Planet Fitness, Inc. reported earnings bounced back in the second quarter ended June 30 as system-wide same-store sales increased 13.6 percent.

“Our high-quality, affordable fitness experience resonates now more than ever as Americans are seeking value and feeling the rising costs of everyday items such as food and gas. We believe that people will continue to prioritize their health and wellness while being more cost-conscious, and we offer a welcoming environment for people of all fitness levels. During the second quarter, our join trend returned to pre-pandemic seasonality with the addition of approximately 300,000 net new members, ending the quarter with more than 16.5 million,” said Chris Rondeau, CEO. “We now have more than 3.3 million teens enrolled in our High School Summer Pass, a program that offers teens a chance to work out for free at our gyms over the summer—an extremely important initiative given the ongoing and alarming teen mental health crisis. This is more than three times the number of participants than when we last ran the program in 2019. Nearly 15 percent of all high school-aged teens in the U.S. are either enrolled in the program or are paying members at Planet Fitness. We’re proud to be helping them establish healthy habits that they can build upon into the future.”

Second Quarter Fiscal 2022 Results

  • Total revenue increased from the prior year period by 63.5 percent to $224.4 million;
  • System-wide same-store sales increased 13.6 percent;
  • System-wide sales increased $151 million to $1,019 million, from $868 million in the prior year period;
  • Net income attributable to Planet Fitness, Inc. was $22.3 million, or $0.26 per diluted share, compared to $14.0 million, or $0.17 per diluted share, in the prior year period;
  • Net income increased $10.1 million to $25.1 million, compared to $15.0 million in the prior year period;
  • Adjusted net income increased $16.3 million to $34.5 million, or $0.38 per diluted share, compared to $18.2 million, or $0.21 per diluted share, in the prior year period;
  • Adjusted EBITDA increased $34.3 million to $89.9 million from $55.6 million in the prior year period;
  • 34 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 2,324 as of June 30, 2022;
  • Repurchased and retired approximately 697,000 shares of Class A common stock using $44.3 million of cash on hand;
  • Repaid in full its $75 million of borrowings under our Variable Funding Notes using cash on hand; and
  • Cash of $446.3 million, which includes cash and cash equivalents of $383.5 million and restricted cash of $62.8 million.

Operating Results Second Quarter Ended June 30, 2022
For the second quarter 2022, total revenue increased $87.2 million or 63.5 percent to $224.4 million from $137.3 million in the prior year period, which included system-wide same-store sales growth of 13.6 percent.  By segment:

  • Franchise segment revenue increased $9.7 million or 13.3 percent to $82.5 million from $72.8 million in the prior year period. The increase in franchise segment revenue for the second quarter of 2022 was primarily due to a $6.2 million increase in franchise royalty revenue, a $1.6 million increase in National Advertising Fund (NAF) revenue, and a $1.7 million increase in placement revenue. Of the $6.2 million increase in royalty revenue, $5.9 million was attributable to a same-store sales increase of 13.4 percent in franchisee-owned stores, $1.9 million was attributable to new stores opened since April 1, 2021 or stores that were not open for all of the prior year period due to COVID-related temporary closures, and $0.8 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $3.1 million as a result of the stores acquired in the acquisition of Sunshine Fitness Growth Holdings, LLC in the first quarter of 2022 (the Sunshine Acquisition) moving from the franchise segment to the corporate-owned segment;
  • Corporate-owned stores segment revenue increased $60.9 million or 150.0 percent to $101.5 million from $40.6 million in the prior year period. Of the increase, $49.5 million was attributable to the acquisition of 114 stores in the Sunshine Acquisition, $5.3 million was from the corporate-owned store same-store sales increase of 15.7 percent, $4.0 million was from new stores opened since April 1, 2021 and stores that were not open for all of the prior year period due to COVID-related temporary closures, and the remainder due to higher annual fee revenue; and
  • Equipment segment revenue increased $16.6 million or 69.8 percent to $40.4 million from $23.8 million in the prior year period, driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2022 compared to the three months ended June 30, 2021. In the three months ended June 30, 2022, the company had equipment sales to 26 new franchisee-owned stores compared to 19 in the prior year period.

For the second quarter of 2022, net income attributable to Planet Fitness, Inc. was $22.3 million, or $0.26 per diluted share, compared to $14.0 million, or $0.17 per diluted share, in the prior year period. Net income was $25.1 million in the second quarter of 2022 compared to $15.0 million in the prior year period. Adjusted net income increased $16.3 million to $34.5 million, or $0.38 per diluted share, from $18.2 million, or $0.21 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.7 percent and 26.6 percent for the current and prior year period, respectively, 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 it does not consider in the evaluation of ongoing operational performance, increased $34.3 million to $89.9 million from $55.6 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 $2.6 million to $54.3 million. The increase in franchise segment EBITDA for the second quarter of 2022 was primarily due to the revenue increases described above. Partially offsetting these EBITDA increases, NAF expense was $5.4 million higher in the three months ended June 30, 2022 than in the prior year period;
  • Corporate-owned stores segment’s EBITDA increased $29.1 million to $39.5 million. Of the increase, $20.7 million was attributable to corporate-owned stores acquired in the Sunshine Acquisition and $9.8 million due to the same-store sales increase of 15.7 percent, partially offset by a higher corporate-owned store selling general and administrative expenses primarily as a result of the Sunshine Acquisition; and
  • Equipment segment EBITDA increased by $4.6 million to $10.2 million driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2022, compared to the three months ended June 30, 2021, as described above.

Company Update
The company announced that Dorvin Lively, president, announced his retirement and will transition through the next couple of months. Lively joined Planet Fitness in 2013 as CFO and was instrumental in developing the company’s finance organization, preparing and leading its IPO in 2015, and, more broadly, expanding the brand domestically and globally. The company has begun a search for his replacement.

2022 Outlook
For the year ending December 31, 2022, the company reiterated the following expectations as compared to its 2021 results, which include the impact of the Sunshine Acquisition and assumes no worsening of the pandemic that impacted its performance, including prolonged store closures or mandated operational restrictions:

  • New equipment placements of approximately 170 in franchisee-owned locations; and
  • System-wide same-store sales in the low double-digit percentage range.

The following are 2022 growth expectations over the company’s 2021 results:

  • Revenue to increase in the mid-50 percent range;
  • Adjusted EBITDA to increase in the high-50 percent range;
  • Adjusted Net Income to increase in the low-90 percent range; and
  • Adjusted earnings per share to increase in the mid-80 percent range based on Adjusted diluted shares outstanding of approximately 90.7 million and inclusive of the issuance of equity as part of the Sunshine Acquisition and the second quarter share repurchase.

The company now expects 2022 net interest expenses to be approximately $86 million as a result of its recent debt refinancing and upsizing.

Photo courtesy Planet Fitness