Q4 2023 Life Time Group Holdings Inc Earnings Call

Participants

Erik Weaver; Interim Chief Financial Officer; Life Time Group Holdings Inc

Bahram Akradi; Founder, Chairman, and Chief Executive Officer; Life Time Group Holdings Inc

Megan Alexander; Analyst; Morgan Stanley

Christopher Carril; Analyst; RBC Capital Markets

Alexander Perry; Analyst; BoFA Global Research

Brian Nagel; Analyst; Oppenheimer & Co., Inc.

John Heinbockel; Analyst; Guggenheim Securities LLC

John Baumgartner; Analyst; Mizuho Securities USA

Simeon Siegel; Analyst; BMO Capital Markets

Presentation

Operator

Good morning, and welcome to the lifetime Group Holdings Fourth Quarter and Full Year 2023 earnings. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from. As a reminder, this conference is being recorded.
I will now turn the call over to Danny McNease, Vice President of Corporate Finance.

Good morning, and thank you for joining us for the lifetime 2023 Annual Earnings Conference Call. With me today are Brahma Crotty, Founder, Chairman and CEO, and Erik Weaver, Interim CFO and Chief Accounting Officer.
During this call, the Company will make forward-looking statements which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today.
During the comprehensive discussion of Risk Factors in the Company's SEC filings, which you are encouraged to review.
The Company will discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA, or what we refer to as net debt leverage ratio and free cash flow. This information, along with reconciliations to the most directly comparable GAAP measures are included in the Company's earnings release issued this morning, our eight K filed with the SEC and on the Investor Relations section of our website.
With that, it is my pleasure to turn the call over to Eric Weaver. Eric?

Erik Weaver

Thank you, Danny, and good morning, everyone. Before we begin, I'd like to take a moment and share how excited I am to be on the call with you today. I've been a lifetime for over 20 years, holding various roles in the finance department and have made a seamless transition into my role as interim Chief Financial Officer. We have an amazing company and a strong financial team.
I am now pleased to share our financial results. Starting with our fourth quarter. Total revenue increased 18.2% to $558.8 million, driven by a 20.9% increase in membership dues and enrollment fees and an 11% increase in in-center revenue. Access memberships increased 5.2% to end the year at more than 763,000 memberships. Total memberships ended the quarter at approximately 815,000. Average monthly dues were $183, up 13.2% from the fourth quarter last year. Revenue per access membership increased to $711 from $640 in the prior year period as we continued to benefit from higher dues, increased visits and increased in-center activity.
Net income for the fourth quarter was $23.7 million up 73% versus the fourth quarter 2022. Adjusted net income was $38 million, an increase of $20.4 million versus the fourth quarter 2022 adjusted diluted earnings per share was $0.19 compared to $0.09 per share in the fourth quarter last year. Adjusted EBITDA increased 28.7% to $137.7 million, and our adjusted EBITDA margin of 24.6% increased 200 basis points as compared to the fourth quarter 2022. Our strong financial performance continues to drive growth in cash flow and a reduction of our net debt leverage. Net cash provided by operating activities increased 74.7% to $132.1 million as compared to the fourth quarter 2022, we reduced our net debt to adjusted EBITDA leverage to 3.6 times in the fourth quarter versus 6.5 times in the prior year period. For the full year, total revenue increased 21.6% to $2.217 billion, driven by a 24.4% increase in membership dues and enrollment fees and a 15.3% increase in in-center revenue. Net income for 2023 was $76.1 million versus a $1.8 million net loss in 2022. Adjusted net income was $129.7 million, which increased by $171.3 million versus a net loss in the prior year. Adjusted diluting diluted earnings per share was $0.64 compared to a loss of $0.21 per share for the prior year. Adjusted EBITDA increased 90.6% to $536.8 million, and our adjusted EBITDA margin of 24.2% increased 8.8 percentage points compared to the full year in 2022. We are extremely pleased with the Company's financial performance in 2023 with momentum on our side. We are very excited about the opportunities in front of us in 2024.
I will now turn the call over to Bruce.

