Item 1A. RISK FACTORS
Risks Relating to Our Business Operations and the Growth of our Business
We may be unable to attr act and retain members and we may not effectively optimize memberships and increase revenue per center membership, either of which could have a negative effect on our business, results of operations and financial condition.
The success of our business depends on our ability to attract and retain members, optimize memberships and increase our revenue per center membership. There are numerous factors that could impact our ability to do these things, any of which could adversely impact our business, results of operations and financial condition. These factors include (i) our ability to deliver premium member experiences with strong member engagement, (ii) members valuing our offerings at the prices we charge including as we have shifted to a premium offering, (iii) changing desires, confidence, discretionary spending and behaviors of consumers and our ability to anticipate and respond to such shifts, (iv) introductions or terminations of products, services, memberships, benefits or technology, (v) general economic and environmental conditions, (vi) market or center maturity or saturation, (vii) direct and indirect competition in our trade areas and (viii) social fears such as terror or health threats.
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All of our members are able to cancel their membership at any time upon providing advance notice. We must therefore continually engage existing members and attract new members. Our qualified membership programs, which are administered and often subsidized through third parties and provide significantly lower average membership dues, can also be canceled upon providing advance notice. Several qualified membership programs expire in 2026 if not renewed. As we limit the qualified membership program offerings and as some or all of the programs terminate or expire, we are seeking to optimize the memberships in our clubs and increase our revenue per center membership, which includes converting existing qualified members to other direct memberships with the Company. The factors outlined immediately above could impact our ability to do these things.
Elevating our member experiences to meet and exceed their expectations requires investment in our team members, programs, products, services and centers. These investments may impact our short-term results of operations and cash flows as our investments in our business may be made more quickly than we see the returns on our investments. Additionally, we cannot be certain that these strategies will attract and retain members or deliver higher revenue per center membership.
Our business, results of operations and prospects may be adversely affected by the environments in which we operate, including with respect to the macroeconomy, the political climate and social unrest, global pandemics or other health crises, severe weather, natural disasters and shifting climate patterns, hostilities and gun violence.
The macroeconomic environment in which we operate can adversely impact our business, results of operations and prospects, including with respect to inflation, interest rates, taxes or tariffs, labor and supply chain issues, and economic recession or low growth . While the inflation rate has improved and been more stable, the extended period of elevated inflation and overall higher costs has impacted our expenses and capital expenditures in several areas, including wages, construction costs, supply costs, utilities, rent and other operating expenses. These inflationary impacts pressure our margin performance and increase our capital expenditures, particularly for our cost to build new centers. Similarly, while interest rates have decreased and we have been able to secure interest rate swaps on the term loan portion of our variable rate credit facility, the comparatively higher interest rate environment has also increased the cost of our borrowings. The combined impact of inflation and higher interest rates, together with our focus on lowering our leverage ratio and generating positive free cash flow, caused us to temporarily slow down the start of new construction on our ground-up suburban builds, which impacted the centers we opened in 2024 and 2025. The macroeconomic environment can also adversely impact consumer sentiment and their ability or willingness to spend money to obtain or retain their membership with us or to engage with our in-center businesses.
The political climate in the United States and internationally is dynamic, with increased polarization and division, shifts in regulatory policies and enforcement, and social unrest and tensions. If we do not anticipate and manage the challenges relating to this environment, it could have a negative impact on our brand, revenue and profits.
Global pandemics or other health crises can also adversely impact our business, results of operations, financial condition and prospects. We experienced significant reductions in membership levels, revenue per center membership, center activity and new center growth related to the COVID-19 pandemic, including from the responses of diverse governmental authorities in closing or restarting our operations. Our business took time to recover from that pandemic. We cannot be certain that we will not need to close our centers, restrict operations within our centers or suspend or reduce the level of real estate or construction activities again related to another pandemic or health crisis.
Severe weather, shifting climate patterns and other physical climate-related risks, including drought, heat stress, storms, flooding and fires; natural disasters; and social unrest, hostilities and gun violence, including active threats or terrorist activities (or expectations about them), can adversely affect our members, consumer spending and confidence levels, supply availability and costs, as well as our operations in impacted markets, all of which could have an adverse effect on our business, results of operations, prospects and financial condition. We may also be forced to temporarily or permanently close centers due to any number of such circumstances. While the magnitude and timing of these impacts are uncertain and may vary across our members, suppliers, centers and markets, the severity and impact of center closures and center damage or destruction, and the cost to build or operate our centers, could increase as the climate, geopolitical and social environment changes, including as the frequency and severity of extreme weather increases, and with respect to our water usage in environments where water may be scarce or costly, the cost to cool our facilities in environments that experience higher temperatures. The severity and impact could also be greater in geographical locations across the country where we operate multiple centers and as we expand or continue to expand in potentially more challenging environmental locations. Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be delayed or the proceeds may be insufficient to cover our losses fully . Our business could also be impacted by risks associated with transition to a lower-carbon economy, including market risks such as building performance requirements, shifts in insurance markets and carbon pricing. Additionally, while we have been a company focused on corporate responsibility from our formation, as we continue to develop and execute on our initiatives in these areas, we could incur additional costs or risks that adversely impact our business.
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If we are unable to successfully execute our asset-light growth strategy, our results of operations, cash flow and return on invested capital may be negatively impacted. Our center profitability may decline as we open new centers.
