Budget gym franchise Planet Fitness continued to fire on all cylinders, reporting higher sales and profit for the second quarter and raising its 2016 full-year guidance.

Total revenue for the second quarter, ended June 30, 2016, increased from the prior-year period by 15.9 percent to $91.5 million. System-wide same store sales rose 7.6 percent, with franchisee-owned same store sales increasing 7.8 percent and corporate-owned same store sales increasing 4.7 percent.

Net income was $18.1 million, or 11 cents per diluted share, compared to net income of $11.6 million in the prior-year period.

CEO Christopher Rondeau commented, “Following a strong start to the year our business accelerated during the second quarter, highlighted by system-wide same store sales growth of 7.6 percent. We continue to successfully attract new members to our affordable, non-intimidating fitness offering, including a large percentage of first time gym users. Membership growth at our legacy stores as well as our newly opened locations are fueling strong gains in our high margin franchise segment. We believe this trend will continue as our group of well capitalized franchisees is on schedule to open a record number of new stores this year and we continue to leverage the power of our national advertising fund to drive brand awareness. We have never been more excited about the future growth prospects for Planet Fitness or as confident in the potential of our business model to drive significant long-term value for our shareholders.”

Segment Results
By segment, Planet Fitness’ franchise revenue, which includes commission income, increased 34.7 percent to $29.5 million. Corporate-owned stores segment revenue increased 5.6 percent to $26.4 million. And equipment segment revenue increased 10.9 percent to $35.6 million This increase was driven by an increase in replacement equipment sales to existing franchisee-owned stores, partially offset by a decrease in equipment sales to new franchisee-owned stores related to fewer stores opened compared to the prior-year period, officials said.

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 the company does not consider in the evaluation of ongoing operations) increased 18.6 percent to $36.8 million, from $31 million in the prior-year period.

Franchise segment EBITDA increased 39.4 percent to $24.7 million, driven by royalties from new franchised stores opened since June 30, 2015 as well as higher same store sales and overall margin expansion. Corporate-owned stores segment EBITDA increased 2.8 percent to $9.5 million, driven primarily by higher revenue related to the increase in same store sales. Equipment segment EBITDA increased 8.5 percent to $7.9 million, driven by an increase in replacement equipment sales to existing franchisee-owned stores, partially offset by a decrease in equipment sales to new franchisee-owned stores.

Secondary Offering
In June 2016, the Planet Fitness completed a secondary offering of 11.5 million shares of its Class A common stock at a price of $16.50 per share. All of the shares sold in the offering were offered by existing holders of limited liability company units of Pla-Fit Holdings, LLC and certain holders of Class A common stock. The company did not receive any proceeds from the sale of shares of Class A common stock offered by the selling stockholders.

2016 Outlook
Looking ahead, for the second time in as many quarters this year, the company raised its full-year 2016 outlook, now expecting:

  • Total revenue between $366 million and $372 million, versus a previous range of $360 million to $370 million.
  • System-wide same store sales growth in the high-single-digit range, versus a previous forecast in the mid-single-digit range.
  • Between 210 and 220 new franchised stores, which was unchanged.
  • Adjusted net income of $62 million to $65 million, or 63 cents to 66 cents per diluted share, versus previous projections of $61 million to $64 million, or 62 cents to 65 cents per diluted share.

Photo courtesy Planet Fitness