Bahram Akradi

Thank you, Eric, for your commitment to the company for the past 20 years and for excelling at your new role as Interim CFO.
Let me begin by expressing my gratitude to our 37,000 plus team members at lifetime. Our continued progress and success would not be possible without their passionate and relentless commitment to elevating our brand and delivering the finest member experiences in the leisure industry. We accomplish this through our innovative programming and services designed to delight our 1.5 million members across North America. I'm extraordinarily proud of our accomplishment this past year. 2023 was a great year of outstanding progress for lifetime. We achieved every one of our operating and strategic objectives while exceeding our financial goals and our progress is continuing this year and has set us up very nicely for 2024. Early 2024 has been among the strongest start we have ever seen in terms of member engagement, member visits and member retention.
In terms of financial goals, during 2023, we increased our revenue by over 20%. Even more impressively, our adjusted EBITDA almost doubled compared to the prior year. In addition, our primary financial objective has been to lower our net debt to adjusted EBITDA. We are making progress here, and we expect this ratio to be under three times by the end of 2024.
As it relates to our operating and strategic progress, we continue to elevate our brand, our programming and our member experiences are the finest in the high end leisure industry. The enhancements we have developed in the areas such as the small-group training, pickle ball and Aurora offering have increased the desirability of our brand and the engagement of our members as a measure of remarkable progress we achieved during 2023 by the back half of the year member visits in our same-store clubs has essentially caught up to the very high levels of 2019. The clubs look and feel healthy and energized a trend that we're seeing into the 2024 with the increased demand for our membership. We have now more than 20 clubs with waitlist, and we expect to have additional clubs on the waitlist by the April May time table while establishing waitlist for our busiest club is designed to maintain our extraordinary member experience. It also improves our member retention. We are experiencing record visits per membership as a result of the strategic initiatives we developed and implemented over the last several years. Increased visits per membership translates into higher retention rates and enhanced member satisfaction. We expect to realize the highest retention rates in the history of the lifetime for 2024, like most high end leisure brands, we are not seeing any weaknesses in our demand or traffic so far in 2024 right now, we see no reason to suggest that positive trends we are experiencing today should change going forward. Importantly, we're not seeing any negative impact on our business from the new weight loss drugs. We're all hearing so much about for individuals on such programs exercise and the strength training is absolutely vital for avoiding the loss of lean muscle mass and for maintaining healthy weight long term. We are confident that this mega trend will be particularly positive for lifetime. I will be glad to expand on this with more details during Q&A.
Now, our key financial objectives for 2024 are first to deliver double digit growth for revenue and adjusted EBITDA. As stated in our earnings release this morning, we are guiding to a revenue of $2.46 billion to $2.5 billion and adjusted EBITDA of $595 million to $610 million for 2024. And secondly, to be cash flow positive after all capital expenditure for the year. At this point, we're still expecting to turn positive during the second quarter of this year. Again, we'll be glad to expand on this during Q&A.
Now that Lifetime's recovery is very much behind us going forward. Our intention is to issue guidance on an annual basis, consistent with our high end leisure industry peers, such as Vail Resorts. We plan to visit this annual guidance quarterly and update as needed throughout the year to help with this transition. We're providing first quarter revenue and adjusted EBITDA guidance, and this will be our last quarterly guidance. With that, we're guiding to the revenue of $585 million to $595 million and adjusted EBITDA of $142 million to $146 million for the first quarter over the last 30 years, lifetime has repeatedly demonstrated the ability to respond to major challenges and emerge better and stronger every time we have become a highly coveted high end leisure brand. And as such our growth opportunities have continued to expand as our business has evolved as a highly evolved subscription business, our priority is to be the most desirable brand in the leisure industry by providing the finest destinations, the strongest programming and the best customer experiences to track our success. We constantly measure member engagement, which has never been higher as illustrated by visits per membership on our improving retention rates.
In sum for 2024, we look forward to continue to build upon the progress and the successes what we delivered in 2023 and the momentum we're enjoying so far this year.
Thank you. We're happy to take your questions now.

Question and Answer Session

Operator

Thank you. At this time we'll be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Starkey in one moment please while we poll for questions.
And our first question comes from the line of Megan Alexander with Morgan Stanley. Please proceed with your question.

Megan Alexander

Hi, good morning. Thanks very much, Brian.
I wanted to ask about membership that you talked about early '24 being amongst the strongest start in terms of engagement visits, retention. I guess looking at the fourth quarter, where you ended from a membership perspective, it does look to be below what historical seasonality would suggest. So maybe can you just walk us through how 4Q played out relative to your expectations, both from what you're seeing in terms of churn and new joins and then what you're seeing so far in 2024?

