Planet Fitness, Inc. reported net earnings jumped 45.3 percent in the third quarter ended September 30 as total revenue grew 13.6 percent and system-wide same-store sales increased by 8.4 percent.

“I’m honored to serve as interim CEO of such a truly unique brand with a strong track record of growth as we enter the next chapter of the Planet Fitness journey. As a Board member and a Planet Fitness franchisee, I know firsthand the power of this brand, the strength of our team, and our commitment to a welcoming, non-intimidating culture, all of which uniquely position us to continue to lead the industry. My priorities are to lead the team as we execute on the current strategy with a focus on enhancing returns on stores as well as assisting the Board with the search for a permanent CEO,” said Governor Craig Benson, interim chief executive officer. “We ended the third quarter with more than 18.5 million members, drove 8.4 percent system-wide same-store sales growth primarily from an increase in members, and grew our store count to nearly 2,500 locations globally. With our industry-leading results, we’re adjusting our store-level return model to further improve the attractiveness of opening and operating Planet Fitness stores in a new macro-environment. The changes include decreasing certain capital investments by extending the timing for replacing equipment and completing remodels, to set us and our franchisees up for continued long-term sustainable growth.”

Third Quarter Fiscal 2023 results

  • Total revenue increased from the prior year period by 13.6 percent to $277.6 million.
  • System-wide same-store sales increased by 8.4 percent.
  • System-wide sales increased $124.8 million to $1,092.9 million, from $968.1 million in the prior year period.
  • Net income attributable to Planet Fitness, Inc. was $39.1 million, or $0.46 per diluted share, compared to $26.9 million, or $0.32 per diluted share, in the prior year period.
  • Net income increased $10.6 million to $41.3 million, compared to $30.7 million in the prior year period.
  • Adjusted net income increased $13.6 million to $51.8 million, or $0.59 per diluted share, compared to $38.2 million, or $0.42 per diluted share, in the prior year period.
  • Adjusted EBITDA increased $18.0 million to $111.9 million from $93.9 million in the prior year period.
  • 26 new Planet Fitness stores were opened during the period, including 2 corporate-owned and 24 franchisee-owned stores, bringing system-wide total stores to 2,498 as of September 30, 2023.
  • Cash, cash equivalents and marketable securities of $474.1 million, which includes cash and cash equivalents of $309.0 million, marketable securities of $118.7 million and restricted cash of $46.4 million.

Operating Results for Third Quarter Ended September 30, 2023

For the third quarter 2023, total revenue increased $33.2 million or 13.6 percent to $277.6 million from $244.4 million in the prior year period, which included the impact of the system-wide same-store sales growth of 8.4 percent. By segment:

  • Franchise segment revenue increased $17.4 million or 21.6 percent to $98.2 million from $80.7 million in the prior year period. The increase in franchise segment revenue for the third quarter of 2023 was primarily due to an $8.0 million increase in franchise royalty revenue, a $3.5 million increase in franchise and other fees, a $3.0 million increase in National Advertising Fund (NAF) revenue, a $1.5 million increase in equipment placement revenue and $1.3 million of revenue associated with the sale of HVAC units to franchisees. Of the $8.0 million increase in franchise royalty revenue, $4.4 million was attributable to a franchisee-owned same-store sales increase of 8.2 percent, $1.7 million was from higher royalties on annual fees and $1.6 million was attributable to new stores opened since July 1, 2022;
  • Corporate-owned stores segment revenue increased $11.9 million or 11.8 percent to $113.2 million from $101.3 million in the prior year period. Of the increase, $6.8 million was from the corporate-owned store same-store sales increase of 10.1 percent, and $5.1 million was from new store openings since July 1, 2022 and the April 2023 acquisition of 4 stores in Florida; and
  • Equipment segment revenue increased $3.8 million or 6.1 percent to $66.1 million from $62.3 million in the prior year period, driven by $5.6 million of higher equipment sales to existing franchisee-owned stores in the three months ended September 30, 2023. We had equipment sales to 22 and 27 new franchisee-owned stores in the three months ended September 30, 2023 and September 30, 2022, respectively.

For the third quarter of 2023, net income attributable to Planet Fitness, Inc. was $39.1 million, or $0.46 per diluted share, compared to $26.9 million, or $0.32 per diluted share, in the prior year period. Net income was $41.3 million in the third quarter of 2023 compared to $30.7 million in the prior year period. Adjusted net income increased $13.6 million to $51.8 million, or $0.59 per diluted share, from $38.2 million, or $0.42 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 25.9 percent for both the current and 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 $18.0 million to $111.9 million from $93.9 million in the prior year period.

Segment EBITDA represents its 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 $14.1 million to $67.6 million. The increase in franchise segment EBITDA for the third quarter of 2023 was primarily attributable to the franchise revenue increases as described above of $17.4 million, partially offset by $1.3 million of the higher cost of goods sold from HVAC units sold to franchisees, $0.8 million of higher selling, general, and administrative expenses, and higher national advertising fund expenses of $0.6 million;
  • Corporate-owned stores segment EBITDA increased $3.8 million to $44.3 million. Of the increase, $3.9 million was attributable to the stores included in the same store sales base and $2.2 million was from new store openings since July 1, 2022 and the April 2023 acquisition of 4 stores in Florida, partially offset by $1.0 million of higher corporate store selling, general, and administrative expenses in the three months ended September 30, 2023 and by a $1.3 million gain in the prior year related to the sale of corporate-owned stores; and
  • Equipment segment EBITDA increased by $0.6 million to $16.4 million, primarily driven by higher equipment sales to existing franchisee-owned stores in the three months ended September 30, 2023 compared to the three months ended September 30, 2022, as described above.

2023 Outlook
For the year ending December 31, 2023, the company is updating or reiterating the following expectations as compared to the company’s 2022 results, which assumes there are no material new supply chain disruptions:

  • It now expects new equipment placements of between approximately 130 and 140 in franchisee-owned locations (previously it expected approximately 140);
  • It now expects system-wide new store openings of between approximately 150 and 160 locations (previously it expected approximately 160); and
  • It continues to expect system-wide same-store sales in the high single-digit percentage range

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

  • It now expects revenue to increase by approximately 14 percent, previously it expected approximately 12 percent;
  • It now expects Adjusted EBITDA to increase by approximately 18 percent, previously it expected approximately 17 percent;
  • It now expects Adjusted net income to increase by approximately 33 percent, previously it expected approximately 30 percent; and
  • It now expects Adjusted earnings per share to increase approximately 35 percent (previously it expected approximately 34 percent), based on Adjusted diluted shares outstanding of approximately 89 million, inclusive of the nearly 1.7 million shares repurchased through September 30, 2023.

The company continues to expect 2023 net interest expense to be in the low $70 million range, capital expenditures to increase approximately 40 percent, and depreciation and amortization to increase in the high-teens percentage range.

Photo courtesy Planet Fitness