Life Time Fitness Inc. Q3 2010 Earnings Call Transcript

Life Time Fitness Inc. Q3 2010 Earnings Call Transcript
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Life Time Fitness Inc. (

LTM

)

Q3 2010 Earnings Call

October 21, 2010 10:00 am ET

Executives

John Heller - Senior Director of Investment Relation and Treasurer

Bahram Akradi - Chairman, President and CEO

Mike Robinson - CFO

Analysts

Scott Hamann - Keybanc Capital Markets

Michael Lasser - Barclays Capital

Tony Gikas - Piper Jaffray

Ed Aaron - RBC Capital Markets

Greg Mckinley - Dougherty & Company

Sharon Zackfia - William Blair & Company

Brent Rystrom - Feltl & Company

Presentation

Operator

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» Life Time Fitness, Inc. Q3 2009 Earnings Call Transcript

Good day, ladies and gentlemen. Welcome to the Q3 2010 Life Time Fitness earnings conference call. My name is Jeremy and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. (Operator Instructions). I would now like to turn the conference over to the host for today, John Heller, Senior Director of Investment Relations and Treasurer. Please proceed, sir.

John Heller

Thanks Jeremy. Good morning and thank you for joining us on today’s conference call to discuss the third quarter 2010 financial results for Life Time Fitness. We issued our earnings press release this morning. If you did not obtain a copy you may access at our website which is www.lifetimefitness.com. Concurrent with the issuance of our third quarter results we have filed a Form 8-K with the SEC which also includes the press release.

On today's call, Bahram Akradi our Chairman, President and CEO will discuss key highlights from our third quarter and our operations. Following that Mike Robinson, our CFO, will review our financial highlights. Once we have completed our prepared remarks, we will answer your questions until 11:00 am Eastern time. At that point in the call, Jeremy will provide instructions on how to ask questions. I will enclose with the tentative date of our fourth quarter of 2010 earnings call. Finally, a replay of this teleconference will be available on our website at approximately 1:00 pm Eastern time today.

Today’s conference call contains forward looking statements and future results could differ materially from those statements made. Actual results may be affected by many factors including the risks and uncertainties identified in our SEC filings. Certain information in our earnings release and information disclosed on this call constitute non-GAAP financial measures including EBITDA and free cash flow. We have included reconciliations of the differences between GAAP and non-GAAP measures in our earnings released and our Form 8-K. Other required information about our non-GAAP data is included in our Form 8-K.

With that let me now turn the call over to Bahram Akradi. Bahram?

Bahram Akradi

Thanks John. I am excited to provide you with my thoughts and perspective on our third quarter of 2010. Late last year, the company put in place a number of strategies to allow us to win in this challenging environment. A year later we can say that those strategies are working. Our same-store sales, operating margins, revenue per member, and efficient rate all improved for the quarter and year-to-date compared to 2009. We believe this is direct results of the efforts of our team and the effectiveness of the substantial investments we have made in the business. We are determined to demonstrate our value proposition and connect with our members in the best way imaginable.

Attrition for the quarter was down 100 basis point versus a year ago bringing our trailing 12 month rate to 37.1%. This is down from 40.6% at the same time last year. We are pleased with the results as we relentlessly drive towards our goal of 36%.

That said, with the continuing economic headwinds we have never had to work harder to attract and retain members. To accomplish this we have been proactive on many fronts. We have invested heavily in our value proposition with enhanced program and service offerings and mind-blowing value pricing in cafes spas and member activities. We have invested in member engagement and connectivity ensuring that new members get involved and stay connected to the club in ways that matters to them. In fact, we have brought over 500 people from across the company to Minneapolis today and tomorrow for what we call our company’s inside expo which allows a key center leadership to gain first hand reinforcement of many initiatives and the businesses we have available to our membership to drive the value and engagement we believe is so critical for successes. While this is a significant cost we firmly believe is the right thing to do in this environment. In summary, our value proposition and engagement initiatives are progressing well.

On the other hand we continue to see persistent difficulties in attracting and retaining new members without substantial effort. We have had to keep enrolment fees low to attract new members and invest heavily in programming to see improvement in retention. As we have said all year we do not expect this to change any time soon, however, over the last two years we have run our business with the expectation of headwinds and we believe our results demonstrate that we are winning and we also firmly believe we can continue to win.

Our revenues for the quarter were strong throwing over 10% above a year ago. This growth is coming primarily from our in-center businesses. This performance is driven by our value pricing and engagement initiatives centered around children activities which peak during the summer months. While these revenues come at low emergent than our dues, we believe that an increase use of our services is key in keeping memberships connected engaged, which is reflected in our improved retention rate.

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