Bahram Akradi

It's a great question, Meg and good morning, so the fourth quarter there was just slightly above our expectation in the net memberships. The Our expectations are basically, as we've stated over and over, is focused on really trying to get the right balance of the membership so we can deliver the right experience in the clubs. Q4 of this year, everything was as expected or slightly better as I mentioned. However, we had more and I like this versus like 2019. We had way more club openings in the fourth quarter there. So it offset it some of the memberships that they drop the seasonal drops that comes from on the September to December, but everything is completely in line and again within our expectation except other. And then the same thing beginning of the year are beginning of the year is in up slightly above our expectation in terms of the net membership gain, and that is truly the name of the game in our business. Really the net membership is how many memberships are dropping out, how many coming in and finding the right balance there to make sure you don't oversell over crowd. The clubs you don't you don't you don't pinch the experiences. So we constantly manage that as diligently as we can do across all the different centers.

Megan Alexander

Really helpful. Thank you. And maybe as a follow-up. Can you just talk about the openings for the year? I think you said nine maybe help us with how many of those are asset-light versus some of the more suburban heavy build that build-outs.
And then just related to that, I think on the last quarter call you you may need more clubs if we're doing more asset-light to get to a similar revenue number. I think this nine to 10 is a bit below what you've been, what you've been doing.

Bahram Akradi

So maybe just help us understand what the offset is there yes, it's just a little timing on getting the projects through the construction phase approval phase. We actually have pretty front loaded this year. So we have about half a dozen clubs that we opened early, we have a total of about nine 10 clubs. And I think that the one thing I would tell you is that when you guys this is the challenge that we've talked about with our business is that like just asset light doesn't mean there are smaller like as an example, we have we're opening two clubs this year Harbor Island and Droid in Atlanta. These are full sized clubs. There are 90,000 indoor outdoor tennis pickle ball of 900,000 square feet total assets, indoor plus the extra external but they were asset light. And we got these back from landlords in particular, where from a different league, they gave us nice T I's and then we're spending maybe another $10 million or $15 million bucks for each one out of our pocket, all, but they're not small clubs. And then there are some clubs that like 40 to 60,000 square foot facilities and there's a half a dozen clubs, four five clubs that they're opening right now early this year. And these are big clubs. These are big, big traditional facilities of that. We had started building last year and they just opening a lot look as we go through the balancing of the CapEx, you will see bunch of the CapEx last year was for getting these clubs are launched are the bulk of the money was spent now they're just going to open and we have a club like Arden Arden in Sacramento, California, and that facility, again is a large facility, but is again, we'll show up as an asset light. So asset light doesn't mean necessarily they're smaller. It just means that we got into it with less than $60 million, $65 million of our capital upfront before the sale leaseback.

Erik Weaver

Yes, if I could add to that just from a square footage standpoint, just to add to that last year, we opened up 800,000 square feet, and we intend to do the same or more of this year.
So just to add to that point.

Megan Alexander

Thank you.

Operator

Our next question comes from the line of Chris Carril with RBC Capital Markets. Please proceed with your question.

Christopher Carril

Hi, thanks. Good morning. So Brian, maybe can you talk about some of the trends that you're seeing in your newer markets versus your legacy markets?
You know, if you could touch on what you're seeing from the perspectives of revenue per center member visits in those different markets? That would be helpful.

Bahram Akradi

Yes. So let's talk about my separate clubs from markets. Newer clubs opening up there. They're opening up with a faster ramp, the fastest ramps we ever have had in the history of the Company, they're opening up and we're pretty much cash flow all positive in the at the center level and contribution margin at the center level of like within 60 days, 90 days is much faster than they used to be on a contribution margin basis. The best results, the revenue per square foot. However, you want to look at it rent for the asset, the average membership price, all of those are higher than the traditional clubs where we have the legacy large amount of legacy membership where we have told you guys repeatedly while we are raising legacy prices, we don't do it all at once. And we are very thoughtful of the customer reaction to how we treat them in this matter. So on the new clubs are breaking records one after another in terms of how they are getting and they are getting opened up. We just opened Red Bank. Our New Jersey yesterday would be brand new records and everything. So we are really, really thrilled about the way every other than that. The business is working. The older clubs. We spent significant amount of time money and energy over the last two years. I'm in really modernizing and updating those clubs. So they can deliver the same experience in the same programmings as we're doing in our brand-new class of. We spent the bulk of that money over the last 24 months of the results of that is that they're all having that was their best same stores on a general basis. And generally speaking, those older clubs are doing better than they ever have as well, and they're continuing to continuing to accelerate in their in the ramping out there and some of them I know some of the older clubs are like the West just their say, asset Garden City. These type of clubs are a way above where they used to be, and they are doing numbers as good as all the record-breaking home clubs that we are opening. And so I just really across the board, we're not seeing any store that our trends are are less on performing clubs of the past. And when we're digging in on those and where we spend very methodical energy on identifying the top 25, what we do right there, the bottom 25, but we're not doing great there. And we break it down the way. That's where we have the opportunity in just our own execution is not the market is not outside forces is just our own on lack of precision in execution in some of those markets, which is then we work really, really hard to sort of trying to figure out how we problem solve. But the new business model this is the most important thing, the most important takeaway for all of you, the new business model, the positioning of lifetime as the higher end leisure company having the most engaged customers that we have ever had having the most visits per memberships that we have ever had. The new model is far superior to anything we had ever executed over the last 30 years.

