Life Time Fitness Management Discusses Q2 2012 Results - Earnings Call Transcript

Life Time Fitness (LTM)

Q2 2012 Earnings Call

July 19, 2012 10:00 am ET

Executives

John Heller

Bahram Akradi - Founder, Chairman, Chief Executive Officer and President

Michael R. Robinson - Chief Financial Officer and Executive Vice President

Analysts

Brian W. Nagel - Oppenheimer & Co. Inc., Research Division

Scott W. Hamann - KeyBanc Capital Markets Inc., Research Division

Michael Lasser - UBS Investment Bank, Research Division

Brent R. Rystrom - Feltl and Company, Inc., Research Division

Lee J. Giordano - Imperial Capital, LLC, Research Division

Sean P. Naughton - Piper Jaffray Companies, Research Division

Paul Swinand - Morningstar Inc., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Life Time Fitness Earnings Conference Call. My name is Keisha, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to hand the conference over to Mr. John Heller, Senior Director of Investor Relations. Please proceed.

John Heller

Thanks, Keisha. Good morning, and thank you for joining us on today's conference call to discuss the second quarter 2012 financial results for Life Time Fitness. We issued our earnings press release this morning. If you did not obtain a copy, you may access it at our website, which is lifetimefitness.com.

Concurrent with the issuance of our second 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 second quarter and our operations. Following that, Mike Robinson, our CFO, will review our financial highlights and update our financial guidance for 2012.

Once we have completed our prepared remarks, we will answer your questions until 11:00 a.m. Eastern time. At that point in the call, Keisha will provide instructions on how to ask a question. In order to give as many as possible a chance to ask a question, please limit yourself to only one question. I will close with a tentative date of our third quarter 2012 earnings call.

Finally, a replay of this teleconference will be available on our website at approximately 1:00 p.m. 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, free cash flow and other non-GAAP operating measures. We have included reconciliations of the differences between GAAP and non-GAAP measures in our earnings release 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 pleased to be here to share my thoughts and perspective on the second quarter 2012 results. We had a great second quarter. Revenue growth remains strong across the board. Dues revenue grew nearly 11% for the quarter over a year ago.

Our in-center revenue had its 10th straight quarter of year-on-year double-digit growth at 12%. The continued strong growth rate demonstrates the effectiveness of our member connectivity initiatives and the quality of our in-center products and services.

Net income for the quarter was up over 21% versus last year and our earning per share was $0.73, 19% higher at than last second quarter. Same-store sales was up 4.2% and mature center same-store sales for the quarter was up 3.6%. Operating margin for the quarter was 19.6%, up 160 basis points over last year. I am very pleased with these results.

Attrition for the quarter was 8.6%. Excluding the impact of the Lifestyle Family Fitness center acquired late last year, attrition for the quarter was 8.2% versus 8.1% last year. Our trailing 12-months attrition was 36% or 35.5% if you exclude the impact of Lifestyle Family Fitness clubs. There has been a lot of noise around attrition since our first quarter earning release.

Let me emphasize, the attrition numbers work very well within our business model. Remember that our goal is to maximize dues revenue. With our current attrition rate at around 36%, we have been able to focus much more on price increases and mix improvement, and this allows more improvement in our most important metric which is the growth in dues revenue.

I could not be more satisfied with our 10.9% year-to-date dues growth. This is an impressive performance by our team. Overall, I am thrilled with where we stand halfway through the year. Total revenue year-to-date is up nearly 12% over last year. Over the next couple of years, I would like our stretch goal for revenue growth to be 15%. I will emphasize that this is not our official guidance, but rather a big target that we will strive to achieve.

I would like to comment specifically on Lifestyle Family Fitness acquisition. While we are going through remodeling and repositioning of these clubs in 2012, we expect they will be very productive facilities in 2013 and beyond. We are very bullish on this acquisition and the membership demographic trends that we are seeing.

Our strategic game plan for growing Life Time as a healthy way of life company is working. We have the potential for strong growth in the next 5 years. We're working hard to accelerate our Greenfield development and bring more iconic destination locations online in prominent areas with colorful demographics. Although it can take time to build this backlog, executed properly, these centers can drive both higher average dues and higher in-center spend per membership. We will announce more details on these locations in the next few quarters. Stay tuned.

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