We are executing on a strategy to grow our business in an asset-light manner as detailed in “Item 1—Business—Our Growth Strategies and Member Experience Initiatives” of this Annual Report. To successfully expand the number of our centers, we must identify and acquire or lease sites that meet the site selection criteria we have established. We may face competition for sites that meet our criteria, and as a result, we may lose those sites or we could be forced to pay higher prices for those sites. Additionally, we must engage and negotiate with numerous third parties, including landlords, developers, sellers, contractors and governmental authorities. Their timeline and ability to move forward may differ from ours. If we are unable to cost-effectively identify and acquire or lease sites for new centers, or if our analysis of the suitability of a site is incorrect, our revenue growth rate, profits, cash flow and return on invested capital may be negatively impacted. Additionally, if we do not adapt to or anticipate the challenges relating to expanding our operations, including more diverse locations, sizes and types of buildings, executing remodels and determining timelines in new markets and spaces, we may not be able to expand profitably at our targeted returns and on the timeline or at the rate we expected. Any of these results could have a negative impact on our revenue growth rate, profits, cash flow and returns.
Our focus for new centers continues to include wealthier demographic and coastal locations for ground-up suburban builds, mall or retail locations, vertical residential and urban locations. If we are unable to leverage our brand and what we bring to these markets and locations, we may be required to pay relatively higher costs for land or lease payments. Our construction and development costs are higher to offer more luxurious amenities and features within the new centers. We have also experienced escalating construction costs more generally due to inflation. Higher gross invested capital and higher occupancy costs at these centers require increases in the value of sale-leaseback transactions or higher operating profits per center to produce our targeted rate of return. Our center operating margins may also be lower while the new centers build membership base. An increase in pre-opening expenses and lower revenue volumes characteristic of newly opened centers affect our operating margins at these new centers.
Opening new centers in existing markets attracts some memberships away from other centers in those markets, which could lead to diminished revenue and profitability. In addition, as a result of new center openings in existing markets, and because older centers represent an increasing proportion of our center base over time, our same-center revenue increases will be lower than in the past.
Delays in new center openings could have an adverse effect on our growth.
A significant amount of time and capital expenditures is required to develop and construct or remodel our new centers. Our ability to open new centers on schedule and on budget or at all depends on a number of factors, many of which are beyond our control. These factors include:
• obtaining financing at acceptable rates, including executing sale-leaseback transactions to fund construction of new sites and negotiating tenant improvement contributions from developers and landlords;
• obtaining entitlements, permits and licenses necessary to complete construction of the new center on schedule and to operate the center;
• negotiating the terms of the acquisition or lease of new centers;
• securing access to centers and the costs of labor and materials necessary to develop and construct or remodel our centers;
• delays or cost increases due to inflation, material shortages, labor issues, design changes, weather conditions, acts of God, pandemics or epidemics, discovery of contaminants, accidents, deaths or injunctions;
• recruiting, training and retaining qualified employees; and
• general economic conditions, including inflation that has elevated new center construction costs.
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Our growth and changes in the industry could place strains on our management, employees, information systems and internal controls, which may adversely impact our business.
Our plans for expansion and development, including an increase in the number of our new centers each year, development of existing and new businesses and memberships, expansion of our “Healthy Way of Life” ecosystem and acquisitions of other businesses, as well as changes in the industry, may place significant demands on our administrative, operational, financial, technological and other resources. Any failure to manage growth and development effectively could harm our business. To be successful, we will need to continue to develop technologically and implement management information systems and improve our operating, administrative, financial and accounting systems and controls. We will also need to train new employees and maintain close coordination among our executive, accounting, finance, legal, human resources, risk management and operations functions. These processes are time-consuming and expensive, increase management responsibilities and divert management attention.
We may incur significant costs in the development and implementation of new or re-imagined businesses or strategies with no guarantee of success.
In order to elevate and broaden member experiences, increase our revenue per center membership, remain competitive, respond to consumer demands and expand our business, we have developed, and expect to continue to develop and re-imagine, in-center, digital and ancillary businesses and strategies as well as co-working and living spaces. We may incur significant costs in the development or refinement of these businesses and strategies, some of which may be outside of our core competency. In addition, we cannot guarantee that these businesses or strategies will be successful and contribute to earnings or that we will be able to scale these businesses in an efficient manner or at all, and any of these businesses or strategies may lose money and have an adverse effect on our business, financial condition and operating results.
We may be unable to successfully acquire or invest in suitable businesses or, if we do acquire or invest in them, they may disrupt our existing business, we may be unable to successfully integrate the businesses into our existing business or the acquired assets may be subject to impairment, any of which may have an adverse effect on our results of operations and financial condition.
To remain competitive and expand our business, we acquire and invest in complementary businesses and centers. We may not be able to find suitable acquisition candidates or joint venture partners in the future. If we do find suitable candidates, we may not be in a financial position to pursue the transactions or we may not be able to conduct effective due diligence or execute the transactions on favorable terms or at all. We may also have to incur debt or issue equity securities to pay for any acquisition or investment, which could adversely affect our financial condition or dilute our stockholders.
If we do acquire other businesses, we cannot provide any assurances that we will be able to successfully integrate those businesses and integrating those businesses into our existing business may place significant demands on our administrative, operational, financial and other resources and may require significant management time, which may disrupt our other businesses. We may also need to invest significant capital into the acquired businesses or centers to deliver experiences consistent with the Life Time brand. Our ability to acquire and integrate larger or more significant companies is unproven. Any failure to integrate an acquired business or center into our existing business could have an adverse effect on our existing business, results of operations and financial condition.
