Planet Fitness saw sales jump 19.0 percent in the first quarter, boosted by a system-wide same-store sales increase of 9.9 percent. Earnings climbed 27.7 percent. The fitness chain saw the highest quarterly net member growth since the first quarter of 2020.

The company reiterated its growth expectations for 2023.

“Our strong momentum from the end of 2022 continued into the first quarter, driving membership to more than 18.1 million, which reflects the company’s highest quarterly net member growth since the first quarter of 2020. Our business continues to rebound from the impact of COVID-19 shutdowns with more than 50 percent of our U.S. stores opened prior to 2019 back to or above pre-pandemic membership levels, with member growth driving our 9.9 percent increase in system-wide same stores sales,” said Chris Rondeau, Chief Executive Officer. 

“Our brand’s resiliency despite inflation and other macroeconomic factors was apparent in our first quarter member trends, with all generational groups back to pre-pandemic population penetration levels, a continued overall lower cancellation rate, as well as our perks program offering even more value with discounts to help our members offset increased pricing on everyday items. We believe we are financially well-positioned to invest in growth areas, such as technology and a small dedicated international team, while also returning cash to shareholders, including the $50 million in shares repurchased year-to-date,” Rondeau concluded.

First Quarter Fiscal 2023 Results

  • Total revenue increased from the prior year period by 19.0 percent to $222.2 million;
  • System-wide same-store sales increased by 9.9 percent;
  • System-wide sales increased $147 million to $1,108 million, from $961 million in the prior year period;
  • Net income attributable to Planet Fitness, Inc. was $22.7 million, or $0.27 per diluted share, compared to $16.5 million, or $0.19 per diluted share, in the prior year period;
  • Net income increased $6.4 million to $24.8 million, compared to $18.4 million in the prior year period;
  • Adjusted net income increased $7.8 million, or 27.7 percent, to $36.4 million, or $0.41 per diluted share, compared to $28.5 million, or $0.32 per diluted share, in the prior year period;
  • Adjusted EBITDA increased $13.5 million to $90.2 million from $76.7 million in the prior year period;
  • 36 new Planet Fitness stores were opened during the period, bringing the system-wide total stores to 2,446 as of March 31, 2023;
  • Repurchased and retired 317,599 Class A common stock shares using $25 million of cash on hand; and
  • Cash of $523.0 million includes cash and cash equivalents of $460.4 million and restricted cash of $62.6 million.

Operating Results for the First Quarter Ended March 31, 2023
For the first quarter 2023, total revenue increased $35.5 million or 19.0 percent to $222.2 million from $186.7 million in the prior year period, which included system-wide same-store sales growth of 9.9 percent.

By Segment
Franchise segment revenue increased $12.6 million or 15.7 percent to $92.7 million from $80.1 million in the prior year period. The increase in franchise segment revenue for the first quarter of 2023 was primarily due to an $8.0 million increase in franchise royalty revenue, a $2.8 million increase in National Advertising Fund (“NAF”) revenue, and a $2.6 million increase in franchise and other fees, partially offset by a $0.7 million decrease in equipment placement revenue. Of the $8.0 million increase in franchise royalty revenue, $4.9 million was attributable to a franchisee-owned same-store sales increase of 9.7 percent, $2.4 million was from higher royalties on annual fees and $1.9 million was attributable to new stores opened since January 1, 2022. Partially offsetting the royalty revenue increases was a decrease of approximately $0.9 million, primarily due to the stores acquired in the acquisition of Sunshine Fitness Growth Holdings, LLC in the first quarter of 2022 (the “Sunshine Acquisition”) becoming corporate-owned stores beginning February 10, 2022. The $0.7 million decrease in placement revenue was driven by lower new equipment placements in the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Corporate-owned stores segment revenue increased $29.7 million or 39.0 percent to $105.9 million from $76.2 million in the prior year period. Of the increase, $23.5 million was attributable to the February 10, 2022 acquisition of 114 stores in the Sunshine Acquisition, $3.2 million was from the corporate-owned store same-store sales increase of 12.1 percent, and $3.0 million was from new stores opened since January 1, 2022; and

Equipment segment revenue decreased $6.8 million or 22.3 percent to $23.7 million from $30.4 million in the prior year period, driven by $8.5 million of lower equipment sales to 18 new franchisee-owned stores in the three months ended March 31, 2023 compared to 33 new franchisee-owned stores in the three months ended March 31, 2022, partially offset by an increase of $1.8 million in sales to existing franchisee-owned stores in the three months ended March 31, 2023.

