Planet Fitness, Inc. Announces Fourth Quarter and Fiscal Year 2016 Results

Posted: March 1, 2017 in Chains

Planet Fitness

NEWINGTON, N.H. – Planet Fitness, Inc. (NYSE: PLNT) reported financial results for its fourth quarter and fiscal year ended December 31, 2016 and announces full year 2017 outlook.

Fourth Quarter Fiscal 2016 Highlights

Total revenue increased from the prior year period by 10.0% to $116.4 million.
System-wide same store sales increased 10.6%.
Net income was $21.9 million, or $0.18 per diluted share, compared to net income of $17.2 million, or $0.06 per diluted share in the prior year period.
Adjusted net income(1) increased 15.9% to $19.7 million, or $0.20 per diluted share, compared to $17.0 million, or $0.17 per diluted share in the prior year period.
Adjusted EBITDA(1) increased 17.7% to $44.1 million from $37.5 million in the prior year period.
74 new Planet Fitness stores were opened system-wide during the period, bringing system-wide total stores to 1,313 at December 31, 2016.
Declared and paid a cash dividend to Class A shareholders of $2.78 per share.

Fiscal Year 2016 Highlights

Total revenue increased from the prior year by 14.4% to $378.2 million.
System-wide same store sales increased 8.8%.
Net income was $71.2 million, or $0.50 per diluted share, compared to net income of $38.1 million, or $0.11 per diluted share in the prior year.
Adjusted net income(1) increased 26.9% to $67.6 million, or $0.69 per diluted share, compared to $53.2 million, or $0.54 per diluted share in the prior year.
Adjusted EBITDA(1) increased 22.0% to $150.6 million from $123.5 million in the prior year.
195 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 1,313 on December 31, 2016.

(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, “it was another terrific year for Planet Fitness. We increased system-wide same store sales high-single digits, grew adjusted net income 27% and returned $271 million to shareholders through a special one-time dividend. The foundation of our success starts with our affordable, non-intimidating fitness offering. Our welcoming in-store experience featuring industry leading cardio and strength equipment is resonating with an increasing number of consumers as we expand brand awareness through our growing national and local advertising spend combined with our powerful franchise base that continues to bring our brand to new communities. We ended the year with over 1.6 million additional members in 2016, many of whom had never belonged to a gym before, and the new year is off to a strong start. I’m incredibly proud of everything we have accomplished, especially how we’ve enriched so many members’ lives and delivered strong returns for our franchisees and shareholders. We are excited to build on our current momentum in 2017 and over the long-term.”

Operating Results for the Fourth Quarter Ended December 31, 2016

For the fourth quarter of 2016, total revenue increased $10.6 million or 10.0% to $116.4 million from $105.8 million in the prior year period. By segment:

Franchise segment revenue, which includes commission income, increased $7.5 million or 30.2% to $32.1 million from $24.7 million in the prior year period;
Corporate-owned stores segment revenue increased $1.2 million or 5.1% to $26.0 million from $24.7 million in the prior year period; and
Equipment segment revenue increased $1.9 million or 3.3% to $58.3 million from $56.5 million.

System-wide same store sales increased 10.6%. By segment, franchisee-owned same store sales increased 11.0% and corporate-owned same store sales increased 4.7%.

For the fourth quarter of fiscal 2016, net income was $21.9 million, or $0.18 per diluted share, compared to net income of $17.2 million, or $0.06 per diluted share in the prior year period. Adjusted net income (see “Non-GAAP Financial Measures”) increased 15.9% to $19.7 million, or $0.20 per diluted share, from $17.0 million, or $0.17 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 year period and 39.4% for the 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 17.7% to $44.1 million from $37.5 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 $6.7 million or 34.8% to $25.9 million driven by royalties from new stores opened since December 31, 2015 as well as higher same store sales;
Corporate-owned stores segment EBITDA increased $0.9 million or 8.8% to $10.6 million driven by higher same store sales; and
Equipment segment EBITDA increased $2.1 million or 16.0% to $15.1 million driven primarily by higher equipment sales.