Additionally, as we have acquired other businesses, we have recorded assets, liabilities and intangible assets at fair value at the time of acquisition. If the fair value of the long-lived assets or intangible assets were determined to be lower than the carrying value, the assets would be subject to impairment, which could adversely affect our financial results.
Our business could be adversely affected by competition in the competitive health, fitness and wellness industry.
We compete with numerous industry participants as detailed in “Item 1—Business—Competition” of this Annual Report. Competitors compete with us to attract members in our markets and digitally. Competitors also attempt to copy all or portions of our business model or services, which could erode our market share and brand recognition or impair our business and results of operations. It is also possible that competitors could introduce new products and services or new ways to provide those products and services that negatively impact consumer preference or willingness to pay for our products and services. Certain competitors have advantages over us, including non-profit and government organizations may be able to obtain land and construct centers at a lower cost and collect membership fees without paying taxes, thereby allowing them to charge lower prices. Additionally, consolidation in the health, fitness and wellness industry could result in increased competition among participants. This competition may limit our ability to attract and retain members or to optimize our revenue per center membership, each of which could materially and adversely affect our business, results of operations and financial condition.
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Our dependence on third-party suppliers for equipment and certain products and services could result in disruptions to our business and could adversely affect our business, results of operations and financial condition.
Equipment and certain products and services needed for us to operate our business efficiently and to consistently meet our business requirements are sourced from third-party suppliers. The ability of these third-party suppliers to successfully provide reliable and high-quality products and services is subject to economic, political, trade, technical and operational uncertainties that are beyond our control. Any disruption to our suppliers’ operations, or any inability by us to identify and enter into agreements with alternative suppliers on a timely basis and on acceptable terms, could impact our supply chain and our ability to service our centers and elevate and expand our brand. Transitioning to new suppliers could be time-consuming and expensive and may result in interruptions in our operations. If any of these events occurs, it could have a material adverse effect on our business, results of operations and financial condition.
Risks Relating to Our Brand
Our business depends on the quality and reputation of our brand, and any deterioration in the quality or reputation of our brand or in the health, fitness and wellness industry could materially adversely affect our market share, business, results of operations and financial condition.
Our brand and reputation are among our most important assets. Our ability to attract and retain members and expand our business is impacted by the external perceptions of Life Time as a leading lifestyle and leisure brand that consistently delivers premium experiences. Any operation of our centers or omni-channel ecosystem that does not meet expectations, any adverse incidents, including involving social matters, the safety of our members, guests or employees, physical or sexual abuse, or harm to a child at any of our children areas, or any negative events or publicity regarding us, our competitors or the health, fitness and wellness industry, may damage our brand and reputation, cause a loss of consumer confidence in Life Time and our industry and have an adverse effect on our market share, business, results of operations and financial condition.
Use of social media platforms, and email, text messaging, phone and social media marketing, may adversely impact our reputation, business, results of operations, and financial condition or subject us to fines or other penalties.
Negative commentary and videos about us or calls for collective action against us, such as boycotts, may be posted on social media platforms or similar at any time to a broad audience, which may harm our brand, reputation or business without affording us an opportunity for redress or correction in a timely manner or at all. Consumers value readily available information about health, fitness and wellness and often act on such information without further investigation and without regard to its accuracy.
We also use email, text messaging, phone and social medial platforms as marketing tools. As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices could adversely impact our business, results of operations and financial condition or subject us to fines or other penalties.
Our intellectual property rights may be inadequate to protect our business or may be infringed, misappropriated or challenged by others. We may also become involved in costly litigation or be required to pay royalties or fees.
We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements and third-party nondisclosure and assignment agreements. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason, whether in the United States or internationally, could have a material adverse effect on our business, results of operations and financial condition.
We rely on our trademarks, trade names and brand names to distinguish our products and services from the products and services of our competitors, and we have registered or applied to register many of these trademarks. There is no assurance that our trademark applications will be approved in the United States or internationally. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products or services, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands and to replacing products. In particular, although we own a United States federal trademark registration for use of the LIFE TIME ® mark in the field of health and fitness centers, we are aware of entities in certain locations around the country and internationally that use LIFE TIME FITNESS, LIFE TIME or other similar marks in connection with goods and services related to health, fitness and wellness. The rights of these entities in such marks may predate our rights. Accordingly, if we open any centers or otherwise operate in the areas in which these parties operate, we may be required to pay royalties or other fees or may be prevented from using the mark in such areas. Furthermore, if any third party were to successfully seek cancellation of our trademark registrations, we may be prevented from using such marks throughout the United States or internationally.
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Further, there is no assurance that competitors or other businesses will not infringe on our intellectual property rights or that we will not have disputes with third parties to enforce our intellectual property rights, protect our trademarks, determine the validity and scope of the proprietary rights of others or defend ourselves from claims of infringement, invalidity, misappropriation or unenforceability. Our risk of infringement or misappropriation may increase with the increased use of generative artificial intelligence. In the event of any such infringement or claimed infringement or any misappropriation, the value of our brand may be harmed and we may be required to incur substantial costs and divert resources to pursue, or defend against, any claim. Additionally, any damage to our brand or reputation could cause membership levels to decline and make it more difficult to attract new members. If we were to fail to successfully defend a claim against us, we may have to pay significant fees (and fines and penalties) and enter into royalty or licensing agreements, we may be prevented from using the intellectual property within certain markets in connection with goods and services that are material to our business or we may be unable to prevent a third party from using our intellectual property. Any such failure to successfully protect our intellectual property rights, or to defend against any claims or infringement, invalidity, misappropriation or unenforceability, for any reason, could have an adverse effect on our business, results of operations and financial condition.
