Dive Brief:
- Life Time Group CFO Robert Houghton abruptly resigned from his position effective Dec. 31, the sports and recreational center operator announced in a recent filing with the Securities and Exchange Commission.
- Houghton will cease services as CFO and EVP to the Chanhassen, Minnesota-based company effective Jan. 5 pursuant to his separation agreement, according to the company filing. Erik Weaver, a 20-year veteran of the company who has served as its chief accounting officer and controller since May 2022, stepped in as interim CFO effective Jan. 1, according to the company filing.
- Houghton’s resignation comes as Life Time Group seeks to turn cash flow positive by the middle of 2024 and looks to manage rising costs attached to operating its sports and fitness centers, according to a recent press release.
Dive Insight:
Houghton, 51 years old as of Life Time’s latest proxy filing in March, joined the company as its EVP and CFO in August 2022, previously serving as SVP of finance for United Natural Foods. In accordance with his separation agreement, Houghton will receive a lump sum payment of $505,000 and will also be eligible to receive the restricted stock units granted to him as part of his annual bonus for 2023, according to the SEC filing.
Vesting for those units will be based on actual results under Life Time’s 2023 incentive program, and “any performance that exceeds the target performance metric will be paid to Mr. Houghton in a lump sum cash payment,” according to the filing. Houghton received an annual base salary of $600,000 in association with his appointment as CFO in August 2022, and was eligible for a target annual incentive equal to 66.67% of that base, according to the company’s proxy.
The CFO swap comes as the company looks to achieve its goal of becoming cash flow positive by the middle of this year as it faces rising costs amid continued economic uncertainty.
While the company reported record revenues for its most recent fiscal third quarter ended Sept. 30, it also reported rising costs related to the running of its fitness centers following investments made to improve member engagement, according to its earnings results.
Life Time Group saw a 17.9% bump in revenue year-over year to $585 million for its fiscal third quarter ended Sept. 30 compared to the year earlier while its net income fell to $7.9 million compared to $24.7 million over the same periods. Operating costs for its centers also rose 8.2% year-over-year to $319.4 million, the fitness operator reported.
The company’s investments in programming have led to an increase in average member visits by 24% as compared to 2019, CEO, Chairman and founder Bahram Akradi said in a statement included in its earnings release.
In a Dec. 27 press release which followed the news Houghton would be stepping down from his role as CFO, Life Time Group reaffirmed its full-year guidance for fiscal 2023, expecting revenues of between $2.21 billion to $2.22 billion, an increase of 21.7%. It also expects net income of between $66 to $69 million.
The company also reaffirmed its expectation that it will be cash flow positive by the middle of 2024 following capital expenditures which includes new club growth, Akradi said in a statement included in the release.
“Our business and outlook remain strong,” Akradi said. “I look forward to continue working with senior vice president and controller, Erik Weaver… as he assumes the role of interim Chief Financial Officer with the transition of Bob Houghton to his new career endeavor. Bob is a consummate professional and I wish him well."
Life Time Group did not immediately respond to requests for comment.