Christopher Carril

Got it. Thanks for all that on. Then on the center operations expense, can you provide maybe a little bit more detail on what drove that lower as a percentage of center revenue in the 4Q.

Erik Weaver

I mean, even lapping some of the costs coming out in the 4Q of 22, you were still able to see some good leverage on that line. So hoping you could expand a little bit more on that center of leverage and to what extent you expect this to continue into '24?

Bahram Akradi

And so we we expect to have our EBITDA margin hovering between 23% and 23.5% and 24.5%. Now that doesn't seem like a big margin, but it is quite a bit when you actually look at the numbers that 1% up or down, and that's the difference in like.
Okay. The timing of the clubs, you open a bunch of clubs. At the same time, you have a little bit do you have to pre hire everybody, you're taking all that expense, you open the clubs. So then really is we just we're buying, we're buying a little bit of buffer for that as we get the clubs more caught up in reramp. So this is another super important takeaway for all of you. We we're misunderstood beginning of last year in our advisor. As I brought up to you guys and repeatedly explained, we were and re-ramp in our clubs and most clubs, the burden every ramp stage today that re-ramping of the clubs is probably 90% done, but they're not 100% done. So you're going to see throughout the year the impact of that catching up. So this this levels of EBITDA margin, this 24%, give or take half a percent is where I would recommend someone to target in their modeling I wouldn't go much higher because sometimes we do deliberately decide to make additional investments to make sure the experience with state top-notch. And so that's really where what I can tell you. So I don't I don't see a particular shift in anything we did is just naturally the business caught up in a more news coming in. The clubs are re-ramping and producing and we're spending more money, as Edmond mentioned to you guys. And we will continue to spend more money on programming on pickle ball pros, pickle ball leagues on small group classes we're adding, we're paying more to the top end stars that would people love to follow. So we're going to continue to invest to deliver the highest experiences. And then the offset of that. Of course, when you're delivering that you end up clubs on a waitlist, you have the ability to charge exactly what you need to charge to make sure you can get the right experience in there and the margin will come right through.

Christopher Carril

Great. Thanks so much.

Operator

Thank you. Our next question comes from the line of Alex Paris with Bank of America. Please proceed with your question.

Alexander Perry

Hi. Thanks for taking my questions and congrats on a strong quarter and finish to the year. I guess just first, can you talk about your pricing outlook on especially in light of a large amount of clubs being on wait list, what is your expectation on where pricing could go versus the $183 of average monthly dues you did in 2023.

