Profits at Planet Fitness, Inc. grew 11.5 percent in its second quarter ended June 30 as sales advanced 5.1 percent. System-wide same-store sales increased 4.2 percent. The budget fitness chain reiterated its guidance for the year.

“Since I stepped into the CEO role in June, I have become even more confident and excited about my decision to join such an iconic brand, supported by a strong foundation and team, a solid base of approximately 100 franchisees, and approximately 19.7 million members,” said Colleen Keating, chief executive officer. “During the quarter, we continued to demonstrate the unique strength of our asset-light, highly franchised business model by refinancing a portion of our debt and entering a $280 million accelerated share repurchase program as we strive to deliver enhanced shareholder value.”

Keating, formerly CEO at FirstKey Homes, continued, “As we enter our next chapter, we are committed to further defining our growth ambition and capitalizing on the meaningful opportunities across the industry both in the U.S. and internationally. This includes maintaining a steadfast focus on delivering an unparalleled member experience, evolving our brand messaging and operating under the principle that when our franchisees win, we win. By doing so, I’m confident in our potential for long-term sustainable growth of stores and members and our ability to deliver significant value for shareholders.”

Second Quarter Fiscal 2024 Highlights

  • Total revenue increased from the prior year period by 5.1 percent to $300.9 million.
  • System-wide same-store sales increased 4.2 percent.
  • System-wide sales increased to $1.2 billion from $1.1 billion in the prior year period.
  • Net income attributable to Planet Fitness, Inc. was $48.6 million, or $0.56 per diluted share, compared to $41.1 million, or $0.48 per diluted share, in the prior year period.
  • Net income increased $5.1 million to $49.3 million, compared to $44.2 million in the prior year period.
  • Adjusted net income increased $4.5 million to $62.2 million, or $0.71 per diluted share, compared to $57.7 million, or $0.65 per diluted share, in the prior year period.
  • Adjusted EBITDA increased $8.6 million to $127.5 million from $118.9 million in the prior year period.
  • Planet Fitness opened 18 new clubs system-wide during the period, including 17 franchisee-owned and one corporate-owned store. As of June 30, 2024, the total number of system-wide clubs was 2,617.
  • Cash and marketable securities of $447.7 million, which includes cash and cash equivalents of $247.0 million, restricted cash of $47.8 million and marketable securities of $152.9 million as of June 30, 2024.

Operating Results for the Second Quarter Ended June 30, 2024
For the second quarter of 2024, total revenue increased $14.5 million or 5.1 percent to $300.9 million from $286.5 million in the prior year period, including system-wide same-store sales growth of 4.2 percent.

By segment:

  • Franchise segment revenue increased $8.9 million or 9.1 percent to $107.8 million from $98.8 million in the prior year period. Of the increase, $6.3 million was due to higher royalty revenue, of which $3.1 million was attributable to a franchise same-store sales increase of 4.3 percent, $1.8 million was attributable to new stores opened since April 1, 2023 and $1.3 million was from higher royalties on annual fees. Franchise segment revenue also includes $2.1 million of higher National Advertising Fund revenue;
  • Corporate-owned stores segment revenue increased $11.7 million or 10.3 percent to $125.5 million from $113.8 million in the prior year period. Of the increase, $6.6 million was attributable to corporate-owned stores included in the same-store sales base, of which $1.9 million was attributable to a same-store sales increase of 4.0 percent, $1.9 million was attributable to higher annual fee revenue and $2.9 million was attributable to other fees. Additionally, $5.1 million was from new stores opened and acquired since April 1, 2023; and
  • Equipment segment revenue decreased $6.2 million or 8.4 percent to $67.7 million from $73.9 million in the prior year period. Of the decrease, $4.7 million was due to lower revenue from equipment sales to new franchisee-owned stores and $1.5 million was due to lower revenue from equipment sales to existing franchisee-owned stores. In the second quarter of 2024, we had equipment sales to 18 new franchisee-owned stores compared to 26 in the prior year period.