Risks Relating to Our Techn ological Operations
We rely on technology and if we are unable to adapt to significant and rapid technological change, including with respect to artificial intelligence, and deliver connected and digital experiences, we may not compete effectively and our business could be adversely affected.
Technology is a key component of our business model and we regard it as crucial to our success moving forward. We increasingly use electronic and digital means to interact with our members, provide services and products, support our business operations and collect, maintain and store individually identifiable information. We use an integrated and proprietary member management system to manage the flow of member information within each of our centers and between centers and our corporate office. We also continue to invest in our mobile application and systems, including artificial intelligence such as L•AI•C, our first generative, artificial intelligence driven healthy way of life personal companion with personalized content and recommendations. While we seek to offer our members best-in-class technology solutions, we operate in an environment of significant and rapid technological change, including with respect to artificial intelligence, and with industry participants who have greater resources and personnel dedicated to innovating and developing technology and artificial intelligence. To remain competitive, we must continue to maintain, enhance and improve the functionality, capacity, accessibility, reliability, use and features of our mobile application, automated member interfaces and other technology offerings as well as the use of technology and artificial intelligence in the corporate support of our business.
Our growth and success will depend, in part, on our ability to continue to elevate and broaden our member experiences and product and services offerings, including through developing our omni-channel ecosystem, licensing leading technologies, systems and use rights, enhancing our existing platforms and services and creating new platforms and services. We must also respond to member demands, technological advances and emerging industry standards and practices on a cost-effective and timely basis. The adoption of new technologies or market practices (including artificial intelligence) requires us to devote significant resources to improve and adapt our services and how we operate. We need to secure and maintain third party rights including to use music with our content, which can be costly depending on the method we use to provide our content and may involve many third parties and navigating complex and evolving legal issues. Keeping pace with these ever-increasing technological and use requirements can be expensive, and we may be unable to make these improvements to our technology infrastructure or obtain the necessary use rights in a timely manner or at all. If we are unable to anticipate and respond to the demand for new services, products and technologies on a timely and cost-effective basis, or to adapt to and leverage technological advancements and changing standards, our business, results of operations and financial condition could be materially and adversely affected. Furthermore, we may rely on the ability of our members to have the necessary hardware products (smartphones, tablets, watches, etc.) to support our new product offerings. To the extent our members are not prepared to invest or lack the necessary infrastructure, the success of any new initiatives may be compromised.
If we fail to properly maintain the operation, integrity and security of our systems and our data or the data of our members, guests and employees, to comply with applicable privacy or other laws, or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be adversely affected.
The operation, integrity and security of our systems and our data and the data of our members, guests and employees is critical to us. Despite the security measures we have in place and our continuous assessment and improvements, our systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of cyber terrorism, malicious attacks, misinformation, demands for ransom, vandalism or theft, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. Because such attacks and other events are increasing in sophistication and frequency and frequently change in nature, including due to artificial intelligence being used by bad actors, we, and our third-party service
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providers, may be unable to anticipate such events or implement adequate preventative measures, and any compromise of our systems, or those of our third-party providers, may not be discovered and remediated promptly. Any such event or any changes in consumer behavior following such an event affecting us or a third party may materially and adversely affect our business, which in turn may materially and adversely affect our reputation, results of operations and financial condition. Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be delayed or the proceeds may be insufficient to cover our losses fully, which could have a material adverse effect on our business, results of operations and financial condition.
Additionally, the collection, maintenance, use, disclosure and disposal of individually identifiable or other personal data by our businesses are regulated at the federal, state and foreign levels as well as by certain financial industry groups, such as the Payment Card Industry Security Standards Council, Nacha, Canadian Payments Association (Payments Canada) and individual credit card issuers. Some of this data is sensitive and could be an attractive target of a criminal attack by malicious third parties with a wide range of motives and expertise. Federal, state and foreign regulators and financial industry groups continue to adopt or consider new privacy and security requirements that may apply to our businesses. Similarly, federal, state and foreign regulators are considering laws and regulations for artificial intelligence. Compliance with evolving and fragmenting privacy, artificial intelligence and security laws, requirements and regulations results in time and cost increases due to necessary systems changes, new limitations or constraints on our business models and the development of new administrative processes. They also may impose further restrictions on our collection, disclosure and use of information that is housed in one or more of our databases. Noncompliance with privacy or artificial intelligence laws, financial industry group requirements or a security breach or other event involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive and/or confidential information, whether by us or by one of our vendors, could have adverse effects on our business, operations, brand, reputation and financial condition, including decreased revenue, fines and penalties, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against our licenses to do business and injunctive relief.
Moreover, any failure or unforeseen issues, such as bugs, data inconsistencies, cloud concentration issues, outages, fires, floods, changes in business processes and other interruptions with our systems or the systems of third-party vendors could adversely impact our business and member experiences and cause us to lose members. Disruptions or failures that affect our billing and other administrative functions could also have an adverse effect on our results of operations. Correcting any disruptions or failures that affect our systems could be difficult, time-consuming and expensive. Additionally, if we need to move to different third-party systems, or otherwise significantly modify our systems, our operations and member experiences could be interrupted and negatively impacted.