Bahram Akradi

So I'm going to start, I'm going to give it to Eric and Danny to chat about this data on the arm forecast and updates all day long. So you should you should kind of think about it in two major categories. We have done the bulk of repositioning for our company over the last couple of years. And that means we need to move the clubs other the middle level price points, get them to the high end and make sure the experiences matches and to make sure lifetime homogeneously is a higher and leisure brand in it in athletic Country Club space. Most of that is done. The next piece is we know we feel a little pressure on the on the club utilization at that point or do we add another $10 a month or $15, $20 a month at the rack rates we're almost forced sometimes to add that price to make sure the club doesn't get overcrowded. And then the way we're managing it now is we basically quickly for the club on a waitlist and then we can manage to weight this managed to sign up on and then be condemned because okay, maybe we need to go from to 49 to 59 or two 59 to 69. So that's really I would say the bulk of it is done the new changes to the rack rates, new rack rates would be modest changes going forward necessary by all overs over demand, right? But it will be modest and then you will you should expect because of what we have told you when we told you guys middle of last year, we have about $17 million difference between the customers who are not paying the rack rate if all of unpaid the rack rate of $17 million a month arm were never going to take that all those ones were going to just bleed data being sold silver slowly. So again, the customer experiences are not like we're gonna more where we're taking advantage of the situation. So that's going to come in. But some of it with the churn when somebody drops in at one 80 to the next person comes in up to 20 to 30. That's that's going to continue to kind of lift a little bit.
And then on the other piece of it is there were small legacy home price increases. So I expect we see more like in a typical year, not 2024, we will have is still because of this tail end of the re-ramp, we will have a bigger same-store. But going into '25, '26, '27, I expect that 3% to 4% same-store growth opportunity.
Just as this pricing thing, just work its way through the pipeline, if that helps you at all.
Yes, that's incredibly helpful. And then my follow-up is I just wanted to ask about the strategic initiatives. Are there any new strategic initiatives we should be thinking about increased member engagement beyond what you've already talked about, how you've talked about pickle ball, small format group trade. He started to talk about a new food offering or me or just any new strategic offerings that we should be thinking about that that should help drive 2024? Thanks.
Yes. So I don't so the everything you're thinking about '24. So we we are doing sort of a revolutionary change like we did with DPT. with our food. Our food was really playing. We were, as I mentioned to you guys, we played offense coming out of COVID on and though regional play offense in our food, the food was playing defense. It was unimpressive. I was for the most part, and I don't want to say this is across all the systems, but generally speaking, a very uninspiring, very boring on just kind of defensive actions, and that was the 2024 initiative we just launched beginning of this year. So the freedom and creativity, we're allowing the clubs to a lot of kind of protein tests provide of suggestions and offers. We're having a really, really enthusiastic launch with this is going to take months and months and months before you're going to see meaningful material numbers but I expect we're doing it's 10%, 15%, 20% better on our on our FNB. by the back half of the year than we are doing right now. We're seeing the lift start, but it's going to be kind of slow and gradual. Miura is a huge opportunity for particularly lifetime. We have exactly the right customer base in our clubs and one of the mentions, as I mentioned, I wanted to expand on was the of the weight-loss drugs. This is not this is going to remain a mega trend. It's going to stay. It's not it's not for and is particularly not on the it's not a negative for exercise because you absolutely need to combine the proper weight training and nutrition with these drugs, if you wanted to work, they will work. They are they do they will stay. But just like everything else, it's a tool people can use the tool, the wrong way people can use the tool the right way if they use the tool the right way, the exercise business is going to get a win out of it. However, lifetime is particularly in the right spot because our customers paying two to $300 a month for their membership. The weight loss customer is spending $500,000, $600,000 a month on this drug. They are going to want they're right professional facilities and professional personal trainers and nutrition is to help them with the augmentation of the big investments we're making in that some of these people would feel comfortable going to clubs initially now that they get a little head start, they lose 15, 20, 30 pounds. They get they get more comfortable coming in. And not only that they also start saying, hey, should I am losing weight, but I'm also becoming skinny fat to put it mildly. And then then they really have all the elements needed to go to a go to a right place. And then lifetime is uniquely positioned again because we have many local in every market. We have facilities where we can launch New York clinics for longevity for addressing this weight loss trends, the peptide, all of that there is also regulations against that. A lot of people are trying to do this online across states that the expectation is that clearly you're going to have to visit the doctor in your states. And again, we are so perfectly suited with the facilities. We have the clinics that they're already embedded in almost every market. We have at least one or two facilities that have built in clinics in them. So we look at this as nothing, but upside.

Alexander Perry

Perfect. That's very helpful. Best of luck going forward. Thank you.

Operator

Thank you. Our next question comes from the line of Brian Nagel with Oppenheimer & Company. Please proceed with your question.

Brian Nagel

Good morning, Matt. Morning, nice year.

Erik Weaver

Thank you so much.

Brian Nagel

Eric and Danny, welcome to the call.

Bahram Akradi

Thank you.

Brian Nagel

So I've got a couple of questions on I guess, more quantitative in nature, but your blog, we talked a lot about you mentioned on the call today. The plan to get to free cash flow positive for the year starting in the second quarter. Can you just go through? And I know this is maybe a bit of a follow-up to one of the prior questions, but just the building blocks of that you're particularly with lifetime still in here in 2024, you're still pursuing a relatively aggressive expansion plan. But how do we how should we think about the building blocks to get to that, that free cash flow positive in Q2 and beyond?