For the first quarter of 2023, net income attributable to Planet Fitness, Inc. was $22.7 million, or $0.27 per diluted share, compared to $16.5 million, or $0.19 per diluted share, in the prior year period. Net income was $24.8 million in the first quarter of 2023 compared to $18.4 million in the prior year period. Adjusted net income increased $7.8 million to $36.4 million, or $0.41 per diluted share, from $28.5 million, or $0.32 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 25.9 percent and 26.2 percent for the current and prior year period, respectively, and excludes certain non-cash and other items that Planet Fitness does not consider in the evaluation of ongoing operational performance.

Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, adjusted for the impact of certain non-cash and other items that Planet Fitness does not consider in the evaluation of ongoing operational performance, increased $13.5 million to $90.2 million from $76.7 million in the prior year period.

Segment EBITDA represents its Total Segment EBITDA broken down by the company’s reportable segments. Total Segment EBITDA is equal to EBITDA, defined as net income before interest, taxes, depreciation and amortization.

Franchise segment EBITDA increased $4.6 million to $64.7 million. The increase in franchise segment EBITDA for the first quarter of 2023 was primarily attributable to the franchise revenue increases as described above, partially offset by higher NAF expenses of $2.4 million, a $3.3 million increase in an estimated legal liability, and a $2.1 million gain in the three months ended March 31, 2022 on the settlement of preexisting contracts associated with the Sunshine Acquisition.

Corporate-owned stores segment EBITDA increased $10.2 million to $33.5 million. Of the increase, $5.3 million was attributable to the corporate-owned stores acquired in the Sunshine Acquisition and $5.4 million was attributable to the same-store sales increase of 12.1 percent. Partially offsetting these increases was higher selling, general and administrative expense of $0.9 million, primarily as a result of the Sunshine Acquisition.

Equipment segment EBITDA decreased by $3.1 million to $5.6 million primarily driven by lower equipment sales to new franchisee-owned stores in the three months ended March 31, 2023 compared to the three months ended March 31, 2022, as described above.

Subsequent Franchise Acquisition
On April 16, 2023, the company completed an acquisition of four franchise stores operating in Florida for approximately $26.3 million using cash on hand.

Subsequent Shares Repurchased
During the second quarter of 2023, the company repurchased 310,823 shares of Class A common stock for a total cost of approximately $25.0 million.

2023 Outlook
For the year ending December 31, 2023, the company is reiterating the following expectations as compared to the company’s 2022 results, which assumes there is no material resurgence of COVID-19 that causes member disruptions, whether via shutdowns or more stringent mandates that result in a significant change in membership behaviors, or any significant new supply chain disruptions:

  • New equipment placements of approximately 160 in franchisee-owned locations; and 
  • System-wide same-store sales in the high single-digit percentage range

The following are 2023 growth expectations over the company’s 2022 results:

  • Revenue to increase in the 13 percent to 14 percent range;
  • Adjusted EBITDA to increase in the 17 percent to 18 percent range;
  • Adjusted net income to increase in the 30 percent to 33 percent range; and
  • Adjusted earnings per share to increase in the 33 percent to 36 percent range, based on Adjusted diluted shares outstanding of approximately 89.5 million, including one million repurchased shares.

The company expects 2023 net interest expense to be approximately $75 million. It also expects capital expenditures to increase to the mid-30 percent range driven by additional stores in its corporate-owned portfolio and depreciation and amortization to increase to the mid-10 percent range driven by the increase in capital expenditures and a full year of depreciation and amortization of the assets acquired in the Sunshine Acquisition in its results over 2022.

Photo courtesy Planet Fitness