Planet Fitness Revenue Jumps In Q2

Planet Fitness Inc. on Tuesday reported revenue for the second quarter of $181.7 million, up 29.3 percent from the year-ago quarter. System-wide same store sales increased 8.8 percent.

Adjusted net income increased 26.6 percent to $42.0 million, or $0.45 per diluted share, compared to $33.2 million, or $0.34 per diluted share in the prior year period.

Second Quarter Fiscal 2019 Highlights

• Total revenue increased from the prior year period by 29.3 percent to $181.7 million.
• System-wide same store sales increased 8.8 percent.
• Net income attributable to Planet Fitness, Inc. was $34.8 million, or $0.41 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $25.9 million, or $0.29 per diluted share in the prior year period.
• Net income increased 30.9 percent to $39.8 million, compared to net income of $30.4 million in the prior year period.
• Adjusted net income increased 26.6 percent to $42.0 million, or $0.45 per diluted share, compared to $33.2 million, or $0.34 per diluted share in the prior year period.
• Adjusted EBITDA increased 31.1 percent to $76.5 million from $58.4 million in the prior year period.
• 53 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 1,859 as of June 30, 2019.

Adjusted net income and Adjusted EBITDA are non-GAAP measures. For reconciliations of Adjusted EBITDA and Adjusted net income to U.S. GAAP (“GAAP”) net income see “Non-GAAP Financial Measures” accompanying this press release.

“We are very pleased with our second quarter performance, particularly the significant increase in profitability and robust number of new store openings,” stated Chris Rondeau, Chief Executive Officer. “Our group of experienced and well capitalized franchisees continue to successfully execute their development plans, which along with favorable real estate trends, is leading to an acceleration in unit growth. We now expect to open between 250 and 260 new Planet Fitness locations system-wide in 2019, a record for our brand, up from our prior outlook of approximately 225. With the strong returns generated by our welcoming, non-intimidating fitness concept, franchisees are increasingly eager to reinvest in both expanding their geographic footprint and broadening awareness of the Planet Fitness Brand among casual and first time gym users, as well as re-investing in their existing store fleet by re-equipping their clubs with new equipment. I am very proud of all our recent accomplishments and I am confident that the work being done across our system by our franchisees, corporate staff and team members in our stores is setting the Company up for continued success.”

Operating Results for the Second Quarter Ended June 30, 2019

For the second quarter 2019, total revenue increased $41.1 million or 29.3 percent to $181.7 million from $140.6 million in the prior year period. By segment:

• Franchise segment revenue increased $13.7 million or 23.5 percent to $71.8 million from $58.2 million in the prior year period, driven primarily by higher royalty revenue as a result of new stores opened since April 1, 2018, a 9.0 percent increase in same store sales, and a higher average royalty rate;
• Corporate-owned stores segment revenue increased $5.4 million or 15.9 percent to $39.7 million from $34.3 million in the prior year period, $3.2 million of which is from corporate-owned stores opened or acquired since April 1, 2018, and another $1.6 million of which is from same store sales growth; and
• Equipment segment revenue increased $22.0 million or 45.7 percent to $70.2 million from $48.1 million in the prior year period, driven by an increase in replacement equipment sales to existing franchisee-owned stores and an increase in equipment sales to new stores.

System-wide same store sales increased 8.8 percent. By segment, franchisee-owned same store sales increased 9.0 percent and corporate-owned same store sales increased 5.8 percent.

For the second quarter of 2019, net income attributable to Planet Fitness, Inc. was $34.8 million, or $0.41 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $25.9 million, or $0.29 per diluted share in the prior year period. Net income was $39.8 million in the second quarter of 2019 compared to $30.4 million in the prior year period. Adjusted net income increased 26.6 percent to $42.0 million, or $0.45 per diluted share, from $33.2 million, or $0.34 per diluted share in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.6 percent for the current year period and 26.3 percent for the comparable prior year period and excludes certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance (see “Non-GAAP Financial Measures”).

Adjusted EBITDA, which is defined as net income before interest, taxes, depreciation and amortization, adjusted for the impact of certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance (see “Non-GAAP Financial Measures”), increased 31.1 percent to $76.5 million from $58.4 million in the prior year period.

Segment EBITDA represents our Total Segment EBITDA broken down by the Company’s reportable segments. Total Segment EBITDA is equal to EBITDA, which is defined as net income before interest, taxes, depreciation and amortization (see “Non-GAAP Financial Measures”).

• Franchise segment EBITDA increased $9.8 million or 24.5 percent to $49.9 million driven by royalties from franchised stores opened since April 1, 2018, a higher average royalty rate and higher same store sales of 9.0 percent;
• Corporate-owned stores segment EBITDA increased $3.5 million or 23.7 percent to $18.1 million driven primarily by an increase in same store sales, higher annual fees and from additional clubs opened or acquired since April 1, 2018; and
• Equipment segment EBITDA increased by $5.3 million or 46.4 percent to $16.8 million driven by an increase in replacement equipment sales to existing franchisee-owned stores and an increase in equipment sales to new stores.

2019 Outlook

For the year ending December 31, 2019, the Company now expects:

• Total revenue increase of approximately 18 percent as compared to the year ended December 31, 2018;
• Total new store equipment sales in the range of 250 to 260;
• System-wide same store sales of approximately 8 percent;
• Adjusted net income to increase approximately 20 percent as compared to the year ended December 31, 2018; and
• Adjusted net income per diluted share to increase approximately 26 percent as compared to the year ended December 31, 2018.

Presentation of Financial Measures

Planet Fitness, Inc. (the “Company”) was formed in March 2015 for the purpose of facilitating the initial public offering (the “IPO”) and related recapitalization transactions that occurred in August 2015, and in order to carry on the business of Pla-Fit Holdings, LLC (“Pla-Fit Holdings”) and its subsidiaries. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of Pla-Fit Holdings not owned by the Company.

The financial information presented in this press release includes non-GAAP financial measures such as EBITDA, Segment EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted, to provide measures that we believe are useful to investors in evaluating the Company’s performance. These non-GAAP financial measures are supplemental measures of the Company’s performance that are neither required by, nor presented in accordance with GAAP. These financial measures should not be considered in isolation or as substitutes for GAAP financial measures such as net income or any other performance measures derived in accordance with GAAP. In addition, in the future, the Company may incur expenses or charges such as those added back to calculate Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted. The Company’s presentation of Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted, should not be construed as an inference that the Company’s future results will be unaffected by similar amounts or other unusual or nonrecurring items. See the tables at the end of this press release for a reconciliation of EBITDA, Adjusted EBITDA, Total Segment EBITDA, Adjusted net income, and Adjusted net income per share, diluted, to their most directly comparable GAAP financial measure.

Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores. We define the same store sales base to include those stores that have been open and for which monthly membership dues have been billed for longer than 12 months. We measure same store sales based solely upon monthly dues billed to members of our corporate-owned and franchisee-owned stores.

The non-GAAP financial measures used in our full-year outlook will differ from net income and net income per share, diluted, determined in accordance with GAAP in ways similar to those described in the reconciliations at the end of this press release. We do not provide guidance for net income or net income per share, diluted, determined in accordance with GAAP or a reconciliation of guidance for Adjusted net income and Adjusted net income per share, diluted, to the most directly comparable GAAP measure because we are not able to predict with reasonable certainty the amount or nature of all items that will be included in our net income and net income per share, diluted, for the year ending December 31, 2019. These items are uncertain, depend on many factors and could have a material impact on our net income and net income per share, diluted, for the year ending December 31, 2019.