Erik Weaver

Yes, Brian, this is Eric. I can take that. So I mean, as we kind of mentioned our adjusted EBITDA, call it 600, right, which we expect probably about another 130 for debt service. When you account for our non-cash rent, that that's going to get up to about $500 million of cash before CapEx. So that's going to give us a $500 million of capital to deploy and in our pipeline that we have planned that shows us that gets us to that free cash flow. That pipeline is going to deliver that double-digit top and bottom line that we talked about. So it is math and the math works and we've got it planned out.
So the $500 million is mentioning, we'll probably spend roughly $150-ish, give or take $10 million, $15 million of that in modernization of our facilities, a CapEx for technology, et cetera, right? And that leaves the call it three 2330 that can be purely applied to future growth capital. And when you start thinking that of some of this assets are kind of upfront leases where we're getting some TI.s and then we put some of our capital plan for those type of clubs. I would put $10 million, $15 million in on average of if we take a club if we build it ground up for $65 million, take it back to sell leaseback at $50 million now we still have $15 million. It's just upfront loaded. This is really important for all of you guys to sort of understand the beauty of our position right now. But when we have the pubs that we have, the clubs that are committed on an asset-light basis to a landlord, they have a certain expectation of when the opening they're providing their TI., we're putting the money and we're pretty much locked in. But the good news is the investments is a small when you look at the ones that we're doing ground-up, that was $60 million, $65 million of upfront spend and then go into sale leaseback. Now the 100% control of that is in our end, we own the land, we own the construction company. We have the GC. We can decide exactly when we want to start that. So our commitment to you guys is that hey, we're going to deliver double digit top line and bottom line, and we're going to manage this amazing cash flow. And then we can I mean, next year, we're going to generate more than $330 million. That will allows us to put deploy more capital our two for growth. So we feel really solid about what we're telling you here.

Brian Nagel

Is that helpful, very helpful, broadliner. So let me once that's helpful. Let me ask another question or I guess it's a follow-up to that. But yes, of course, we've been watching that business sort of, say, develop, evolve out of the COVID crisis. I know we've talked you mentioned this, I think, in your prepared comments, but I'm about that I called I called reported was a slack that we call the ongoing ramp re-ramp sort of save these costs because you look at the centers now again, forgetting or putting aside for a second, the new centers, you'll be opening '24 and beyond, what's still the incremental EBITDA. So it could get and I've asked this in perspective, have you been for all intents purposes below what your EBITDA expectations for the last several quarters now. But as we look at the base of centers now, what do you what do you view as incremental EBITDA that could come as a result will come just from the centers you have.

Erik Weaver

And Ryan, this is probably one of the most stupid questions that any investor. Any investors should ask and then get the full detail and really modeled this out. But really the way we look at it and when we went private with the how the private equity shops looked at this.
Okay. How many clubs do you have, if you don't if you complete what you have under construction and don't build anything new, what will be the EBITDA, you can be you can sort of rough and tough back-of-the-envelope except about $100 million to $150 million of incremental EBITDA that will come if you ever stop development and let everything that is left completely mature out. That's that's the that's the kind of a miss missing linking here in people calculating rate of return. And the way that Eric, Danny and I are thinking about this as we go forward is to provide you guys. Hey, here we have X amount of dollars deployed at the end of 2023. We expect that at maturity give us two more years on all of that investment. We expect the return to what we expect this level of revenue and EBITDA on that bucket. Now we're going to spend $400 million. I'm just giving this as an example of $250 million, $400 million of new net capital of this. This year. And this much including leverage, Weatherford's capitalized rents or whatever. And then you can expect such as such revenue and return on that over the next three years. So that's the way we need to kind of translate our business in the future so that this piece is not misunderstood, but roughly $100 million to $150 million of incremental EBITDA would be if we just the clubs are opening, let's say, by the first half of the year, lead lead all of these clubs mature are you can add we can add that number, you can be $750 million of EBITDA.

Brian Nagel

Yes. Very helpful. Congratulations. Good luck. Thank you.

Bahram Akradi

Thank you so much.

Operator

Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed with your question.

John Heinbockel

But I wanted to start with can you talk a little bit about the pipeline? I know you look at right, the battleships, the takeovers, urban residential and suburban mall writing about those four. What is the pipeline of projects that you're looking at look like, right in each of those four? And is the idea going forward that you sort of want to do 50% capital light and maybe not so much projects, but well, I guess projects 50% capital light and 50%, not capital light. Is that is that the idea so that you spend $500 million or so in total CapEx?

