Planet Fitness, Inc. reported sales grew 27.6 percent in the second quarter that ended June 30, with system-wide same-store sales increasing 8.7 percent on strong member growth. The fitness chain nonetheless slightly reduced its growth targets for the year due to higher new store construction costs and increased interest rates.

“Our judgment-free, high-quality, and affordable fitness experience continues to resonate with consumers as all generational groups have surpassed their pre-pandemic penetration levels. More of our members are working out more frequently, previous members are rejoining at a faster rate than they did pre-pandemic, and they’re staying longer as Q2 was our eighth straight quarter with lower year-over-year cancellation rates,” said Chris Rondeau, chief executive officer. “Despite continued strong member growth, as a result of the compounding effects of higher new store construction costs and increased interest rates, we are reducing our 2023 outlook for placements of equipment in new franchisee stores to approximately 140. While we are bringing down our near-term store growth forecast due to external headwinds, the fundamentals of the business remain strong, as evidenced by our Q2 results, and we repurchased $100 million in shares during the quarter, reflecting our strong balance sheet and confidence in the future.”

Second Quarter Fiscal 2023 Results

  • Total revenue increased from the prior year period by 27.6 percent to $286.5 million;
  • System-wide same-store sales increased by 8.7 percent;
  • System-wide sales increased $128 million to $1,147 million, from $1,019 million in the prior year period;
  • Net income attributable to Planet Fitness, Inc. was $41.1 million, or $0.48 per diluted share, compared to $22.3 million, or $0.26 per diluted share, in the prior year period;
  • Net income increased $19.1 million to $44.2 million, compared to $25.1 million in the prior year period;
  • Adjusted net income increased $23.8 million to $57.7 million, or $0.65 per diluted share, compared to $33.9 million, or $0.37 per diluted share, in the prior year period;
  • Adjusted EBITDA increased $29.8 million to $118.9 million from $89.1 million in the prior year period;
  • 26 new Planet Fitness stores were opened during the period, including three corporate-owned and 23 franchisee-owned stores, bringing system-wide total stores to 2,472 as of June 30, 2023;
  • Repurchased and retired 1.4 million shares of Class A common stock using $100 million of cash on hand; and
  • Cash, cash equivalents and marketable securities of $418.9 million, which includes cash and cash equivalents of $236.1 million, marketable securities of $120.3 million and restricted cash of $62.5 million.

Operating Results for the Second Quarter Ended June 30, 2023

For the second quarter 2023, total revenue increased $62.0 million or 27.6 percent to $286.5 million from $224.4 million in the prior year period, which included the impact of the system-wide same-store sales growth of 8.7 percent. By segment:

  • Franchise segment revenue increased $16.3 million or 19.7 percent to $98.8 million from $82.5 million in the prior year period. The increase in franchise segment revenue for the second quarter of 2023 was primarily due to an $8.1 million increase in franchise royalty revenue, a $3.4 million increase in National Advertising Fund (NAF) revenue, a $2.9 million increase in equipment placement revenue, and a $1.1 million increase in franchise and other fees. Of the $8.1 million increase in franchise royalty revenue, $4.5 million was attributable to a franchisee-owned same-store sales increase of 8.6 percent, $2.0 million was from higher royalties on annual fees and $1.6 million was attributable to new stores opened since January 1, 2022. The $2.9 million increase in placement revenue was driven by higher existing equipment placements in the three months ended June 30, 2023, compared to the three months ended June 30, 2022;
  • Corporate-owned stores segment revenue increased $12.3 million or 12.1 percent to $113.8 million from $101.5 million in the prior year period. Of the increase, $7.1 million was from the corporate-owned store same-store sales increase of 10.2 percent, and $5.2 million was from new store openings since April 1, 2022, and the April 2023 acquisition of 4 stores in Florida; and
  • Equipment segment revenue increased $33.4 million or 82.6 percent to $73.9 million from $40.4 million in the prior year period, driven by $33.7 million of higher equipment sales to existing franchisee-owned stores in the three months ended June 30, 2023. The company had equipment sales to 26 new franchisee-owned stores in both the three months ended June 30, 2023 and June 30, 2022.

For the second quarter of 2023, net income attributable to Planet Fitness, Inc. was $41.1 million, or $0.48 per diluted share, compared to $22.3 million, or $0.26 per diluted share, in the prior year period. Net income was $44.2 million in the second quarter of 2023 compared to $25.1 million in the prior year period. Adjusted net income increased $23.8 million to $57.7 million, or $0.65 per diluted share, from $33.9 million, or $0.37 per diluted share, in the prior year period. 

  • Franchise segment EBITDA increased $11.8 million to $66.1 million. The increase in franchise segment EBITDA for the second quarter of 2023 was primarily attributable to the franchise revenue increases as described above of $12.9 million, higher national advertising fund revenue of $3.4 million, and lower national advertising fund expenses of $1.0 million, partially offset by higher expenses related to equipment placement services of $1.3 million, higher selling, general, and administrative expenses of $1.3 million, and a $3.0 million increase in an estimated liability for a legal matter;
  • Corporate-owned stores segment EBITDA increased $9.2 million to $48.7 million. Of the increase, $7.8 million was attributable to the same-store sales increase of 10.2 percent, and $1.7 million was from new store openings since April 1, 2022, and the April 2023 acquisition of four stores in Florida, partially offset by higher store operation expenses; and
  • Equipment segment EBITDA increased by $6.9 million to $17.1 million, primarily driven by higher equipment sales to existing franchisee-owned stores in the three months ended June 30, 2023, compared to the three months ended June 30, 2022, as described above.

Share Repurchases
During the second quarter of 2023, the company repurchased 1,381,154 shares of Class A common stock for a total cost of approximately $100 million.

2023 Outlook
For the year ending December 31, 2023, the company is updating or reiterating the following expectations as compared to the company’s 2022 results, which assumes there are no material new supply chain disruptions:

  • Planet Fitness now expects new equipment placements of approximately 140 in franchisee-owned locations (previously, it expected around 160);
  • It now expects system-wide new store openings in approximately 160 locations; and
  • It continues to expect system-wide same-store sales in the high-single-digit percentage range.

2023 Growth Expectations Over 2022 Results

  • Planet Fitness now expects revenue to increase approximately 12 percent (previously, it expected 13 percent to 14 percent growth);
  • It now expects adjusted EBITDA to increase approximately 17 percent (previously, it expected 17 percent to 18 percent growth);
  • It now expects adjusted net income to increase approximately 30 percent (previously, it expected 30 percent to 33 percent growth)
  • It now expects adjusted earnings per share to increase; by approximately 34 percent (previously, it expected 33 percent to 36 percent growth), based on adjusted diluted shares outstanding of about 89 million, including the nearly 1.7 million shares repurchased through June 30, 2023.

Planet Fitness now expects 2023 net interest expense to be in the low $70 million range (previously, it expected $75 million). It now expects capital expenditures to increase approximately 40 percent (previously, it expected the mid-30 percent range) and expects depreciation and amortization to grow in the high-teens percentage range (previously, it expected the mid-teens percentage range).

Logo courtesy Planet Fitness