For the second quarter of 2024, net income attributable to Planet Fitness, Inc. was $48.6 million, or $0.56 per diluted share, compared to $41.1 million, or $0.48 per diluted share, in the prior year period. Net income was $49.3 million in the second quarter of 2024 compared to $44.2 million in the prior year period. Adjusted net income increased 7.8 percent to $62.2 million, or $0.71 per diluted share, from $57.7 million, or $0.65 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 25.8 percent and 25.9 percent for the second quarter of 2024 and 2023, respectively, and excludes certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance.

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 the company does not consider in evaluating ongoing operational performance, increased 7.2 percent to $127.5 million from $118.9 million in the prior year period.

Segment EBITDA represents the 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 $11.3 million or 17.1 percent to $77.4 million. The increase is primarily the result of a $8.9 million increase in franchise segment revenue, as well as a $3.1 million legal reserve that negatively impacted the second quarter of 2023 and $1.5 million of lower selling, general and administrative expense in the second quarter of 2024, partially offset by $2.2 million of higher NAF expense.
  • Corporate-owned stores segment EBITDA increased $0.6 million or 1.2 percent to $49.3 million. The increase was primarily attributable to $0.8 million from the corporate-owned same store sales increase of 4.0 percent.
  • Equipment segment EBITDA increased $1.4 million , or 8.4 percent, to $18.6 million. The increase was primarily driven by higher margin equipment sales related to an updated equipment mix resulting from the adoption of the new growth model.

Share Repurchase Program
On June 12, 2024, the company entered into a $280 million accelerated share repurchase agreement with Citibank, N.A.. On June 14, 2024, its paid the Bank $280 million in cash and received approximately 3.1 million shares of our Class A common stock, which were retired.

At final settlement, the Bank could be required to deliver additional shares of the company’s Class A common stock back to the business, which would be retired upon delivery, or, under certain circumstances, the company could be required to deliver shares of our Class A common stock or may elect to make a cash payment to the Bank. The final number of shares to be repurchased would be determined based on the volume-weighted average stock price of our Class A common stock during the term of the transaction, less a discount and subject to adjustments under the terms and conditions of the ASR Agreement. The final settlement of the ASR Agreement will be completed during the third quarter of 2024.

The ASR Agreement contains provisions customary for agreements of this type, including adjustments to the transaction terms, the circumstances generally under which the ASR Agreement may be accelerated, extended, or terminated early by the Bank, and various acknowledgments, representations and warranties made by the parties to one another. As of June 30, 2024, approximately $75.0 million shares remain under the company’s 2022 share repurchase program.

On June 13, 2024, the company’s board of directors approved a share repurchase program of up to $500 million, contingent upon, and effective at, the completion of the ASR Agreement, to replace the company’s 2022 share repurchase program.

2024 Outlook
For the year ending December 31, 2024, the company is reiterating the following expectations:

  • New equipment placements of approximately 120 to 130 in franchisee-owned locations; and
  • System-wide new store openings of approximately 140 to 150 locations.

The company is also reiterating the following growth expectations over its 2023 results:

  • System-wide same-store sales in the 3 percent to 5 percent percentage range;
  • Revenue to increase in the 4 percent to 6 percent range;
  • Adjusted EBITDA to increase in the 7 percent to 9 percent range;
  • Adjusted net income to increase in the 4 percent to 6 percent range; and
  • Adjusted net income per share, diluted to increase in the 7 percent to 9 percent range based on adjusted diluted weighted-average shares outstanding of approximately 86.5 million, inclusive of the shares expected to be repurchased as part of the ASR Agreement.

The company expects 2024 net interest expense to be approximately $75.0 million, excluding the write-off of deferred financing costs associated with its debt refinancing transaction. It also expects capital expenditures to increase approximately 25 percent, driven by additional stores in its corporate-owned portfolio, and depreciation and amortization to increase in the 11 percent to 12 percent range.

Image courtesy Planet Fitness