Bahram Akradi

Yes, it's a great, great question. So look, here's what I believe. And I'm right now currently in discussions for sale leaseback with certain entities. And there is a couple of different ways to answer your question. I want to be. I want to be full detail on this. So we have at least 10 sites that are under contract land paid for permits are in process. So we can start the ground up facilities. And I want to start changing the term from Battleship because what happens is people think that if we take over 120,000 square feet club and an asset-light basis is no longer a battleship.
So let's just talk about ground-u p versus non ground-up. And so when we looked at the ground-up assets from there currently and in the past. How we've done does is we have bought the land. We've built them out. We spent $60 million, $65 million. What do today's dollars, $70 million bucks to build them out and then we take out and opened $45 million, $50 million, $55 million of that and sell leaseback or after the club is open. We also have had situations where the landowner. Our landlord has said, okay, we will we will buy that soon as 60 days after your open. They have a binding LOI. They'll take it from us. And I when we when we are able to pay off all the all the bills and get them cleanly in waivers on that. The other way to get them done is to actually just do like we put up $10 million, they put out $50 million. We put up the last $10 million and we have a structure that is sort of a sum some mixture of at least upfront all and go forward. We're working on all these different options that we have in a pipeline basis, John, we have enough deals in the pipeline that we can start as many as does that we want and we need to accomplish our well. We just literally have 100% flexibility there.
Now on the other side, is a little more opportunistic. And I am going to be after today after all these calls, meetings, et cetera, going to be on the plane flying out for a couple of days I'm looking at assets, cut two or three of them are things that we can take over. We can spend some money, remodel and launch. So there and then there are we discussing people is an office building is another market where it's another huge growth opportunity. You have a new office building. You have to revitalize this thing. You need the you need a game changing. You can have your own digital fitness center in there that nobody goes to. You need a branded experience inside of that, like people need the branded experience in the high-rise apartment buildings and there are just enough deals in discussion and pipeline, John, that I don't I do not see a scenario where we cannot deliver 10 clubs a year and 800,000 to 1 million square feet per year. That's the way I see it. Now the makeup of that, and I don't want to tell you it's going to be this makeup or that makeup? Because then I then it looks like we we said something we did something different. I think we can you can expect about 800,000 to 1 million square feet of new assets coming online per year and the return on them is all pretty much the same. We target high 30s. He's our IR are on our net dollar invested. So if we after sale leaseback gets to the same number and if this nice upfront rest of target, we're looking at a 35% plus IRR on the dollars we invest.

John Heinbockel

That's great. I'm wondering what other question or opportunity, I think to look at incentive revenue, right? You think about wallet share, right with your premium households I mean, how do you think about growing that? Because I know there's a big opportunity to do that. You probably there's some holes, but I also think you haven't marketed it aggressively, I don't think so to those existing households. So how do you attack that?

Bahram Akradi

And when, yes, listen, if you have something worth purchasing or service worth taking our customer will do it. So it's our own lack of execution when the customer is buying from us.
So to just illustrate that to you, as I'm taking through the top 25 bottom 25 clubs in execution. I'll give you just an example of CapEx. Some clubs are selling at $30 a customer. Some clubs are selling six. So if we're selling $6 a month per customer. What we're doing is we're just making sure the customer doesn't walk into that Cafe. We are turning them off the services flow. The food is an exciting. It's not thrilling. But then we have examples like Miami falls or West Palm Beach where we are delivering the right experience and the numbers are just dramatically different, right. So at the end. But the only thing I can tell you is that you can sit back and I am proud of my team once you guys understand, we we we got hit by a tsunami or hurricane a tornado all at the same time at 2020. It's been a sequential and methodical progress. First, we had to get the traffic and dues and then we have to work the next most important thing, reinvent our personal training. We had in January, we had 2,500 applicants for our personal training department versus 11 to 1,200 the year before lifetime takes it takes time to build the brand for the customer to call. So we fix PTPT. is a great progress. We are having record weeks right now as we're going forward from now, we now we're working on our cafes. Cafe will take, as I told you from beginning to end the year Mira and then one other area. We have not done it. It all even a thoughtful job in the past is our shop is what we actually package experience we provide for people buying lifetime branded coatings, LTH. nutritional products, et cetera. All of that now has been bundled up on their one superb executive of the company and chemo, Al and his team. We are we are working on that again. I wouldn't go change the numbers, John, for next quarter the quarter after, but I expect us to deliver of sort of the incremental revenue opportunities to our shops through the aura tourist cafes to spas. We have enough we have enough tailwind this year to deliver the numbers we delivered. We just gave you what we gave you on guidance for the year and for the quarter there. That's just the tailwinds of the things we have done. It does not require the implementation of the things I just mentioned to you to get those numbers, but we want to get those things rolling. So we have enough momentum into them by the fourth quarter this year so then we have set ourselves up properly for '25 and going forward. That's really the way we have tons of opportunities yet left in our own execution. I emphasize we do a lot of things.

