Planet Fitness, Inc. reported that total revenue for the fourth quarter increased 1.4 percent to $285.1 million, compared to $281.3 million in the prior-year period, including system-wide same-store sales growth of 7.7 percent.
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 PLNT does not consider in the evaluation of ongoing operational performance, increased 7.8 percent to $114.3 million from $106.1 million in the prior-year period.
The report comes as the company reported this week that its former CEO had left the Board of Directors early over cost-cutting moves and authority given to the interim CEO, and news this morning that the company’s CFO was retiring (see coverage links below).
Franchise segment revenue increased 13.9 percent to $98.2 million from $86.3 million in the prior-year period. Of the increase, $7.8 million is due to higher royalty revenue, of which $4.1 million is attributable to the franchise same-store sales increase of 7.6 percent, $1.7 million is due to new stores opened since October 1, 2022 and $2.0 million is due to higher royalties on annual fees. This increase also includes $2.7 million of higher National Advertising Fund (NAF) revenue and $1.4 million of higher revenue associated with the sale of HVAC units to franchisees, partially offset by $1.0 million in lower equipment placement revenue.
- Franchise segment EBITDA increased $19.4 million, or 39.7 percent, to $68.3 million in the quarter. The increase was said to be primarily the result of a $12.0 million increase in Franchise segment revenue, as well as an $8.5 million legal reserve that negatively impacted the fourth quarter of 2022, partially offset by $1.9 million of higher NAF expense.
Corporate-Owned Stores segment revenue increased 15.9 percent to $116.4 million in the fourth quarter, from $100.5 million in the prior-year period. Of the increase, $9.4 million was attributable to a same-store sales increase of 8.7 percent, $4.3 million was from new stores opened since October 1, 2022 and $2.3 million was from the acquisition of four stores in Florida.
- Corporate-Owned Stores segment EBITDA increased $6.2, or 16.0 percent, to $45.0 million in Q4. The increase was said to be primarily due to $6.4 million of higher EBITDA from the existing stores in the same-store-sales base.
Equipment segment revenue decreased 25.5 percent to $70.4 million in q4, compared to $94.6 million in the prior-year period. Of the decrease, $25.0 million was due to lower equipment sales to existing franchisee-owned stores, partially offset by $0.9 million of higher equipment sales to new franchisee-owned stores. In the fourth quarter of 2023, Planet Fitness said it had equipment sales to 67 new franchisee-owned stores compared to 66 in the prior-year period.
- Equipment segment EBITDA decreased by $7.5 million, or 30.8 percent, to $16.9 million in the fourth quarter, said to be primarily due to lower equipment sales to existing franchisee-owned stores.
Net income attributable to Planet Fitness, Inc. was $35.3 million, or 41 cents per diluted share, in the fourth quarter, compared to $33.7 million, or 40 cents per diluted share, in the prior-year period.
Net income was $36.8 million in the fourth quarter of 2023 compared to $36.3 million in the prior-year period.
Adjusted net income increased 12.5 percent to $53.1 million, or 60 cents per diluted share, from $47.3 million, or 53 cents per diluted share, in the prior-year period. The company said Adjusted net income has been adjusted to reflect a normalized income tax rate of 25.9 percent for both the fourth quarter of 2023 and 2022 and excludes certain non-cash and other items that it does not consider in the evaluation of ongoing operational performance.
Seventy-seven new Planet Fitness stores were opened system-wide during the fourth quarter, bringing system-wide total stores to 2,575 as of December 31, 2023.
“In 2023, we proactively developed the New Growth Model to fuel long-term sustainable store growth and in recognition of the macro-economic environmental changes that have taken place since the pandemic,” said Craig Benson, interim CEO. “Focused on enhancing returns and reducing the capital requirements for opening and maintaining a Planet Fitness franchise location, the New Growth Model will provide our franchisees with additional flexibility to build their store portfolios for years to come “While we believe that 2024 will be a transition year as our franchisees incorporate the changes into their growth plans, given our consistent and predictable asset-light model we believe that we can deliver between 10 and 11 percent adjusted EBITDA growth, enabling us to generate significant cash flow to invest in the business and return capital to shareholders via our share repurchase program. Importantly, we are expanding our total store opportunity to 5,000 in the U.S. based on the results of our recently completed third-party studies, up from the 4,000 total store opportunities we communicated at the time of our initial public offering in 2015.”
Fiscal Year 2023 Highlights
- Total revenue increased from the prior year by 14.4 percent to $1.1 billion.
- System-wide same-store sales increased 8.7 percent.
- Net income attributable to Planet Fitness, Inc. was $138.3 million, or $1.62 per diluted share, compared to $99.4 million, or $1.18 per diluted share, in the prior year.
- Net income was $147.0 million, compared to $110.5 million in the prior year.
- Adjusted net income increased 34.0 percent to $199.0 million, or $2.24 per diluted share, compared to $148.5 million, or $1.64 per diluted share, in the prior year.
- Adjusted EBITDA increased 19.0 percent to $435.4 million from $365.8 million in the prior year.
- 165 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 2,575 as of December 31, 2023.
2024 Outlook
For the year ending December 31, 2024, the company expects the following, which assumes there are no material impacts from COVID-19 or other public health emergencies or any significant new supply chain disruptions:
- New equipment placements of approximately 120 to 130 in franchisee-owned locations;
- System-wide same-store sales in the 5 percent to 6 percent range;
- The following are 2024 growth expectations over the company’s 2023 results:
- Revenue to increase in the 6 percent to 7 percent range;
- Adjusted EBITDA to increase in the 10 percent to 11 percent range;
- Adjusted net income to increase in the 9 percent to 10 percent range; and
- Adjusted earnings per share to increase in the 10 percent to 11 percent range, based on Adjusted diluted shares outstanding of approximately 88 million, inclusive of one million shares repurchased.
The company also expects 2024 net interest expense to be approximately $70 million. It also expects capital expenditures to increase approximately 25 percent driven by additional stores in our corporate-owned portfolio and depreciation and amortization to increase in the 11 percent to 12 percent range.
Image courtesy Planet Fitness, Inc.
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See below for more SGB Media coverage of Planet Fitness.
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