Planet Fitness, Xponential Fitness and Life Time Group Holdings all raised their full-year guidance and reported a strong uptick in revenues and membership growth in the third quarter, although membership activity has yet to return to pre-pandemic levels. Executives on analyst calls said they remain bullish on continued improvement in 2023 despite inflationary and macroeconomic pressures.

Planet Fitness Q2 Sales Climb 58.4 Percent
Planet Fitness’ total revenue surged 58.4 percent for the third quarter to $244.4 million. System-wide same-store sales increased 8.2 percent.

Net income was $26.9 million, or 32 cents per share, rising 54.6 percent from $17.4 million, or 21 cents, from the prior year. On an adjusted basis, earnings jumped 76.0 percent to $38.2 million, or 42 cents, from $21.7 million, or 25 cents. Adjusted EBITDA rose 52.2 percent to $93.9 million.

On a call with analysts, Chris Rondeau, CEO, said the budget fitness chain ended the quarter with more than 16.6 million members, an all-time high, while adding 29 new locations, growing its total gym base to 2,353.

“Member trends remained strong in the quarter with joins back to historic pre-pandemic seasonality,” said Rondeau. “Also, members who are visiting the gym continue to visit more frequently, and cancels are lower than in 2019, which we believe are signs that members are generally more committed to fitness.”

Planet Fitness recently hosted its first in-person franchisee conference in three years with the theme “Unstoppable,” highlighting the chain’s perseverance during the pandemic. Rondeau said, “While the industry recorded that 25 percent of health and fitness facilities had closed due to COVID, given the strength of our model and franchise system, we survived the pandemic without a single permanent foreclosure, emerging even stronger with tremendous opportunity for future growth.”

The company remains focused on increasing penetration across all generations, but its recent push to attract the Gen Z demographic through its High School Summer Pass Program has paid off. A total of 3.5 million teens signed up for Planet Fitness’ High School Summer Pass program, offering free membership to teens during the summer months. When the program ended in August, more than 14 percent of all high school-age teens in the U.S. were pass holders. Rondeau said, “Not only did they enroll in the program, but teens also logged 17 million workouts.”

To date, nearly 300,000 teens and parents or guardians have joined for a total conversion rate of 5 percent, outpacing the conversion rate of a similar program it ran in 2019. Said Rondeau, “We continue to market to them and believe that when they are ready to join a gym, Planet Fitness will be top of mind.”

Among other strategic initiatives, Planet Fitness’ system-wide rollout of its Black Card price increase in May from $22.99 to $24.99 continues to outperform test results. The higher rate and net member growth helped drive the 8.2 percent comp gain in the quarter. Rondeau said, “This helps our franchisees and corporate stores segment partially offset increased operational costs experienced in the last couple of years.”

The percentage of mature stores that have recovered and surpassed previous membership levels remains stable at around mid-30 percent since the second quarter; however, Planet Fitness has geared up its marketing plans for the first quarter, when it typically gets 60 percent of its full-year net membership gains. The period will be the first quarter in four years without interruption from the pandemic. 

Rondeau said Planet Fitness is the presenting sponsor for this year’s Times Square New Year’s Eve celebration, its eighth year in a row, and a kick-off campaign playing to the mental benefits of working out, including “managing stress, improved sleep and a post-workout positive energy feeling.”

Planet Fitness’ updated guidance calls for:

  • Revenue to increase in the high-50 percent range, previously expected growth in the mid-50 percent range;
  • System-wide same-store sales growth in the low double-digit percentage range, in line with previous guidance;
  • Adjusted EBITDA to increase approximately 60 percent, previously expected growth in the high-50 percent range;
  • Adjusted net income to increase in the low-100 percent range, previously expected growth in the low-90 percent range;
  • Adjusted EPS to increase in the mid-90 percent range, up from the mid-80 percent range; and
  • New equipment of approximately 150-to-160 in franchisee-owned locations, previously the company expected around 170 placements, reflecting a worsening of the HVAC supply chain issue.