John Heinbockel

Great. And we have a lot of opportunity to improve our execution. John, thank you.

Operator

Thank you. Our next question comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question.

John Baumgartner

Cory, thanks for the question and maybe I'm wrong. I wanted to ask about the digital strategy, the digital and I hold really bottomed out in 2023.
It seems I'm curious how you're thinking about digital as you're gaining visibility into the post-COVID world post COVID activities.
How are you thinking about digital engagement at this point? Are there tweaks to the strategy going forward? Is there a need to invest or manage differently in regards to digital? Thank you.

Bahram Akradi

As a great question were we are execution there. The goal is if you look at the digital companies that everybody thought there, the Amazons of the world as a game changer, you have to take a look and see where they're at today. And the reality is I don't think that's a sustainable business. However, providing digital option to all of our customers is a must. And so therefore, we are 100% committed. There is massive initiatives in line. If you look at our app today, it basically provides everything from podcast, the best content, the best information it has best on-demand, so sort of exercises and a very, very robust streaming and everything else you would ever need. So what we haven't done yet is we haven't decided to kind of robustly market that and create the kind of, I would say, the two options of the one that they pay a certain amount a month, $3 a month or the freemium option for lifetime. This is the byproduct of what we have to do for our access customers. So we have every option. So we choose to take this thing to where we have millions and millions of incremental subscribers that they're not paying anything, but they have access to our brand and some of the content and then they can do other things they can shop online with us, et cetera. That's within our decision bandwidth. And I can I'm not going to expand more on it. All I can tell you is obviously you should expect we're thinking through all these things. And at the right time, we deploy the right strategy as well.

John Baumgartner

Thank you.

Operator

Thank you. And our last question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question.

Simeon Siegel

Thanks, morning, guys. Nice job and hope you're all doing well.

Bahram Akradi

Thank you.

Simeon Siegel

Samir Lam from really great fee increase engagement stats and the retention was fantastic. Could you quantify that at all where we now for retention versus pre-pandemic to your point? And then how does that play into general membership expectations for the coming year? And maybe what are you expecting for membership growth embedded in that full year revenue guidance?

Bahram Akradi

Yes, those are two again, very astute questions, Simeon, first of the biggest in the K there of the desirability we offer is that we our customer wants to stay right. So I have been I had been surprised in the persistence of a higher attrition rates than 2019 in 2023, early half of the year that was listed in 22. It was way higher despite the fact we don't have sales. We have promotions, a customer joins on their own merit, but then we saw that number just consistently come down. This is the attrition rate. And now from here going forward, we want to refer to this as retention, which is basically the inverse of that number. So up in the fourth quarter there of a back half of 2023 we start seeing kind of beating 2019, very nice to be beating 2022. But now we are projecting potentially in the 90% range of 2019 and 80% of at 80 ish percent of 2022 of 2022, '23. So we know when we go this year, we can have attrition rates. It could be almost 20% better than last year. So these trends are right now, again, attrition rate, Simeon is a couple of months ahead. So right now, if you came in today and put your at your notice to drop your membership, you're effectively an April attrition rate. So we can see that number forward or any trends are very, very solid. I expect us to the big number for me, the big behaviors, we'll end up the year with 29 something attrition rate, which would be the historically best attrition rate in the history of the Company ever.

Simeon Siegel

Great. And what was your other question manager thinking about?

Erik Weaver

Yes, exactly. So just within so I think the I think the reshuffling of the business, I think we are within the last honestly, last 10% of the re-ramp. And therefore, I think from here going forward, I don't expect the membership. We don't expect to give up memberships to get the dues, if you know what I'm saying to you. So we expect to see a modest membership gain on a regular basis going forward for the year.

Simeon Siegel

That's great.
Thanks.

Bahram Akradi

From that and look for the rest of year. Thank you so much my friend.

Operator

Thank you. And we have reached the end of the question-and-answer session, and I'll now turn the call back over to CEO, Rob McNally for closing.

Bahram Akradi

All right. I just wanted to thank all of you guys for your very, very diligent Q&A and care that you have for the Company. I am grateful to all of our team, as I mentioned early in the call for their passion and commitment, and we're looking forward for a great year. So hopefully, we're looking forward to having you guys and just about 60 days again and continue our progress forward. Thank you so much.

Operator

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.