Investment Thesis
Life Time exhibits strong top-line growth (14.3% YoY revenue) and exceptional reported profitability gains (139.2% net income growth), but faces critical financial health concerns that outweigh near-term performance. Negative free cash flow of -$61.2M combined with severely depressed liquidity ratios (0.53x current, 0.42x quick) indicate structural cash generation problems and potential distress, while ROE of 2.7% and ROA of 1.1% reveal poor asset and equity utilization.
Strengths
- Strong revenue growth of 14.3% YoY demonstrates solid membership demand and market share gains
- Exceptional net income growth of 139.2% YoY with operating margin of 17.1% shows operational leverage
- Positive operating cash flow of $198.8M from core business activities
- Manageable debt-to-equity ratio of 0.47x provides reasonable leverage cushion
Risks
- Negative free cash flow of -$61.2M indicates company is burning cash despite reported profitability, suggesting unsustainable operations
- Critically low current ratio of 0.53x and quick ratio of 0.42x signal severe liquidity stress and working capital crisis
- Extremely low return on equity (2.7%) and return on assets (1.1%) demonstrate inefficient capital deployment and poor profitability quality
- Capital expenditures of $260M exceed operating cash flow, indicating heavy capex burden with questionable payoff given weak returns
Key Metrics to Watch
- Free cash flow trajectory and sustainability relative to capital expenditure plans
- Current and quick ratio improvement versus further deterioration of liquidity position
- Operating leverage and return on equity trends to confirm if profitability gains are durable
- Deferred revenue and working capital composition to understand if membership model explains low current ratio
Financial Metrics
Revenue
788.7M
Net Income
88.1M
EPS (Diluted)
$0.39
Free Cash Flow
-61.2M
Total Assets
8.1B
Cash
120.0M
Profitability Ratios
Gross Margin
N/A
Operating Margin
17.1%
Net Margin
11.2%
ROE
2.7%
ROA
1.1%
FCF Margin
-7.8%
Balance Sheet & Liquidity
Current Ratio
0.53x
Quick Ratio
0.42x
Debt/Equity
0.47x
Debt/Assets
60.3%
Interest Coverage
N/A
Long-term Debt
1.5B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-07T09:42:01.620255 |
Data as of: 2026-03-31 |
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