Xponential Fitness’ Q3 Sales Jump 56 Percent
Xponential Fitness, the owner of a wide range of fitness boutiques, reported revenues jumped 56 percent in the third quarter to $63.8 million. Franchised clubs include Rumble, StretchLab, Club Pilates, CycleBar, Pure Barre, Row House, YogaSix, AKT, BFT, and Stride Fitness.

The sales gains reflect increasing equipment installations and royalties generated from strength in its North American system-wide sales, which expanded 37 percent to $264.8 million, with North American same-store sales growing 17 percent. The North America quarterly run-rate average unit volume (AUV) was $489,000, up 17.3 percent from $417,000 a year ago.

“The consistent growth in our run rate AUVs is a strong reminder that despite inflationary pressures and other macroeconomic challenges, the workouts our franchisees provide across our diverse portfolio of brands remain an integral part of our members’ lives,” said Anthony Geisler, CEO, on a conference call with analysts. “As we continue to open more studios and grow our system-wide sales, our profitability also increases, driven by the high margins our royalties generate.”

The net loss in the quarter totaled $13.1 million, or $1.53 per share, compared to a loss of $8.9 million, or 38 cents, a year ago. The latest period included $13.4 million of higher non-cash contingent consideration expense primarily related to the Rumble acquisition, a $3.7 million increase in impairment of brand assets, and a $700,000 increase in non-cash equity-based compensation expense.

On an adjusted basis, net income was $8.0 million, or 10 cents per share, against a loss of $7 million, or 31 cents, a year ago. Adjusted EBITDA increased to $20.0 million, up nearly three-fold from $6.8 million in the prior-year period.

“As our business continues to grow, we are increasingly reaping the benefits of our asset-light, scalable operating model, providing us with consistent and growing margin performance,” said Geisler. “Considering the macro environment, we’re especially pleased with where our operating margins performed this past quarter.”

Geisler said Xponential Fitness continues to increase membership despite inflationary pressures. In North America, total members for the third quarter increased approximately 33 percent year-over-year to 577,000. Total visits for the third quarter grew 28 percent year-over-year.

Geisler said the average member has a household income of approximately $130,000, and its reoccurring membership fee represents a relatively small amount of a member’s overall budget. Said Geisler, “With membership counts growing and churn remaining low, we are confident in the ongoing health of our membership base and demand for our boutique offerings.”

Regarding growth, Geisler said Xponential Fitness ended the third quarter with 2,485 open studios worldwide, adding 355 studios year-to-date and on track to add 500 in 2022. Geisler said, “In North America, we have over 1,900 licenses sold and contractually obligated to open, along with a replenishing pipeline of organic new studio expansion that offers us four to five years of visibility into our growth.”

Worldwide, the company has almost 1,000 studios it is obligated to open.

Sarah Luna, president, said membership is expected to benefit from new partnerships, including its recent five-year agreement with Princess Cruises that makes Xponential Fitness the company’s first cross-modality fitness franchise to put its brands on a cruise line. 

Last month, four of Xponential Fitness’ brands, Pure Barre, Rumble, AKT, and YogaSix, debuted on Lululemon Studio, offering discounted in-person and virtual classes on LULU’s Mirror platform. 

On Friday, Xponential Fitness announced a partnership with Aktiv Solutions, the fitness equipment manufacturer for hotels, corporate campuses, multifamily housing properties, and universities.

Luna also noted that the company’s boutiques would continue to drive membership in the fourth quarter with promotions and membership engagement activities. She added, “We are especially looking forward to the bump in sales we tend to see around Black Friday and Cyber Monday when studios are running offerings that promote new membership, retail and merchandise sales.”