Risks related to our acceptance of ACH, credit card, debit card and digital payments could harm our brand or our results of operations.
We accept payments through ACH, credit card, debit card and digital transactions. For such transactions, we pay interchange and other fees, which may increase over time. Additionally, if we or any of our processing vendors have problems with our billing software, or the billing software malfunctions, it could have an adverse effect on our member satisfaction and could cause one or more of the major companies to disallow our continued use of their payment products. If our billing software fails to work properly and, as a result, we do not automatically charge our members’ credit cards, debit cards or bank accounts on a timely basis or at all, we could lose membership revenue, which would harm our results of operations.
If we fail to adequately control fraudulent ACH, credit card, debit card and digital transactions, we may face civil liability, diminished public perception of our security measures and significantly higher ACH, credit card and debit card related costs, each of which could adversely affect our business, results of operations and financial condition. The termination of our ability to process payments through ACH transactions or on any major credit or debit card would significantly impair our ability to operate our business.
Risks Relating to Our Capital Structure and Lease Obligations
Our indebtedness and lease obligations, and the restrictive covenants in the documents governing such indebtedness and lease obligations, could adversely affect our financial condition and impact our ability to grow our business, take certain actions or respond to changes in the economy or our industry.
As of December 31, 2025, we had total consolidated indebtedness outstanding of approximately $1,525 million, as detailed in Note 9—Debt, to our consolidated financial statements included in Part II, Item 8 of this Annual Report. For the year ended December 31, 2025, our interest expense, net of interest income was $82 million. Our annual debt service obligation for 2026 is expected to be approximately $86 million for interest and $22 million primarily for term loan and mortgage principal payments. We and our subsidiaries may still incur substantially more debt, including secured debt.
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As of December 31, 2025, we had 185 leased properties, including 134 center leases and 11 ground leases and 17 centers under construction. For the year ended December 31, 2025, our rent expense was approximately $339 million. In addition to minimum lease payments, some of our center leases provide for additional rental payments based on a percentage of net sales, or “percentage rent,” if sales at the respective centers exceed specified levels, as well as the payment of common area maintenance charges, real property insurance and real estate taxes. Many of our leases also have defined escalating rent provisions over the initial term and any extensions. As we continue to execute on our asset-light growth strategy, including sale-leaseback transactions, we expect to lease, rather than own, the majority of our new centers in the future. With our strategy to execute sale-leaseback transactions, we may also have an increasing number of leased locations with a small number of lessors. As of December 31, 2025, we had 55 properties subject to 15 master leases with 14 lessors.
The credit agreement governing our senior secured credit facility and the indenture governing our secured notes contain a number of covenants imposing restrictions on our business, including we are required to comply with a first lien net leverage ratio covenant under the revolving portion of our senior secured credit facility. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. Similarly, since as a lessee we do not completely control the land and improvements underlying our operations, we may not be able to take certain actions that we desire or the lessors could take certain actions to disrupt our rights in the centers we lease. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions, pandemics or epidemics and changes in regulations, and there is no assurance that we will be able to comply with such covenants.
Specifically, our indebtedness and lease obligations, and the restrictions imposed thereby, could have material consequences, including:
• limiting our ability to obtain or guarantee additional indebtedness or make certain investments, which could impact our ability to fund or execute on future working capital, capital expenditures, our growth strategy or other general corporate requirements or business opportunities;
• requiring a substantial amount of our cash flows to be dedicated to debt service and lease obligations, thereby reducing the amount of cash flows available for working capital, capital expenditures, our growth strategy and other general corporate purposes or business opportunities;
• restricting our ability to pay dividends or make distributions on our capital stock or repurchase our capital stock;
• limiting our ability to incur liens, to sell assets, to consolidate, merge, sell or otherwise dispose of all or substantially all of our assets or to enter into transactions with our affiliates;
• increasing our vulnerability to general adverse economic and industry conditions;
• limiting our flexibility in planning for and reacting to changes in the industry in which we compete and to changing business and economic conditions;
• placing us at a disadvantage compared to other, less leveraged competitors; and
• increasing our cost of borrowing or limiting our ability to refinance indebtedness.
Additionally, failure to satisfy our obligations with respect to our indebtedness and lease obligations or a breach of any of the restrictive covenants could result in an event of default under the applicable indebtedness or lease. Such a default may allow the creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness that is subject to an applicable cross-acceleration or cross-default provision. An event of default under the credit agreement governing our senior secured credit facility would permit the lenders thereunder to terminate all commitments to extend further credit under the facilities. Furthermore, if we were unable to repay the amounts due and payable under our secured indebtedness, those lenders or holders, as applicable, could proceed against the collateral granted to them, including our available cash, to secure that indebtedness, subject to the provisions of the applicable intercreditor agreement. In the event our lenders or holders of our secured notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness. Similarly, a number of our leases, including those pursuant to sale-leaseback transactions, may be terminated in the event of a breach and certain other circumstances. The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations and ability to grow our business or satisfy our obligations.
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We may not be able to generate sufficient cash to service all of our indebtedness and lease obligations and may be forced to take other actions to satisfy our obligations, which may not be successful.
