Planet Fitness, Inc. reported fourth-quarter profits more than doubled, beating expectations and forecasted an upbeat full-year outlook following strength in its December national sales, which helped to drive “record membership growth.”

Excluding nonrecurring items, adjusted earnings per share increased to 53 cents, topping Wall Street’s consensus estimate of 47 cents. Revenue was $381.3 million, above Wall Street’s consensus estimate of $271.5 million.

“Looking back over the last couple of years, I am proud of how we continue to prove our system’s resiliency, the strength of our model, our differentiated offering and the passion of our franchisees and team members—all of which position us to continue to succeed in an environment of increasing consumer prioritization of health and wellness,” said Chris Rondeau, chief executive officer.

Rondeau continued, “We ended 2022 with record membership growth in the fourth quarter, which created great momentum coming into Q1 of this year. Driving the member growth was a strong December national sale, fueled by a more coordinated marketing agency structure enabling us to better leverage data analytics to optimize national and local media spend,” said Chris Rondeau, chief executive officer. “Today, more than 6 percent of all Americans over the age of 15 are Planet Fitness members. But we’re not stopping there. We believe that in the future, we can double our membership given our historical ability to do so and the increasing penetration we’ve experienced with each successive generation. We believe our purpose of enhancing people’s lives and creating a healthier world sets us, our franchisees, and our shareholders up for long-term success.”

Fourth Quarter Fiscal 2022 Highlights

  • Total revenue increased from the prior year period by 53.2 percent to $281.3 million;
  • System-wide same-store sales increased 9.0 percent;
  • Net income attributable to Planet Fitness, Inc. was $33.7 million, or $0.40 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $5.7 million, or $0.07 per diluted share, in the prior year period;
  • Net income was $36.3 million, compared to $6.3 million in the prior year period;
  • Adjusted net income increased 115.6 percent to $47.3 million, or $0.53 per diluted share, compared to $21.9 million, or $0.25 per diluted share, in the prior year period;
  • Adjusted EBITDA increased 70.7 percent to $106.1 million from $62.2 million in the prior year period; and
  • 58 new Planet Fitness stores were opened system-wide during the period, bringing the total stores to 2,410 as of December 31, 2022.

Fiscal Year 2022 Highlights

  • Total revenue increased from the prior year by 59.6 percent to $936.8 million;
  • System-wide same-store sales increased 11.4 percent;
  • Net income attributable to Planet Fitness, Inc. was $99.4 million, or $1.18 per diluted share, compared to $42.8 million, or $0.51 per diluted share, in the prior year;
  • Net income was $110.5 million, compared to $46.1 million in the prior year;
  • Adjusted net income increased to $148.5 million, or $1.64 per diluted share, compared to $69.9 million, or $0.80 per diluted share, in the prior year;
  • Adjusted EBITDA increased 64.6 percent to $365.8 million from $222.3 million in the prior year; and
  • 158 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 2,410 as of December 31, 2022.

Operating Results For The Fourth Quarter Ended December 31, 2022
For the fourth quarter of 2022, total revenue increased $97.6 million or 53.2 percent to $281.3 million from $183.6 million in the prior year period, including system-wide same-store sales growth of 9.0 percent.

By segment:

  • Franchise segment revenue increased $7.8 million or 10.0 percent to $86.3 million from $78.4 million in the prior year period. Of the increase, $3.9 million is due to higher royalty revenue, of which $4.3 million is attributable to the franchise same-store sales increase of 8.8 percent, $1.6 million is due to new stores opened since October 1, 2021 and $0.6 million is due to higher royalties on annual fees, partially offset by a reduction of $2.6 million primarily as a result of the acquisition of 114 stores from Sunshine Fitness in the first quarter of 2022. Additionally, $2.2 million is from higher equipment placement revenue, and $1.1 million is from higher National Advertising Fund (NAF) revenue;
  • Corporate-owned stores segment revenue increased $55.6 million or 123.9 percent to $100.5 million from $44.9 million in the prior year period. Of the $55.6 million increase, $50.0 million was attributable to the stores acquired or opened as a result of the Sunshine Acquisition, $3.9 million was attributable to a same-store sales increase of 11.0 percent, and $1.7 million was from other new stores opened or acquired since October 1, 2021; and
  • Equipment segment revenue increased $34.2 million or 56.7 percent to $94.6 million from $60.4 million in the prior year period. Of the increase, $28.0 million was due to higher equipment sales to existing franchisee-owned stores and $6.2 million was due to higher equipment sales to new franchisee-owned stores. In the fourth quarter of 2022, the company had equipment sales to 66 new franchisee-owned stores compared to 63 in the prior year.

For the fourth quarter of 2022, net income attributable to Planet Fitness, Inc. was $33.7 million, or $0.40 per diluted share, compared to $5.7 million, or $0.07 per diluted share, in the prior year period. Net income was $36.3 million in the fourth quarter of 2022 compared to $6.3 million in the prior year period. Adjusted net income increased 115.6 percent to $47.3 million, or $0.53 per diluted share, from $21.9 million, or $0.25 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 25.9 percent for the fourth quarter of 2022 and 27.0 percent for the prior year period and excludes certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance.

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 we do not consider in the evaluation of ongoing operational performance, increased 70.7 percent to $106.1 million from $62.2 million in the prior year period.

