Planet Fitness, Inc. Announces First Quarter 2018 Results
Posted: May 9, 2018 in Chains
HAMPTON, N.H. – Planet Fitness, Inc. (NYSE: PLNT) reported financial results for its first quarter ended March 31, 2018.
First Quarter Fiscal 2018 Highlights
Total revenue increased from the prior year period by 33.2% to $121.3 million.
System-wide same stores sales increased 11.1%.
Net income attributable to Planet Fitness, Inc. was $19.9 million, or $0.23 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $8.8 million, or $0.14 per diluted share in the prior year period.
Net income was $23.5 million, compared to net income of $17.9 million in the prior year period.
Adjusted net income(1) increased 42.3% to $26.2 million, or $0.27 per diluted share, compared to $18.4 million, or $0.19 per diluted share in the prior year period.
Adjusted EBITDA(1) increased 15.4% to $48.8 million from $42.3 million in the prior year period.
47 new Planet Fitness franchise stores were opened during the period, bringing system-wide total stores to 1,565 as of March 31, 2018.
(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.
“We delivered another strong financial performance as first quarter system-wide same store sales increased 11% for the second consecutive year and all three operating segments posted double-digit revenue gains on a percentage basis,” commented Chris Rondeau. “Our success is being fueled by the expansion of our high value, low cost non-intimidating fitness concept in existing and new markets combined with growing brand awareness from increased investments in national and local advertising. At the same time, we continue to explore ways to strengthen our offering, including utilizing technology to provide more immersive workout experiences and personalized workout recommendations. By targeting casual and first-time gym users, we believe Planet Fitness has a long runway for growth based on the fact that the vast majority of the U.S. population does not own a gym membership.”
Operating Results for the First Quarter Ended March 31, 2018
For the first quarter 2018, total revenue increased $30.2 million or 33.2% to $121.3 million from $91.1 million in the prior year period. $10.5 million, or 11.5% of the increase, is national advertising fund revenue and is included in our franchise segment. We began reporting national advertising fund contributions as revenue in 2018 in connection with the adoption of the new U.S. GAAP revenue recognition standard. By segment:
- Franchise segment revenue increased $17.8 million or 48.4% to $54.6 million from $36.8 million in the prior year period, which includes commission income and the above-mentioned $10.5 million of national advertising fund revenue;
- Corporate-owned stores segment revenue increased $5.7 million or 21.0% to $32.7 million from $27.0 million in the prior year period, $2.4 million of which is from six franchisee-owned stores acquired on January 1, 2018; and
- Equipment segment revenue increased $6.7 million or 24.8% to $34.0 million from $27.3 million in the prior year period.
System-wide same store sales increased 11.1%. By segment, franchisee-owned same store sales increased 11.4% and corporate-owned same store sales increased 5.0%.
For the first quarter of 2018, net income was $23.5 million, or $0.23 per diluted share, compared to net income of $17.9 million, or $0.14 per diluted share, in the prior year period. Adjusted net income increased 42.3% to $26.2 million, or $0.27 per diluted share, from $18.4 million, or $0.19 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.3% for the current year period and 39.5% 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 15.4% to $48.8 million from $42.3 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 $4.6 million or 14.5% to $36.7 million driven by royalties from new franchised stores opened since March 31, 2017, a higher average royalty rate and higher same store sales of 11.4%;
- Corporate-owned stores segment EBITDA increased $1.5 million or 13.8% to $12.2 million driven primarily by an increase in same store sales, higher annual fees and the addition of six franchise owned stores acquired January 1, 2018; and
- Equipment segment EBITDA increased by $1.4 million or 22.6% to $7.5 million driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.
For the year ending December 31, 2018, the Company expects:
- Total revenue increase of approximately 20% as compared to the year ended December 31, 2017;
- System-wide same store sales growth in the high single digit range; and
- Adjusted net income and adjusted net income per diluted share to increase approximately 40% as compared to the year ended December 31, 2017.
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 information presented in this press 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 in isolation or 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 ending December 31, 2018. 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 ending December 31, 2018.