We depend on cash flow from operations to pay our indebtedness and lease obligations. Our ability to make scheduled payments on our indebtedness and lease obligations, to refinance our debt obligations before maturity or to negotiate favorable terms on new or expiring leases depends on our financial condition and operating performance, and could be subject to prevailing economic and competitive conditions and to certain financial, business, market, legislative, regulatory, environmental and other factors beyond our control. Our inability to generate sufficient cash flows to satisfy our debt and lease obligations, or to refinance our indebtedness at comparable interest rates and on commercially reasonable terms or at all, or to renew our leasehold interests on their expiration or on terms that are as favorable as the current terms, would materially and adversely affect our business, financial position and results of operations. We could also face substantial liquidity problems and be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our operating and growth needs or our scheduled debt service and lease obligations.
Our ability to raise capital in the future may be limited, which could impact our operations and ability to grow.
Our business requires capital to operate and grow. We have and may need or choose to raise additional funds through the issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms, or at all. If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could further restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
Risks Relating to Our Human Capital
If we cannot retain our key employees and hire additional qualified employees, we may not be able to successfully lead and run our businesses, achieve our growth targets and pursue our strategic objectives. We may also continue to face increased labor costs that could reduce our profitability.
We are highly dependent on the services of our senior management team and other key employees at both our corporate headquarters and our centers. Competition for such employees is intense and most of our executive officers have each been with the Company for over 20 years. Our inability to attract, retain, replace, train and motivate qualified employees in a timely and effective manner could reduce member satisfaction, harm our brand and reputation and adversely affect our operating efficiency and financial results.
Staffing shortages, including for our centers and for key corporate and technology resources, could also hinder our ability to implement our business and growth strategy. Payroll costs are a major component of the operating expenses at our centers. We have experienced and may continue to experience a labor market that requires higher wages and increased benefits, which places pressure on our profitability. Increases in minimum wage rates and mandatory benefits could also result in increased costs for us, which may adversely affect our results of operations and financial condition.
Attempts by labor organizations to organize groups of our employees or changes in labor laws could disrupt our operations or increase our labor costs.
Although none of our employees are currently covered under collective bargaining agreements, we may become subject to collective bargaining agreements, similar agreements or regulations enforced by governmental entities in the future. Changes in the federal regulatory scheme could make it easier for unions to organize groups of our employees. Unionization could hinder our ability to cross-train and cross-promote our employees due to prescribed work rules and job classifications. Labor regulations could also lead to higher wage and benefit costs, changes in work rules that raise operating expenses and legal costs, and limit our ability to take cost saving measures. If relationships with our employees or other personnel become adverse, our centers could experience labor disruptions such as strikes, lockouts and public demonstrations. These or similar agreements, legislation or changes in regulations could disrupt our operations, reduce our profitability or interfere with the ability of our management to focus on executing our business and operating strategies.
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Risks Relating to Legal Compliance and Risk Management
We are subject to extensive governmental laws and regulations, and changes in these laws and regulations could have a negative effect on our results of operations and financial condition.
Our operations and business practices are subject to various United States and foreign national, federal, state, provincial and local laws and regulations, including but not limited to the following:
• consumer protection laws related to the advertising, marketing and sale of our products and services, including laws regulating recurring services;
• statutes that regulate the sale and terms of our membership contracts;
• health or safety regulations related to various center operations, whether operated directly, as a managed service provider or a business associate to third parties, such as MIORA, Life Clinic, our Dynamic Personal Training, LifeCafe, LifeSpa and medi-spa, Life Time Swim and Life Time Kids;
• regulation or licensing of ancillary health, fitness and wellness-related products and services;
• licensing or other regulation of our service providers, such as cosmetologists, massage therapists and registered dietitians;
• environmental and workplace safety laws and regulations;
• climate-related laws and regulations;
• laws and regulations on fair housing and accessibility;
• laws and regulations governing privacy and security of information; and
• wage and hour or other employment related laws and regulations.
Any changes in such laws or regulations or any failure by us to comply with such laws or regulations, including by any of our team members, could have an adverse effect on our results of operations and financial condition. We may also face increased burdens, expenses and challenges in administering our business in a climate of increasing political polarization and volatility and regulatory fragmentation. Additionally, as we expand our business and “Healthy Way of Life” ecosystem, including potentially offering our digital membership or other services internationally, we could be exposed to new or incremental regulatory, economic and political risks in addition to those we already face in the United States and Canada.
We defend against claims related to the development, construction or operation of our facilities and the use, condition or content of our premises, facilities, equipment, mobile application, services, activities or products, which could have a negative effect on our results of operations and financial condition.
Use of our premises, facilities, equipment, mobile applications, services, activities, events or products poses potential health or safety risks to members, guests and customers. Claims are asserted against us from time to time for loss, injury or death suffered by someone (including a minor child) using or visiting our premises, facilities, equipment, mobile applications, services, activities, events or products. We could also face claims in connection with the development, construction and remodel of our centers and other facilities, as well as claims related to environmental matters or remediation. While we carry insurance generally applicable to such claims, we face exposure for losses within any self-insured retention or for uninsured damages.
We also face claims for economic or other damages by members, guests, customers or employees, including consumer protection, wage and hour, membership or ancillary services contract, or other statutory or common law claims arising from our business operations. Such claims may be uninsured or the proceeds of our insurance coverages for such claims may be insufficient to cover our losses fully. Depending upon the outcome, these matters may have a material adverse effect on our business, results of operations and financial condition.
