	179,382		154,427
Current maturities of debt	64,033		15,224
Current maturities of operating lease liabilities	56,320		51,892
Total current liabilities	523,185		457,406
Long-term debt, net of current portion	1,815,965		1,805,698
Operating lease liabilities, net of current portion	2,248,026		2,162,424
Deferred income taxes, net	57,377		41,393
Other liabilities	35,621		34,181
Total liabilities	4,680,174		4,501,102
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.01 par value per share; 500,000 shares authorized; 196,183 and 194,271 shares issued and outstanding, respectively.	1,962		1,943
Additional paid-in capital	2,824,949		2,784,416
Accumulated deficit	(600,497)		(652,876)
Accumulated other comprehensive loss	(9,525)		(9,222)
Total stockholders’ equity	2,216,889		2,124,261
Total liabilities and stockholders’ equity	$	6,897,063	$	6,625,363


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


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


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

	Shares	Amount
Balance at July 1, 2021	145,196	$	1,452	$	1,564,591	$	(15,000)	$	(300,871)	$	(503)	$	1,249,669
Net loss	—	—		—		—		(45,442)		—		(45,442)
Other comprehensive loss	—	—		—		—		—		(2,404)		(2,404)
Share-based compensation	—	—		1,794		—		—		—		1,794
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


	September 30, 2023				December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt (1)	$	1,896,529	$	1,851,542	$	1,840,171	$	1,724,178


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


	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


		Three Months Ended September 30, 2021						Three Months Ended September 30, 2020							Three Months Ended September 30, 2023						Three Months Ended September 30, 2022
		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	$	502,003	$	16,775	$	518,778	$	419,758	$	16,386	$	436,144
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	66,399		—		66,399		60,237		—		60,237
Total Revenue		$	372,000	$	13,040	$	385,040	$	228,349	$	2,681	$	231,030
Total revenue														Total revenue	$	568,402	$	16,775	$	585,177	$	479,995	$	16,386	$	496,381


		Nine Months Ended September 30, 2021						Nine Months Ended September 30, 2020							Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022
		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	$	1,417,352	$	49,480	$	1,466,832	$	1,137,643	$	42,404	$	1,180,047
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	190,927		—		190,927		169,855		—		169,855
Total Revenue		$	933,690	$	23,835	$	957,525	$	704,919	$	14,991	$	719,910
Total revenue														Total revenue	$	1,608,279	$	49,480	$	1,657,759	$	1,307,498	$	42,404	$	1,349,902


October 2021 through September 2022		$	31,841
October 2022 through September 2023		28,252
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	12,515
October 2025 through September 2026	October 2025 through September 2026	1,413,281		October 2025 through September 2026	1,751,209
October 2026 through September 2027				October 2026 through September 2027	64,877
October 2027 through September 2028				October 2027 through September 2028	165
Thereafter	Thereafter	22,277		Thereafter	3,048
Total future maturities of long-term debt	Total future maturities of long-term debt	$	2,399,158	Total future maturities of long-term debt	$	1,895,847


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


	September 30, 2021		December 31, 2020		Classification on Condensed Consolidated Balance Sheet
Lease right-of-use assets:
Operating leases	1,864,246		1,708,597		Operating lease right-of-use assets
Finance leases (1)	2,325		2,295		Other assets
Total lease right-of-use assets	$	1,866,571	$	1,710,892
Lease liabilities:
Current
Operating leases	44,137		49,877		Current maturities of operating lease liabilities
Finance leases	1,383		1,171		Accrued expenses and other current liabilities
Non-Current
Operating leases	1,902,784		1,738,393		Operating lease liabilities, net of current portion
Finance leases	1,007		1,202		Other liabilities
Total Lease liabilities	$	1,949,311	$	1,790,643


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


	Operating leases		Finance leases		Total
October 2021 through September 2022	$	184,947	1,493		186,440
October 2022 through September 2023	195,386		874		196,260
October 2023 through September 2024	203,040		167		203,207
October 2024 through September 2025	205,024		—		205,024
October 2025 through September 2026	208,241		—		208,241
Thereafter	2,803,049		—		2,803,049
Total lease payments	3,799,687		2,534		3,802,221
Less: Imputed interest	1,852,766		144		1,852,910
Present value of lease liabilities	$	1,946,921	$	2,390	$	1,949,311


	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


		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			2023		2022		2023		2022
Revenue:	Revenue:									Revenue:
Center revenue	Center revenue	$	933,690	$	704,919	97.5	%	97.9	%	Center revenue	$	1,608,279	$	1,307,498	97.0	%	96.9	%
Other revenue	Other revenue	23,835		14,991		2.5	%	2.1	%	Other revenue	49,480		42,404		3.0	%	3.1	%
Total revenue	Total revenue	957,525		719,910		100.0	%	100.0	%	Total revenue	1,657,759		1,349,902		100.0	%	100.0	%
Operating expenses:	Operating expenses:									Operating expenses:
Center operations	Center operations	625,322		515,350		65.3	%	71.6	%	Center operations	896,113		814,383		54.1	%	60.3	%
Rent	Rent	154,552		138,470		16.1	%	19.2	%	Rent	203,196		179,166		12.3	%	13.3	%
General, administrative and marketing	General, administrative and marketing	126,896		119,665		13.3	%	16.6	%	General, administrative and marketing	147,005		175,650		8.9	%	13.0	%
Depreciation and amortization	Depreciation and amortization	177,005		188,483		18.5	%	26.2	%	Depreciation and amortization	180,067		171,680		10.8	%	12.7	%
Other operating		30,660		37,412		3.2	%	5.2	%
Other operating expense (income)										Other operating expense (income)	64,837		(56,605)		3.9	%	(4.2)	%
Total operating expenses	Total operating expenses	1,114,435		999,380		116.4	%	138.8	%	Total operating expenses	1,491,218		1,284,274		90.0	%	95.1	%
Loss from operations		(156,910)		(279,470)		(16.4)	%	(38.8)	%
Income from operations										Income from operations	166,541		65,628		10.0	%	4.9	%
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	(96,249)		(84,732)		(5.8)	%	(6.3)	%
Equity in earnings of affiliate	Equity in earnings of affiliate	(412)		(206)		—	%	—	%	Equity in earnings of affiliate	287		129		—	%	—	%
Total other expense	Total other expense	(176,556)		(95,930)		(18.4)	%	(13.3)	%	Total other expense	(95,962)		(84,603)		(5.8)	%	(6.3)	%
Loss before income taxes		(333,466)		(375,400)		(34.8)	%	(52.1)	%
Benefit from income taxes		(58,867)		(99,096)		(6.1)	%	(13.7)	%
Net loss		$	(274,599)	$	(276,304)	(28.7)	%	(38.4)	%
Income (loss) before income taxes										Income (loss) before income taxes	70,579		(18,975)		4.2	%	(1.4)	%
Provision for (benefit from) income taxes										Provision for (benefit from) income taxes	18,200		(3,456)		1.1	%	(0.3)	%
Net income (loss)										Net income (loss)	$	52,379	$	(15,519)	3.1	%	(1.1)	%


	Life Time Group Holdings, Inc.

Date: ~~November 17, 2021~~October 31, 2023	By:	/s/ ~~Thomas E. Bergmann~~Robert Houghton
		~~Thomas E. Bergmann~~Robert Houghton
		Executive Vice President & Chief Financial Officer