Planet Fitness Q3 sales comps up 6.9 percent

Planet Fitness Inc., reported revenue up 8.4 percent to $68.8 million in the third-quarter, including a 6.9 percent rise in same-store sales. Twenty-six new Planet Fitness stores were opened system-wide during the period, bringing the total store count to 1,040 at September 30, 2015.

The budget fitness gym reported a quarterly net loss of $3.9 million on one-time costs of its IPO earlier this year, compared a net income of $8.1 million during the third quarter a year ago. Pro forma adjusted net income, excluding those costs, increased 6.6% to $10.3 million, or 10 cents per diluted share, compared to $9.7 million, or 10 cents per diluted share in the prior year period.

Adjusted EBITDA increased 11.8 percent to $26.5 million from $23.7 million in the prior year period.

Christopher Rondeau, Chief Executive Officer, commented, “We are very pleased with our third quarter results. Our performance was driven by the continued execution of our strategy: expansion of the Planet Fitness store base coupled with system-wide same store sales growth.  Our unique fitness offering and powerful national advertising strategy continue to resonate with a broad consumer audience. Looking ahead, we see a long runway for growth.  With our three operating segments – Franchise, Corporate Stores and Equipment – we are well positioned to generate strong top-line gains, margin expansion and significant free cash flow over the long-term.”

Franchise segment revenue, which includes commission income, increased $4 million or 25.4 percent to $19.8 million from $15.8 million in the prior year period.Franchise segment EBITDA increased $3.6 million or 30.4 percent to $15.5 million.

Corporate-owned stores segment revenue increased $2.5 million or 10.8 percent to $25.2 million from $22.7 million in the prior year period. Corporate-owned stores segment EBITDA decreased $0.2 million or 1.7 percent to
$9.3 million driven primarily by changes in foreign currency exchange
rates and lower profit contributions from the 4 corporate-owned stores
opened during the last 12-months as they ramp to mature operating
margins.

Equipment segment revenue decreased $1.1 million or 4.5 percent to $23.9 million from $25.0 million. The decrease was driven by expected changes in the timing of replacement equipment sales and new store equipment sales.
System-wide same store sales increased 6.9 percent. By segment, franchisee-owned same store sales increased 7.3 percent and corporate-owned same store sales increased 1.7 percent. Equipment segment EBITDA decreased $0.8 million or 14.1 percent to $4.9 million driven by the combination of planned lower equipment sales, lower pricing, and a slight decrease in volume rebates.

For the nine months ended September 30, 2015, total revenue increased $40.9 million or 22.3 percent to $224.7 million from $183.8 million in the prior year period. By segment:

Franchise segment revenue, which includes commission income, increased $12.7 million or 25.1 percent to $63.4 million from $50.7 million in the prior year period;

Corporate-owned stores segment revenue increased $10.9 million or 17.3 percent to $73.7 million from $62.8 million in the prior year period; and,

Equipment segment revenue increased $17.4 million or 24.7 percent to $87.6 million from $70.2 million.
System-wide same store sales increased 8.3 percent. By segment, franchisee-owned same store sales increased 8.8% and corporate-owned same store sales increased 2.2 percent.

Adjusted EBITDA increased $15.8 million or 22.4 percent to $86 million in the nine month period from $70.3 million in the prior year period. EBITDA by segment:

Franchise segment EBITDA increased $7.5 million or 19.0% to $46.8 million, including the negative impact of $3.9 million of non-recurring expenses related to a recent transition of the company's point-of-sale billing and processing (POS) system;

Corporate-owned stores segment EBITDA increased $2.1 million or 8.9% to $26.3 million; and,
Equipment segment EBITDA increased $3.7 million or 24.5% to $18.9 million.

Net income decreased by $7.0 million or 30.3 percent to $16 million from $23.0 million in the prior year period. Pro forma adjusted net income increased 27 percent to $35.7 million, or $0.36 per diluted share, from $28.1 million, or $0.28 per diluted share, in the prior year period. Pro forma adjusted net income has been adjusted to exclude costs associated with the initial public offering of $13.4 million, reflect a normalized federal income tax rate of 40.3 percent as if we were a public company for the first nine months of 2015 and excludes other non-recurring costs.

For the year ending December 31, 2015, the company now expects:

Total revenue between $318 million and $321 million;

System-wide same store sales growth between 7.0 percent and 7.5%;

Between 192 and 197 new franchised stores and 3 new corporate stores; and,

Pro forma adjusted net income of $50.5 million to $51.5 million, or $0.51 to $0.52 per diluted share.