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

  • Franchise segment EBITDA decreased $0.4 million or 0.8 percent to $48.9 million. The decrease is primarily a result of an $8.6 million legal reserve related to a preliminary settlement agreement with a franchisee partially offset by higher revenue of $7.8 million as described above;
  • Corporate-owned stores segment EBITDA increased $24.8 million or 176.5 percent to $38.8 million. The increase is primarily due to $19.7 million of higher EBITDA as a result of the Sunshine Acquisition and $3.6 million of higher corporate-owned store EBITDA from existing stores in the same-store-sales base; and
  • Equipment segment EBITDA increased by $10.1 million or 70.6 percent to $24.4 million, due to higher equipment sales to new and existing franchisee-owned stores as described above.

Operating Results For The Fiscal Year Ended December 31, 2022
For the fiscal year ended December 31, 2022, total revenue increased $349.7 million or 59.6 percent to $936.8 million from $587.0 million in the prior year. By segment:

  • Franchise segment revenue increased $38.9 million or 13.4 percent to $329.6 million from $290.7 million in the prior year period. The increase was primarily a result of $22.8 million of higher royalty revenue in the year ended December 31, 2022 as compared to the year ended December 31, 2021, $14.4 million of which was attributable to a franchise same-store sales increase of 11.2 percent, $9.7 million was attributable to new stores opened since January 1, 2021, $5.2 million was due to prior year COVID-19-related temporary closures and $2.8 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $9.3 million primarily as a result of the stores acquired in the Sunshine Acquisition becoming corporate-owned stores. Also driving the increase was $7.2 million of placement revenue as a result of higher new and replacement equipment placements, $5.7 million of higher NAF revenue, and $2.8 million of the higher franchise and other fees was primarily attributable to higher online join fees;
  • Corporate-owned stores segment revenue increased $212.2 million or 126.9 percent to $379.4 million from $167.2 million in the prior year period. Of the increase, $180.8 million was attributable to the stores acquired or opened as a result of the Sunshine Acquisition, $22.3 million was from the corporate-owned store same-store sales increase of 13.1 percent, and $8.7 million was from new stores opened or acquired since January 1, 2021, and stores that were not open for all of the prior year period due to COVID-19-related temporary closures. Partially offsetting these increases was a reduction of $1.7 million related to the sale of corporate-owned stores located in Colorado; and
  • Equipment segment revenue was $227.7 million in the year ended December 31, 2022, compared to $129.1 million in the year ended December 31, 2021, an increase of $98.7 million, or 76.4 percent. Of the increase, $77.0 million was driven by higher equipment sales to existing franchisee-owned stores, and $21.7 million was driven by higher equipment sales to new franchisee-owned stores in the year ended December 31, 2022, as compared to the year ended December 31, 2021. In the year ended December 31, 2022, we had equipment sales to 153 new franchisee-owned stores compared to 128 in the prior year.

For the year ended December 31, 2022, net income attributable to Planet Fitness, Inc. was $99.4 million, or $1.18 per diluted share, compared to $42.8 million, or $0.51 per diluted share, in the prior year. Net income was $110.5 million in 2022 compared to $46.1 million in the prior year. Adjusted net income increased to $148.5 million, or $1.64 per diluted share, from $69.9 million, or $0.80 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 25.9 percent for the year ended December 31, 2022 and 27.0 percent for the prior year and excludes certain non-cash and other items that the company did not consider in the evaluation of ongoing operational performance.

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 we do not consider in the evaluation of ongoing operational performance, increased 64.6 percent to $365.8 million from $222.3 million in the prior year period.

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

  • Franchise segment EBITDA increased $22.5 million or 11.6 percent to $216.8 million primarily due to $33.2 million of higher franchise revenue and $5.7 million of higher NAF revenue as described above, partially offset by $6.7 million of higher NAF expense and a $8.6 million legal reserve related to a preliminary settlement agreement with a franchisee;
  • Corporate-owned stores segment EBITDA increased $92.9 million or 188.8 percent to $142.1 million. Of the increase, $78.1 million was attributable to the Sunshine Acquisition, $13.7 million was attributable to the same-store sales increase of 13.1 percent and $3.5 million was due to prior year COVID-related temporary closures. These increases were partially offset by a decrease of $2.9 million from new stores opened since January 1, 2021; and
  • Equipment segment EBITDA increased by $29.4 million or 99.1 percent to $59.1 million driven by higher equipment sales to new and existing franchisee-owned stores in the year ended December 31, 2022 compared to the year ended December 31, 2021, as described above.

2023 Outlook
For the year ending December 31, 2023, the company expects the following, which assumes there is no material resurgence of COVID-19 that causes member disruptions, whether via shutdowns or more stringent mandates that result in a significant change in membership behaviors, or any significant new supply chain disruptions:

  • New equipment placements of approximately 160 in franchisee-owned locations; and
  • System-wide same-store sales in the high single-digit percentage range

The following are 2023 growth expectations over the company’s 2022 results:

  • Revenue to increase in the 13 percent to 14 percent range;
  • Adjusted EBITDA to increase in the 17 percent to 18 percent range;
  • Adjusted net income to increase in the 30 percent to 33 percent range; and
  • Adjusted earnings per share to increase in the 33 percent to 36 percent range, based on Adjusted diluted shares outstanding of approximately 89.5 million, inclusive of one million shares repurchased.

The company also expects the 2023 net interest expense to be approximately $75 million. It also expects capital expenditures to increase to the mid-30 percent range driven by additional stores in our corporate-owned portfolio and depreciation and amortization to increase to the mid-10 percent range driven by the increase in capital expenditures and a full year of Sunshine in its results over 2022.

Photo courtesy Planet Fitness