Planet Fitness, Inc. Announces Fourth Quarter and Fiscal Year 2017 Results

Posted: February 22, 2018 in Chains

Planet Fitness

HAMPTON, N.H. – Planet Fitness, Inc. (NYSE: PLNT) reported financial results for its fourth quarter and fiscal year ended December 31, 2017 and announced full year 2018 outlook.

Fourth Quarter Fiscal 2017 Highlights

Total revenue increased from the prior year period by 15.1% to $134.0 million.
System-wide same store sales increased 11.6%.
Net loss attributable to Planet Fitness, Inc. was $3.5 million, or $0.04 per diluted share, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company’s deferred tax assets and tax benefit arrangements due to recent tax reform, compared to net income attributable to Planet Fitness, Inc. of $10.6 million, or $0.18 per diluted share in the prior year period.
Net income was $0.8 million, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company’s deferred tax assets and tax benefit arrangements due to recent tax reform, compared to $21.9 million in the prior year period.
Adjusted net income(1) increased 19.1% to $23.5 million, or $0.24 per diluted share, compared to $19.7 million, or $0.20 per diluted share in the prior year period.
Adjusted EBITDA(1) increased 16.0% to $51.2 million from $44.1 million in the prior year period.
88 new Planet Fitness stores were opened system-wide during the period, bringing system-wide total stores to 1,518 at December 31, 2017.

Fiscal Year 2017 Highlights

Total revenue increased from the prior year by 13.7% to $429.9 million.
System-wide same store sales increased 10.2%.
Net income attributable to Planet Fitness, Inc. was $33.1 million, or $0.42 per diluted share, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company’s deferred tax assets and tax benefit arrangements due to recent tax reform, compared to $21.5 million, or $0.50 per diluted share, in the prior year period.
Net income was $55.6 million, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company’s deferred tax assets and tax benefit arrangements due to recent tax reform, compared to $71.2 million in the prior year.
Adjusted net income(1) increased 21.8% to $82.3 million, or $0.84 per diluted share, compared to $67.6 million, or $0.69 per diluted share in the prior year.
Adjusted EBITDA(1) increased 22.7% to $184.7 million from $150.6 million in the prior year.
210 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 1,518 at December 31, 2017.

(1) Adjusted net income and Adjusted EBITDA are non-GAAP measures. For reconciliations of Adjusted EBITDA and Adjusted net income to U.S. GAAP (“GAAP”) net income see “Non-GAAP Financial Measures” accompanying this release.

Christopher Rondeau, Chief Executive Officer, commented, “We completed our 11th consecutive year of positive system-wide same store sales growth with a fourth quarter gain of 11.6%, our largest quarterly percentage increase of 2017. Our business has continued to accelerate, which is a testament to the growing strength of our brand and the appeal of our affordable, non-intimidating fitness offering, especially with casual and first-time gym users. With the addition of 1.7 million net new members and a record 210 new store openings system-wide in 2017, we’ve continued to build on our leading market share position through effective national and local advertising programs and expanding our geographic footprint in new and existing markets. We begin the New Year with great brand momentum and numerous opportunities to further grow our business in the near and long-term, including significant store development opportunities, increased brand and marketing investments, and using technology to enhance member experiences.”

Operating Results for the Fourth Quarter Ended December 31, 2017

For the fourth quarter of 2017, total revenue increased $17.6 million or 15.1% to $134.0 million from $116.4 million in the prior year period. By segment:

Franchise segment revenue, which includes commission income, increased $7.9 million or 24.6% to $40.0 million from $32.1 million in the prior year period;
Corporate-owned stores segment revenue increased $2.3 million or 8.7% to $28.2 million from $26.0 million in the prior year period; and
Equipment segment revenue increased $7.5 million or 12.8% to $65.8 million from $58.3 million.

System-wide same store sales increased 11.6%. By segment, franchisee-owned same store sales increased 11.9% and corporate-owned same store sales increased 5.6%.