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We defend claims related to our health, fitness and wellness-related offerings or other claims, and the value and reputation of our brand may suffer.
We offer directly or through third parties a variety of health, fitness and wellness-related products and services, such as nutritional and weight loss products, blood screenings and other assessments, anti-aging and longevity services, health, fitness and wellness content and services, chiropractic services and medi-spa services. Claims are asserted or governmental investigations are conducted from time to time against us or such third parties related to these products and services, including regarding the ingredients in, manufacture of or results of using our nutritional products, our provision of other health, fitness and wellness-related services or content or our relationships with third parties. There is no assurance that we will not be required to cease providing certain products or services or that any rights we have under indemnification provisions and/or insurance policies will be sufficient to cover any losses that might result from such claims. Any publicity surrounding such claims may negatively impact the value of our brand.
In the ordinary course of conducting our business, we are exposed to claims that can have significant adverse effects upon our financial position, results of operations and cash flows, including wage and hour claims and class action claims. See “Item 3—Legal Proceedings” in this Annual Report. At any given time, there may be one or more civil actions initiated against us. If one or more of these pending lawsuits, or any lawsuits in the future, are adjudicated in a manner adverse to our interests, or if a settlement of any lawsuit requires us to pay a significant amount, the result could have an adverse impact on our financial position, results of operations and cash flows. In addition, any litigation, regardless of the outcome, may distract our management from the operation of our business.
We may not be able to maintain the required type or level of insurance coverage on acceptable terms or at an acceptable cost.
We may not be able to maintain insurance, including general liability and property insurance, on acceptable terms or maintain a level of insurance that would provide adequate coverage, including against potential third-party liability, health and safety issues, property loss caused by severe or frequent extreme weather or otherwise and other claims. An increase in the number of claims against health and fitness center operators generally or against us in particular may cause the cost of insurance for the industry as a whole or us in particular to rise, and comprehensive insurance coverage may become more difficult to attain. For example, our level of insurance has decreased and the relative cost has increased for insuring parts of our business including our medi-spa services. Any gaps in insurance or any increase in the cost of insurance may have a material adverse effect on our business, results of operations and financial condition.
Adverse developments in applicable tax laws or tariffs could have a material and adverse effect on our business, financial condition and results of operations. Our effective tax rate could also change materially as a result of various evolving factors, including changes in income tax law or changes in the scope of our operations.
We are subject to taxation in the United States at the federal level and by certain states and municipalities and foreign jurisdictions because of the scope of our operations. Additionally, despite the vast majority of our operations being currently operated in the United States, our operations and new center growth could be subject to new or increased tariffs. While our existing operations have been implemented in a manner we believe is in compliance with current prevailing laws, one or more taxing jurisdictions could seek to impose, and certain jurisdictions are actively considering, incremental or new taxes on us. Any adverse developments in tax laws or regulations, including legislative changes, judicial holdings or administrative interpretations, or any new or increased tariffs that impact our operations or growth, could have a material and adverse effect on our business, financial condition and results of operations. Changes in the scope of our operations, including expansion to new products or new geographies, could also increase the amount and type of taxes and tariffs to which we are subject, and could increase our effective tax rate.
Risks Relating to Ownership of Our Common Stock
Our share price has and may change significantly, and stockholders may not be able to resell our common stock at or above the price per share paid or at all.
The trading price of our common stock has experienced volatility. Stock volatility often has been unrelated or disproportionate to the operating performance of particular companies. Additionally, how active and liquid the trading market on the NYSE for our common stock may be impacted by the fact that certain of our existing stockholders who were stockholders before the IPO, who we refer to as the “Voting Group,” collectively held as of December 31, 2025, approximately 38.3% of the voting power of our common stock (down from 62.7% as of December 31, 2024). Stockholders may not be able to resell our common stock at or above the price per share paid due to a number of factors, such as the amount of liquidity in the market for our shares, those listed in other portions of this “Risk Factors” section and the following:
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• results of operations that vary from the expectations of securities analysts and investors or from our competitors;
• if securities analysts do not publish research or reports about our business, or if they downgrade our common stock or our industry;
• changes in expectations as to our future financial performance and growth, including financial estimates and investment recommendations by securities analysts and investors;
• investor perceptions of the investment opportunity associated with our common stock relative to other investment alternatives;
• the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC;
• guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; and
• changes in accounting principles.
These broad market and industry fluctuations may materially adversely affect the market price of our common stock, regardless of our actual operating performance.
In the past, following periods of market volatility, stockholders of companies have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.
Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.
The sale of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
As of December 31, 2025, we had a total of 221,076,666 shares of common stock outstanding and the Voting Group held approximately 38.3% of such shares (down from 62.7% as of December 31, 2024). The Voting Group includes investment funds affiliated with Leonard Green & Partners, L.P. and its affiliates (“LGP”) and TPG Inc. and its affiliates (“TPG”), which collectively held approximately 19.3% of our common stock as of December 31, 2025 (down from 42.5% as of December 31, 2024). Most of the shares of our common stock held by the Voting Group are “restricted securities” under Rule 144 of the Securities Act and subject to certain restrictions on resale. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration such as Rule 144. The Voting Group has certain registration rights under the amended and restated stockholders agreement with the Company (the “Stockholders Agreement”). Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. We currently have an automatic shelf registration statement on Form S-3 filed with the SEC under which we or the Voting Group could elect to register shares of our common stock as was done in 2024 and 2025.
