Premium fitness club Life Time (NYSE:LTH) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 18.7% year on year to $663.3 million. The company’s full-year revenue guidance of $2.95 billion at the midpoint came in 0.5% above analysts’ estimates. Its non-GAAP profit of $0.27 per share was 30.1% above analysts’ consensus estimates.
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Life Time (LTH) Q4 CY2024 Highlights:
- Revenue: $663.3 million vs analyst estimates of $660.7 million (18.7% year-on-year growth, in line)
- Adjusted EPS: $0.27 vs analyst estimates of $0.21 (30.1% beat)
- Adjusted EBITDA: $177 million vs analyst estimates of $175.5 million (26.7% margin, 0.8% beat)
- Management’s revenue guidance for the upcoming financial year 2025 is $2.95 billion at the midpoint, beating analyst estimates by 0.5% and implying 12.6% growth (vs 18.2% in FY2024)
- EBITDA guidance for the upcoming financial year 2025 is $790 million at the midpoint, above analyst estimates of $764.4 million
- Operating Margin: 13.1%, up from 10.5% in the same quarter last year
- Free Cash Flow was $26.82 million, up from -$36.05 million in the same quarter last year
- Same-Store Sales rose 13.5% year on year (11.7% in the same quarter last year)
- Market Capitalization: $6.54 billion
Company Overview
With over 150 locations and gyms that include saunas and steam rooms, Life Time (NYSE:LTH) is an upscale fitness club emphasizing holistic well-being and fitness.
Leisure Facilities
Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Life Time grew its sales at a sluggish 6.6% compounded annual growth rate. This fell short of our benchmark for the consumer discretionary sector and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Life Time’s annualized revenue growth of 19.9% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note that COVID hurt Life Time’s business in 2020 and part of 2021, and it bounced back in a big way thereafter. 
We can better understand the company’s revenue dynamics by analyzing its same-store sales, which show how much revenue its established locations generate. Over the last two years, Life Time’s same-store sales averaged 14% year-on-year growth. Because this number is lower than its revenue growth, we can see the opening of new locations is boosting the company’s top-line performance. 
This quarter, Life Time’s year-on-year revenue growth was 18.7%, and its $663.3 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 12.1% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds.
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Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
While Life Time posted positive free cash flow this quarter, the broader story hasn’t been so clean. Over the last two years, Life Time’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 3.7%, meaning it lit $3.73 of cash on fire for every $100 in revenue.
Life Time’s free cash flow clocked in at $26.82 million in Q4, equivalent to a 4% margin. Its cash flow turned positive after being negative in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Over the next year, analysts predict Life Time’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 1.9% for the last 12 months will increase to 3.3%, giving it more flexibility for investments, share buybacks, and dividends.
Key Takeaways from Life Time’s Q4 Results
We were impressed by how significantly Life Time blew past analysts’ EPS expectations this quarter. We were also glad its full-year EBITDA guidance exceeded Wall Street’s estimates. Overall, this quarter had some key positives. The stock traded up 6.5% to $33.67 immediately following the results.
Life Time may have had a good quarter, but does that mean you should invest right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.