Health and fitness club chain Life Time Group (LTH) posts a fourth-quarter earnings beat on the top and bottom line as it seeks to expand its North American locations and grow membership
Life Time CEO Bahram Akradi joins Yahoo Finance to discuss the gym operator's growth outlook.
"Life Time has always focused at the higher end of a leisure brand, and then we focus being on as much a subscription business as possible," Akradi says, adding: "Our members are using the club about... 12 and a half, 13 times per month. It's a deeply used subscription. The retention rates are at all-time highs"
Akradi also shares his perspective on GLP-1 weight-loss drugs and their presence within the health and wellness space.
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JULIE HYMAN: Shares of Life Time Group getting a major boost today after reporting strong sales and membership growth in its fourth quarter. The company, which operates more than 170 athletic clubs across 31 states, is forecasting more strength in the year ahead. And joining us now is Bahram Akradi who is Life Time CEO.
Bahram, thank you for being here. So as you look at the outlook here and as you look at increasing membership, increasing the number of clubs as well that you all have, what to you is the primary growth driver? What are-- what need are you fulfilling amongst people that's not being filled perhaps by the gyms that are out there?
BAHRAM AKRADI: That's a great question. So Life Time has always focused at the higher end of a leisure brand. And then we focus being that as much a subscription business as possible, very much like what we internally look at is Vail Resorts. Much like them, we have assets that they're not duplicable. There is no way to the 130, 40 of these 170, there is no way to replicate them. At this point, we have another 60 to 70, 80 clubs in the pipeline.
So it's a high end experiential company. Our members are using the club about 13 times, 12.5, 13 times per month. It's a deeply used subscription. The retention rates are at all time highs. So what we focus on is revenue, the margin from that. And we're right about 24% EBITDA margin. And we're looking at the retention. And as we are able to see right now throughout the year forecast, this year looks like we will have the best retention of membership in the history of the company, which ties in directly to the highest member visits per month, which very happy with all the metrics that we are seeing right now.
JOSH LIPTON: And, Bahram, another big theme investors are certainly very interested in, and we talk a lot about here, those new weight loss drugs, the GLP-1s. How is that impacting your business? How are you all capitalizing on that trend?
BAHRAM AKRADI: Yeah. It's in fact-- at first, when I heard that this was like, people thinking this is going to hurt the club business, the exercise business, it's actually contrary. Now the people who are taking the initiative to go and spend $500, a month $600, $1,000 a month on these drugs, they really want to look good. They want to feel good.
And there is no way to have the complete answer without regimented weight training exercise to go along. If they don't do it early on, after a while, they realize they have to do it. Otherwise, if they have good coaching, they're getting started with it. So we haven't seen any negative impact. In fact, if we see anything is positive, we expect that to be the case going forward.
Now Life Time, particularly, is in a great spot because we are the higher end provider of this luxury facilities. And therefore, this customer that is going to come to us is looking for higher-end experience, a more professional trainers to basically address what they need. And we are sitting perfectly to benefit from this.
And then we have launched MIORA, which is our own version of addressing the peptides, the weight loss, the longevity, all of that. We have one location. That's going fantastic. And then the plan is the rollout of that in every market across the country.
JULIE HYMAN: Bahram, who do you consider to be your main competition? Is it-- is there another gym that you feel like you're sort of competing with or is it other activities? How do you think about that?
BAHRAM AKRADI: Yeah, not really. It's really more-- we look at the companies that they're inspiring. They have been around for decades like Life Time has. The only company that right now is in my head and my team's had is Vail Resorts. We have a lot of respect for them. They were the innovator in creating many things, go-to subscription instead of a day-by-day use.
They have a moat. It's difficult to replace those assets. Life Time has similar. The advantage we have is that we have a total addressable market that is still three or four or five times higher than Vails. We have a lot of growth opportunity with great returns. So the company that we internally look to see what are we going to do, how do we compare ourselves, how do we catch up with that revenue and that EBITDA is Vail Resort.
JOSH LIPTON: And, Bahram, I want to get you out of here on this. Besides the clubs, the gym, lifting, working out, another big part of your broader strategy, it's housing, it's real estate. Walk us through that.
BAHRAM AKRADI: OK. So when we started with this almost seven, eight years ago, when we put Life Time in a 1,000 apartment unit high-rise, we saw improved in rates for the apartment per square foot for the apartment. We saw retention being significantly better, which is a key, key factor for the apartment, and of course, the ramp.
All three major KPIs are being affected dramatically with Life Time's $150 billion impression a year, which is massive, and then what we bring in as an amenity. So the we started with developed our own development in Las Vegas. That is 150% per square foot of the market. On rent, it ramped within a year to fall. And then we have a retention rate unheard of in the industry.
So if you're building an apartment building and you have the opportunity to have it branded Life Time, my vision, our vision is to make this like a Four Seasons or Marriott brands, where the developers who want to develop that will basically branded Life Time. We come in, we bring in the expertise in the activation of that facility. And my vision is a village Life Time Work, Life Time Living, Athletic Club, all the services that this program is naturally and intuitively environmentally friendly, because it just reduces the need for people to drive.