For the fourth quarter of fiscal 2017, net income was $0.8 million and net income attributable to Planet Fitness Inc. was a loss of $3.5 million, or $0.04 per diluted share, compared to net income of $21.9 million and net income attributable to Planet Fitness Inc. of $10.6 million, or $0.18 per diluted share in the prior year period. Both amounts in 2017 include the net negative impact of approximately $17.2 million related to the remeasurement of the Company’s deferred tax assets and tax benefit arrangements due to recent tax reform. Adjusted net income (see “Non-GAAP Financial Measures”) increased 19.1% to $23.5 million, or $0.24 per diluted share, from $19.7 million, or $0.20 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 39.5% for the current and comparable prior year period and excludes certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance (see “Non-GAAP Financial Measures”).

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 (see “Non-GAAP Financial Measures”), increased 16.0% to $51.2 million from $44.1 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 (see “Non-GAAP Financial Measures”).

Franchise segment EBITDA increased $6.1 million or 23.4% to $32.0 million driven by royalties from both new stores and higher same store sales;
Corporate-owned stores segment EBITDA increased $0.7 million or 6.5% to $11.3 million driven by higher same store sales and annual fee revenue, partially offset by higher pre-opening costs associated with four corporate-owned stores opened during the fourth quarter; and
Equipment segment EBITDA decreased $0.2 million or 1.0% to $15.0 million. In the fourth quarter of 2016, equipment segment EBITDA included a gain of $1.8 million recorded in connection with the write-off of a previously accrued equipment discount.

Operating Results for the Fiscal Year Ended December 31, 2017

For the fiscal year ended December 31, 2017, total revenue increased $51.7 million or 13.7% to $429.9 million from $378.2 million in the prior year. By segment:

Franchise segment revenue, which includes commission income, increased $33.7 million or 28.9% to $150.2 million from $116.5 million in the prior year;
Corporate-owned stores segment revenue increased $7.4 million or 7.1% to $112.1 million from $104.7 million in the prior year; and
Equipment segment revenue increased $10.6 million or 6.8% to $167.7 million from $157.0 million in the prior year.

System-wide same store sales increased 10.2% from the prior year. By segment, franchisee-owned same store sales increased 10.5% and corporate-owned same store sales increased 4.9% from the prior year.

For full year fiscal 2017, net income was $55.6 million and net income attributable to Planet Fitness Inc. was $33.1 million, or $0.42 per diluted share, compared to net income of $71.2 million and net income attributable to Planet Fitness, Inc. of $21.5 million, or $0.50 per diluted share in the prior year. Both amounts in 2017 include the net negative impact of approximately $17.2 million related to the remeasurement of the Company’s deferred tax assets and tax benefit arrangements due to recent tax reform. Adjusted net income (see “Non-GAAP Financial Measures”) increased 21.8% to $82.3 million, or $0.84 per diluted share, from $67.6 million, or $0.69 per diluted share, in the prior year. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 39.5% for the current year and comparable prior year period and excludes certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance (see “Non-GAAP Financial Measures”).

Adjusted EBITDA (see “Non-GAAP Financial Measures”) increased $34.1 million or 22.7% to $184.7 million in 2017 from $150.6 million in the prior year.

Franchise segment EBITDA increased $29.2 million or 30.0% to $126.5 million;
Corporate-owned stores segment EBITDA increased $6.0 million or 14.7% to $46.9 million; and
Equipment segment EBITDA increased $2.1 million or 5.8% to $38.5 million. In 2016, equipment segment EBITDA included a gain of $1.8 million recorded in connection with the write-off of a previously accrued equipment discount.

Share Repurchase Program

The Company announced that its Board of Directors approved an increase of $80 million to its current $20 million share repurchase program, bringing the total authorized amount available for repurchase to $100 million. The timing of the purchases and the amount of stock repurchased is subject to the Company’s discretion and will depend on market and business conditions, the Company’s general working capital needs, stock price, applicable legal requirements and other factors. Our ability to repurchase shares at any particular time is also subject to continued compliance with the terms of our credit agreement. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing. Planet Fitness is not obligated under the program to acquire any particular amount of stock and can suspend or terminate the program at any time.

2018 Outlook

For the year ending December 31, 2018, the Company expects:

Total revenue increase of approximately 20%;
System-wide same store sales growth in the high single digit percentage range; and
Adjusted net income and adjusted net income per diluted share to increase approximately 40%.

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