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Planet Fitness, Inc. Announces Second Quarter 2017 Results

Posted: August 9, 2017 in Chains

Planet FitnessPlanet Fitness

HAMPTON, N.H. – Planet Fitness, Inc. (NYSE: PLNT) reported financial results for its second quarter ended June 30, 2017.

Second Quarter Fiscal 2017 Highlights

  • Total revenue increased from the prior year period by 17.3% to $107.3 million.
  • System-wide same store sales increased 9.0%.
  • Net income attributable to Planet Fitness, Inc. was $12.4 million, or $0.16 per diluted share, compared to net income attributable to Planet Fitness Inc. of $4.1 million, or $0.11 per diluted share in the prior year period.
  • Net income was $18.0 million, compared to net income of $18.1 million in the prior year period.
  • Adjusted net income(1) increased 28.9% to $21.7 million, or $0.22 per diluted share, compared to $16.8 million, or $0.17 per diluted share in the prior year period.
  • Adjusted EBITDA(1) increased 30.3% to $47.9 million from $36.8 million in the prior year period.
  • 37 new Planet Fitness franchise stores were opened during the period, bringing system-wide total stores to 1,403 at June 30, 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 press release.

Christopher Rondeau, Chief Executive Officer, commented, “We had a great second quarter driven by our relentless commitment to reaching more and more casual and first time gym users with our welcoming, non-intimidating fitness offering. Total revenue increased 17% driven by strong growth in all three of our business segments while system-wide same store sales rose 9%, marking our 42nd consecutive quarter of positive same store sales growth. Through our franchisees’ new store openings along with over $100 million spent annually on national and local advertising programs, we continue to build on our leadership position by capturing additional market share as well as bringing new consumers into the fitness industry. Importantly, we’ve been able to expand Planet Fitness in a highly profitable manner evidenced by the 30% increase in second quarter adjusted EBITDA thanks to our asset-light business model that includes our fast-growing, high-margin Franchise segment. I am confident that our compelling concept and powerful brand recognition combined with unmatched system-wide leadership and resources will allow us to capitalize on opportunities that drive long-term value for our shareholders.”

Operating Results for the Second Quarter Ended June 30, 2017

For the second quarter 2017, total revenue increased $15.8 million or 17.3% to $107.3 million from $91.5 million in the prior year period. By segment:

  • Franchise segment revenue, which includes commission income, increased $8.3 million or 28.2% to $37.8 million from $29.5 million in the prior year period;
  • Corporate-owned stores segment revenue increased $1.9 million or 7.2% to $28.3 million from $26.4 million in the prior year period; and
  • Equipment segment revenue increased $5.6 million or 15.8% to $41.2 million from $35.6 million. This increase was driven by an increase in replacement equipment sales to existing franchisee-owned stores and equipment sales related to new store openings.

System-wide same store sales increased 9.0%. By segment, franchisee-owned same store sales increased 9.3% and corporate-owned same store sales increased 4.3%.

For the second quarter of 2017, net income was $18.0 million, or $0.16 per diluted share, compared to net income of $18.1 million, or $0.11 per diluted share, in the prior year period. Adjusted net income increased 28.9% to $21.7 million, or $0.22 per diluted share, from $16.8 million, 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 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 30.3% to $47.9 million from $36.8 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 $7.8 million or 31.6% to $32.5 million driven by royalties from new franchised stores opened since June 30, 2016 as well as higher same store sales and overall margin expansion;
  • Corporate-owned stores segment EBITDA increased $3.3 million or 34.5% to $12.8 million driven primarily by higher monthly and annual revenue, including an increase in same store sales, and improved operating margin; and
  • Equipment segment EBITDA increased by $2.0 million or 24.8% to $9.8 million driven by an increase in replacement equipment sales to existing franchisee-owned stores and equipment sales related to new store openings.

Secondary Offering

In May 2017, the Company completed a secondary offering of 16,085,510 shares of its Class A common stock at a price of $20.28 per share. All of the shares sold in the offering were offered by certain existing holders of limited liability company units of Pla-Fit Holdings, LLC and certain holders of Class A common stock affiliated with Consumer Partners, LLC, together referred to as the “Selling Stockholders.” The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Selling Stockholders.

Debt Refinancing

In May 2017, the Company amended its credit facility to reduce the interest rate margin for term loan borrowings by 50 basis points, with an additional 25 basis point reduction in rate in the future if the Total Net Leverage Ratio (as defined in the credit agreement) is less than 3.50 to 1.00. The amendment also reduced the interest rate margin for revolving credit line borrowings by 25 basis points.

2017 Outlook

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

  • Total revenue between $409 million and $415 million;
  • System-wide same store sales growth in the 8% to 9% range; and
  • Adjusted net income of $75 million to $77 million, or $0.76 to $0.78 per diluted share.

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