Xponential’s updated outlook calls for:

  • New studio openings to remain in the range of 500 to 520, or an increase of 53 percent at the midpoint as compared to the full year 2021;
  • North America system-wide sales to remain in the range of $995.0 million to $1.005 billion, or an increase of 41 percent at the midpoint as compared to the full year 2021;
  • Revenue is now anticipated to be $235.0 million to $240.0 million, or an increase of 53 percent at the midpoint as compared to the full year 2021; this compares to previous guidance of $211.0 million to $221.0 million, or an increase of 39 percent at the midpoint as compared to full year 2021; and
  • Adjusted EBITDA is now anticipated to be $70.0 million to $74.0 million, or an increase of 164 percent at the midpoint compared to the full year 2021; this compares to previous guidance of $68.0 million to $72.0 million, or an increase of 156 percent at the midpoint as compared to the full year 2021.

Life Time Group’s Q3 Revenue Climbs 29 Percent
Life Time Group’s revenue increased 28.9 percent in the third quarter to $496.4 million, exceeding guidance that had called for revenue in the range of $490 million to $510 million. Comparable center sales increased 25.6 percent.

Net income was $24.7 million, or 12 cents a share, and included a tax-effected gain of $42.7 million from sale-leasebacks and $5.1 million in tax-effected non-cash share-based compensation expense. In the year-ago period, the loss was $45.4 million, or 36 cents.

Adjusted EBITDA increased 50.9 percent to $71.0 million, ahead of guidance ranging from $65 million to $75 million.

Center memberships totaled 728,729 on September 30, an increase of 9.0 percent from 668,310 on September 30, 2021, and up approximately 4,000 from June 30, 2022.

The company had 156 centers in operation as of September 30, adding five in the first nine months of 2022, with seven more slated to open in the fourth quarter.

“We are right on track with our strategic progress on recovery from the pandemic and poised to go beyond,” said Bahram Akradi, founder, chairman and CEO, on a call with analysts.

Akradi said that Life Time’s priority in seeking to recover from the pandemic was to “strictly play offense and focus on rebuilding our membership dues revenue.” He said that the upscale fitness chain is on a path to exceed pandemic membership dues revenue on a same-store basis in the first quarter of 2023.

Initiatives to drive membership growth have included an increased emphasis on small group training and the launch in 2021 of its ARORA community fitness programs tailored to older members. The company also invested in elevating its certification process to support in-person physical training. Finally, Life Time has positioned its clubs as the national pickleball brand leader in the fitness space, with its clubs expected to have nearly 450 pickleball courts by the end of 2022 and more than 600 by the end of 2023.

With membership recovering, Life Time is now focusing on margin expansion. Akradi said, “We see significant opportunities to expand margins over the next year as we expect to capture the benefit of the higher dues revenue, fine-tune and optimize the rollout of our strategic initiatives and improve the efficiency of our club operations and corporate office. We believe that even with inflation and macroeconomic headwinds, we are well-positioned in 2023 to slightly exceed our 2019 adjusted EBIT margin percentage, excluding the impact of rent expense.”

Regarding its liquidity and balance sheet, Life Time noted it is working with financial partners in the sell-leaseback market with plans to close on additional sell-leaseback transactions during the first quarter of 2023.

Akradi said, “As we finish 2222 and look forward to 2023, it is a challenging macroeconomic environment, but I’m excited about the progress we have made on executing our strategic priorities during 2022 and how we are positioned to drive substantial profitability improvement in 2023. Our business model is highly resilient, and we’re in a great position to continue to deliver a healthy way of life to more members for years to come.”

For the fourth quarter, Life Time projected revenue, net loss and adjusted EBITDA to be in the ranges of $460 to $490 million, negative $10 million to negative $2 million, and positive $80 to $90 million, respectively.

For the full year ending December 31, the company projected revenue, net loss and adjusted EBITDA to be in the ranges of $1.81 to $1.84 billion, negative $26 million to negative $17 million, and $255 to $265 million, respectively. Previously, guidance for the year called for revenue, net loss and adjusted EBITDA to be in the ranges of $1.80 to $1.85 billion, negative $73.6 to negative $55.6 million, and $250 to $270 million, respectively.