Planet Fitness, Inc. reduced its guidance for sales and earnings for the year as the first quarter ended March 31 saw a “shift in consumer focus in the New Year to savings and concern over the increase in COVID infections and other illnesses.” The fitness chain also cited the underperformance of an advertising campaign.

“Planet Fitness ended the first quarter with approximately 19.6 million members and system-wide same-store sales growth of 6.2 percent, primarily driven by new members. During the quarter, we faced several headwinds that impacted our results, including a shift in consumer focus in the New Year to savings and concern over the increase in COVID infections and other illnesses, as well as a national advertising campaign that we believe may not have resonated as broadly as we had anticipated. As a result of these and other factors, we are lowering our outlook for the full year,” said Craig Benson, Interim CEO. “Despite these near-term headwinds, we are acting on the things we can control. We’re focused on advancing our new franchisee growth model and its strategic priorities and supporting our franchisees while driving enhanced value for shareholders.”

Benson continued, “Looking ahead, we are thrilled that Colleen Keating will join us as the next CEO of Planet Fitness in June. Colleen brings over three decades of experience across a host of industries, and I’m confident that her expertise in operations, franchise, brand management and leading customer-facing organizations will support Planet Fitness’s next phase of growth.”

First Quarter Fiscal 2024 Highlights

  • Total revenue increased from the prior year period by 11.6 percent to $248.0 million.
  • System-wide same-store sales increased 6.2 percent.
  • System-wide sales increased $114.9 million to $1.2 billion, from $1.1 billion in the prior year period.
  • Net income attributable to Planet Fitness, Inc. was $34.3 million, or $0.39 per diluted share, compared to $22.7 million, or $0.27 per diluted share, in the prior year period.
  • Net income increased $10.2 million to $35.0 million, compared to $24.8 million in the prior year period.
  • Adjusted net income increased $10.9 million to $47.3 million, or $0.53 per diluted share, compared to $36.4 million, or $0.41 per diluted share, in the prior year period.
  • Adjusted EBITDA increased $16.1 million to $106.3 million from $90.2 million in the prior year period.
  • The company opened 25 new Planet Fitness gyms system-wide, including 23 franchisee-owned and 2 corporate-owned stores, bringing its system-wide total stores to 2,599 as of March 31, 2024.
  • Repurchased and retired 313,834 Class A common stock shares using $20.0 million of cash on hand.
  • Cash and marketable securities of $486.4 million, which includes cash and cash equivalents of $301.7 million, restricted cash of $46.2 million and marketable securities of $138.5 million as of March 31, 2024.

Operating Results for the First Quarter Ended March 31, 2024
For the first quarter of 2024, total revenue increased $25.8 million or 11.6 percent to $248.0 million from $222.2 million in the prior year period including system-wide same-store sales growth of 6.2 percent. By segment:

  • Franchise segment revenue increased $11.3 million or 12.2 percent to $104.0 million from $92.7 million in the prior year period. Of the increase, $7.8 million was due to higher royalty revenue, of which $4.0 million was attributable to a franchise same-store sales increase of 6.3 percent, $1.6 million was due to new stores opened since January 1, 2023 and $2.2 million was due to higher royalties on annual fees. This increase also includes $3.0 million of higher National Advertising Fund (NAF) revenue.
  • Corporate-owned stores segment revenue increased $16.5 million or 15.6 percent to $122.4 million from $105.9 million in the prior year period. Of the increase, $10.6 million was attributable to a corporate-owned store same-store sales increase of 6.2 percent, $3.5 million was from new stores opened since January 1, 2023 and $2.4 million was from the acquisition of four stores in Florida (the “Florida Acquisition”) in the prior year.
  • Equipment segment revenue decreased $2.0 million or 8.6 percent to $21.6 million from $23.7 million in the prior year period. Of the decrease, $1.1 million was due to lower revenue from equipment sales to new franchisee-owned stores and $0.9 million was due to lower revenue from equipment sales to existing franchisee-owned stores. In the first quarter of 2024, we had equipment sales to 14 new franchisee-owned stores compared to 18 in the prior year period.

For the first quarter of 2024, net income attributable to Planet Fitness, Inc. was $34.3 million, or $0.39 per diluted share, compared to $22.7 million, or $0.27 per diluted share, in the prior year period. Net income was $35.0 million in the first quarter of 2024 compared to $24.8 million in the prior year period. Adjusted net income increased 29.9 percent to $47.3 million, or $0.53 per diluted share, from $36.4 million, or $0.41 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 first quarter of 2024 and 2023, respectively, and excludes certain non-cash and other items that we do not consider in evaluating ongoing operational performance.

Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, adjusted for the impact of certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance, increased 17.8 percent to $106.3 million from $90.2 million in the prior year period.

Segment EBITDA represents the company’s Total Segment EBITDA broken down by its reportable segments. Total Segment EBITDA is equal to EBITDA, the company defines as net income before interest, taxes, depreciation, and amortization.

Franchise segment EBITDA increased $11.6 million or 17.9 percent to $76.3 million. The increase is primarily the result of a $11.3 million increase in franchise segment revenue, described above, including a $3.1 million legal reserve that negatively impacted the first quarter of 2023, partially offset by $2.8 million of higher NAF expense.

Corporate-owned stores segment EBITDA increased $8.6 million or 25.6 percent to $42.1 million. The increase was primarily attributable to $8.0 million from the corporate-owned same-store sales increase of 6.2 percent and $1.2 million from the stores acquired in the Florida Acquisition, partially offset by lower EBITDA of $1.1 million from new stores opened since January 1, 2023.

As described above, the Equipment segment EBITDA decreased $0.8 million or 14.6 percent to $4.8 million, primarily due to lower equipment sales to new and existing franchisee-owned stores.

2024 Outlook
For the year ending December 31, 2024, the company updated or reiterated the following expectations:

  • It continues to expect new equipment placements of approximately 120 to 130 in franchisee-owned locations;
  • It continues to expect system-wide new store openings of approximately 140 to 150 locations;
  • It now expects system-wide same-store sales in the 3 percent to 5 percent percentage range (previously it expected 5 percent to 6 percent)

The following are 2024 growth expectations over the company’s 2023 results:

  • It now expects revenue to increase in the 4 percent to 6 percent range (previously it expected 6 percent to 7 percent)
  • It now expects adjusted EBITDA to increase in the 7 percent to 9 percent range (previously it expected 10 percent to 11 percent)
  • It now expects adjusted net income to increase in the 6 percent to 8 percent range (previously it expected 9 percent to 10 percent)
  • It now expects adjusted net income per share, diluted to increase in the 7 percent to 9 percent range (previously it expected 10 percent to 11 percent), based on adjusted diluted weighted-average shares outstanding of approximately 88.0 million, inclusive of one million shares repurchased in 2024.
  • The company continues to expect 2024 net interest expense to be approximately $70.0 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