Planet Fitness Announces First Quarter 2016 Results
Posted: May 10, 2016 in Chains
NEWINGTON, N.H. – Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its first quarter ended March 31, 2016.
First Quarter Fiscal 2016 Highlights
- Total revenue increased from the prior year period by 8.3% to $83.3 million.
- System-wide same store sales increased 6.8%.
- Net income was $16.3 million compared to net income of $8.5 million in the prior year period.
- Pro forma adjusted net income(1) increased 20.5% to $15.2 million, or $0.15 per diluted share, compared to $12.6 million, or $0.13 per diluted share in the prior year period.
- Adjusted EBITDA(1) increased 20.4% to $34.3 million from $28.5 million in the prior year period.
- 48 new Planet Fitness franchise stores were opened during the period, bringing system-wide total stores to 1,171 at March 31, 2016.
- The company brought in 1 million net new members, equating to 864 net new members per store.
(1) Pro forma adjusted net income and adjusted EBITDA are non-GAAP measures. For reconciliations of adjusted EBITDA and pro forma adjusted net income to U.S. GAAP (“GAAP”) net income see “Non-GAAP Financial Measures” accompanying this release.
Christopher Rondeau, Chief Executive Officer, commented, “The year is off to a strong start. We continue to be successful attracting new consumers to Planet Fitness, which, combined with system-wide same store sales growth of 6.8% contributed to our outperformance in the first quarter compared with guidance. Awareness of our affordable, non-intimidating fitness offering continues to increase driven by the combination of our powerful national advertising strategy and continued unit expansion. We remain confident that we have a significant runway for growth based on how well our concept continues to resonate with the large population of casual and first time gym users. At the same time, our group of well capitalized franchisees is on schedule to open a record number of new stores this year and the pipeline is robust looking beyond 2016. We believe our differentiated, asset light business model has our company well positioned to deliver enhanced profitability and greater value to our shareholders over the long-term.”
Operating Results for the First Quarter Ended March 31, 2016
For the first quarter 2016, total revenue increased $6.4 million or 8.3% to $83.3 million from $76.9 million in the prior year period. By segment:
- Franchise segment revenue, which includes commission income, increased $5.9 million or 27.2% to $27.7 million from $21.8 million in the prior year period;
- Corporate-owned stores segment revenue increased $2.2 million or 9.1% to $25.7 million from $23.5 million in the prior year period; and
- Equipment segment revenue decreased $1.7 million or 5.2% to $30.0 million from $31.6 million. This decrease was driven by a decrease in equipment sales related to the anticipated fewer new store openings versus a year ago, partially offset by higher re-equipment revenue. Equipment sales related to new store openings and the timing of individual new store openings can be affected by many factors making particular quarter to quarter comparisons less meaningful.
System-wide same store sales increased 6.8%. By segment, franchisee-owned same store sales increased 7.0% and corporate-owned same store sales increased 4.9%.
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 20.4% to $34.3 million from $28.5 million in the prior year period. EBITDA by segment:
- Franchise segment EBITDA increased $10.2 million or 75.4% to $23.8 million driven by royalties from new franchised stores opened since March 31, 2015 as well as higher same store sales and overall margin expansion;
- Corporate-owned stores segment EBITDA increased $2.4 million or 30.3% to $10.2 million driven primarily by higher revenue related to stores not included in the same store sale base plus higher same store sales and overall margin expansion; and
- Equipment segment EBITDA decreased slightly by $0.4 million or 6.6% to $6.3 million driven by lower equipment sales to new stores partially offset by higher sales of replacement equipment from existing franchise stores required to replace certain equipment.
For the first quarter of fiscal 2016, net income was $16.3 million compared to net income of $8.5 million in the prior year period. Pro forma adjusted net income (see “Non-GAAP Financial Measures”) increased 20.5% to $15.2 million, or $0.15 per diluted share, from $12.6 million, or $0.13 per diluted share, in the prior year period. Pro forma adjusted net income has been adjusted to reflect a normalized federal income tax rate of 39.4% for the current and comparable prior year period and excludes amortization and other non-recurring costs and gains.
Share Repurchase Program
The Board of Directors has authorized the Company to purchase, from time to time, as market conditions warrant, $20 million of the Company’s common stock. The share repurchase program does not obligate the Company to repurchase any particular amount of common stock, and it could be modified, suspended or discontinued at any time. The timing and amount of repurchases will be determined by management at its discretion based on a variety of factors such as the market price of its common stock, corporate and legal requirements, general market and economic conditions, and compliance with the terms of agreements governing the Company’s outstanding indebtedness. Purchases of the Company’s common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, in privately negotiated transactions or by other means in accordance with federal securities laws. The share repurchase program does not have a specified expiration date.
Mr. Rondeau said, “The Board’s decision to authorize this $20 million share buyback program reflects their confidence in the strength of the Planet Fitness brand and our asset light business model. We believe that current volatility in our stock price provides us with opportunities to purchase our stock at prices that we believe undervalue our business. This program underscores the Company’s commitment to creating value for our shareholders by using our strong cash flow in the most efficient manner possible as opportunities present themselves.”
For the year ending December 31, 2016, the Company now expects:
- Total revenue between $360 million and $370 million;
- System-wide same store sales growth in the mid-single digit range;
- Between 210 and 220 new franchised stores; and
- Pro forma adjusted net income of $61 million to $64 million, or $0.62 to $0.65 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 transactions that occurred in August 2015, and in order to carry on the business of Pla-Fit Holdings, LLC and its subsidiaries (“Pla-Fit Holdings”). 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 recapitalization transactions are of Pla-Fit Holdings, as the predecessor to Planet Fitness, Inc. for accounting and reporting purposes. Accordingly, these historical results do not purport to reflect what the results of operations of Planet Fitness, Inc. or Pla-Fit Holdings would have been had the IPO and related recapitalization transactions occurred prior to such periods.
The financial information presented in this release includes non-GAAP financial measures such as EBITDA, adjusted EBITDA, pro forma adjusted net income and pro forma adjusted net income per diluted share to provide measures that we believe are useful to investors in evaluating the Company’s performance. These non-GAAP financial measures presented in this release 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, pro forma adjusted net income and pro forma adjusted net income per diluted share. The Company’s presentation of adjusted EBITDA, pro forma adjusted net income and pro forma net income per diluted share should not be construed as an inference that the Company’s future results will be unaffected by unusual or nonrecurring items. See the tables at the end of this press release for a reconciliation of adjusted EBITDA and pro forma adjusted net income to their nearest GAAP financial measure.
The non-GAAP financial measures used in the full-year outlook will differ from GAAP net income and net income per share in ways similar to those described in the reconciliations at the end of this press release.