If the Voting Group exercises its registration rights again, sells a significant number of shares pursuant to an exemption from registration or is perceived by the market as intending to sell them, the market price of our common stock could drop significantly. These factors could also make it more difficult for us to raise additional funds through future offerings of our common stock or other securities.
In addition, our shares of common stock subject to outstanding awards or reserved for future issuance under our 2015 Equity Incentive Plan, 2021 Incentive Award Plan and our 2021 Employee Stock Purchase Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to any vesting agreements. We may also issue our securities in connection with investments or acquisitions. The amount of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders and the securities issued may have rights that are senior to our common stock.
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The Voting Group owns a significant amount of our common stock and their interests may not be aligned with yours. We ceased being a “controlled company” within the meaning of the NYSE rules and the rules of the SEC in June 2025.
As long as the Voting Group continues to own a significant amount of our total outstanding shares of common stock, they will be able to strongly influence the outcome of corporate actions.
It is possible that members of the Voting Group may have interests that are different from other stockholders and may vote in a way with which other stockholders may disagree and that may be adverse to other stockholders’ interests. Further, members of the Voting Group may have differing views from each other, none of which may align with other stockholders’ interests. In addition, the Voting Group’s concentration of ownership could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our common stock to decline or prevent our stockholders from realizing a premium over the market price for their common stock.
Additionally, certain of the members of the Voting Group are in the business of making investments in companies and may from time to time acquire interests in businesses that directly or indirectly compete with certain portions of our business or supply us with goods and services. Such members of the Voting Group may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us or may be more expensive for us to pursue.
We ceased to be a “controlled company” within the meaning of the corporate governance standards of the NYSE and the rules of the SEC effective as of June 5, 2025. Within one year of that date, we are required to have a nominating and corporate governance committee and compensation committee that consist entirely of independent directors. The independence standards are intended to ensure that directors who meet those standards are free of any conflicting interest that could influence their actions as directors. Accordingly, stockholders may not have the same protections afforded to stockholders of other companies that are subject to all of the corporate governance requirements of the NYSE until we meet such requirements during 2026.
Transactions undertaken in connection with the repurchase of our common stock may not occur, and if they do, may not realize the anticipated long-term stockholder value and could have adverse tax effects on us.
In February 2026, our board of directors authorized a share repurchase program for the repurchase of up to $500 million of our common stock, as detailed in “Part II—Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Purchases of Equity Securities.” Our share repurchase program does not obligate us to repurchase any specific number of shares of common stock, has no expiration date and may be modified, terminated or suspended at any time without prior notice. The timing and amount of repurchases, if any, will be subject to our liquidity, leverage ratio, stock price, business and market conditions, and compliance with applicable legal and contractual obligations. Additionally, repurchases of our common stock could reduce our cash reserves, which may impact our ability to finance our growth and strategic acquisitions or opportunities. Repurchases of our common stock, or any decision to not utilize the full authorized amount, could affect the trading price of our common stock and could increase volatility. Although share repurchase programs are intended to enhance long-term stockholder value, there is no assurance that our program will do so. Additionally, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) imposed a 1% excise tax on the fair market value of stock on certain repurchases (including redemptions) of stock by publicly traded corporations on or after January 1, 2023, subject to certain exceptions (including an exception that allows netting the amount of stock redemptions or repurchases against certain new issuances of stock). Subsequently, the U.S. Department of the Treasury issued final regulations providing additional rules about this excise tax. If we redeem or repurchase shares of our common stock in connection with the share repurchase program that we have announced, we could be subject to this excise tax unless we qualify for any of the exceptions that are provided in the Inflation Reduction Act, in the final regulations, or in other laws, regulations or rules. Any such excise tax would be our liability and could increase the amount of tax that we are required to pay.
Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.
Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of the Delaware General Corporation Law (the “DGCL”), could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions include:
• establishing a classified board of directors such that not all members of the board are elected at one time;
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• allowing the total number of directors to be determined exclusively (subject to the rights of holders of any series of preferred stock to elect additional directors) by resolution of our board of directors and granting to our board the sole power (subject to the rights of holders of any series of preferred stock or rights granted pursuant to the Stockholders Agreement) to fill any vacancy on the board;
• limiting the ability of stockholders to remove directors without cause;
• authorizing the issuance of “blank check” preferred stock by our board of directors, without further stockholder approval, to thwart a takeover attempt;
• prohibiting stockholder action by written consent (and, thus, requiring that all stockholder actions be taken at a meeting of our stockholders);
• eliminating the ability of stockholders to call a special meeting of stockholders;
• establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at annual stockholder meetings;
• requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our amended and restated certificate of incorporation or amended and restated bylaws; and
• electing not to be governed by Section 203 of the DGCL.
These provisions could discourage, delay or prevent a transaction involving a change in control of our Company. They could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take corporate actions other than those which our stockholders desire.
Non-U.S. holders who own more than 5% of our common stock may be subject to U.S. federal income tax on gain realized on the sale or other taxable disposition of such stock.
Because we have significant ownership of real property located in the United States, we may be a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes, but we have made no determination to that effect. There can be no assurance that we do not currently constitute or will not become a USRPHC. As a result, any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes (a “Non-U.S. Holder”) may be subject to U.S. federal income tax on gain realized on a sale or other taxable disposition of our common stock if such Non-U.S. Holder has owned, actually or constructively, more than 5% of our common stock at any time during the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period in such stock.