Operating Results for the Fiscal Year Ended December 31, 2016

For the fiscal year ended December 31, 2016, total revenue increased $47.7 million or 14.4% to $378.2 million from $330.5 million in the prior year. By segment:

Franchise segment revenue, which includes commission income, increased $28.4 million or 32.2% to $116.5 million from $88.1 million in the prior year;
Corporate-owned stores segment revenue increased $6.3 million or 6.4% to $104.7 million from $98.4 million in the prior year; and
Equipment segment revenue increased $13.0 million or 9.0% to $157.0 million from $144.1 million in the prior year.

System-wide same store sales increased 8.8% from the prior year. By segment, franchisee-owned same store sales increased 9.0% and corporate-owned same store sales increased 4.9% from the prior year.

Net income increased to $71.2 million, or $0.50 per diluted share, from $38.1 million, or $0.11 per diluted share in the prior year. Adjusted net income (see “Non-GAAP Financial Measures”) increased 26.9% to $67.6 million, or $0.69 per diluted share, from $53.2 million, or $0.54 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 period and 39.4% for the 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 $27.1 million or 22.0% to $150.6 million in fiscal 2016 from $123.5 million in the prior year.

Franchise segment EBITDA increased $31.2 million or 47.3% to $97.3 million;
Corporate-owned stores segment EBITDA increased $4.8 million or 13.2% to $40.8 million; and
Equipment segment EBITDA increased $4.5 million or 14.1% to $36.4 million.

2017 Outlook

For the year ending December 31, 2017, the Company expects:

Total revenue between $405 million and $415 million;
System-wide same store sales growth in the 6% to 8% range; and
Adjusted net income of $71 million to $74 million, or $0.72 to $0.75 per diluted share.

Presentation of Financial Measures

Planet Fitness, Inc. (the “Company”) was formed in March 2015 for the purpose of facilitating the initial public offering (the “IPO”) and related recapitalization transactions that occurred in August 2015, and in order to carry on the business of Pla-Fit Holdings, LLC (“Pla-Fit Holdings”) and its subsidiaries. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of Pla-Fit Holdings not owned by the Company. The financial results in periods prior to the IPO and related recapitalization transactions are of Pla-Fit Holdings, as the predecessor to the Company for accounting and reporting purposes. Accordingly, these historical results do not purport to reflect what the results of operations of the Company or Pla-Fit Holdings would have been had the IPO and related recapitalization transactions occurred prior to August 2015.

The financial information presented in this release includes non-GAAP financial measures such as EBITDA, Segment EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted to provide measures that we believe are useful to investors in evaluating the Company’s performance. These non-GAAP financial measures are supplemental measures of the Company’s performance that are neither required by, nor presented in accordance with GAAP. These financial measures should not be considered as substitutes for GAAP financial measures such as net income or any other performance measures derived in accordance with, GAAP. In addition, in the future, the Company may incur expenses or charges such as those added back to calculate Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted. The Company’s presentation of Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted should not be construed as an inference that the Company’s future results will be unaffected by similar amounts or other unusual or nonrecurring items. See the tables at the end of this press release for a reconciliation of EBITDA, Adjusted EBITDA, Total Segment EBITDA, Adjusted net income, and Adjusted net income per share, diluted, to their most directly comparable GAAP financial measure.

The non-GAAP financial measures used in our full-year outlook will differ from net income and net income per share, diluted, determined in accordance with GAAP in ways similar to those described in the reconciliations at the end of this press release. We do not provide guidance for net income or net income per share, diluted, determined in accordance with GAAP or a reconciliation of guidance for Adjusted net income and Adjusted net income per share, diluted, to the most directly comparable GAAP measure because we are not able to predict with reasonable certainty the amount or nature of all items that will be included in our net income and net income per share, diluted, for the year ended December 31, 2017. These items are uncertain, depend on many factors and could have a material impact on our net income and net income per share, diluted, for the year ended December 31, 2017.

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