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Planet Fitness, Inc. Announces Fourth Quarter and Fiscal Year 2015 Results

Posted: March 3, 2016 in Chains

Planet FitnessPlanet Fitness

NEWINGTON, N.H.– Planet Fitness, Inc. (NYSE: PLNT) reported financial results for its fourth quarter and fiscal year ended December 31, 2015.

Fourth Quarter Fiscal 2015 Highlights

  • Total revenue increased from the prior year period by 10.2% to $105.8 million.
  • System-wide same store sales increased 6.2%.
  • Net income was $17.2 million compared to net income of $13.8 million in the prior year period.
  • Pro forma adjusted net income(1) increased 24.7% to $17.0 million, or $0.17 per diluted share, compared to $13.7 million, or $0.14 per diluted share in the prior year period.
  • Adjusted EBITDA (1) increased 23.9% to $37.5 million from $30.3 million in the prior year period.
  • 84 new Planet Fitness stores were opened system-wide during the period.

Fiscal Year 2015 Highlights

  • Total revenue increased from the prior year by 18.1% to $330.5 million.
  • System-wide same store sales increased 7.7%.
  • Net income was $38.1 million compared to net income of $37.3 million in the prior year.
  • Pro forma adjusted net income(1) increased 26.2% to $53.2 million, or $0.54 per diluted share, compared to $42.2 million, or $0.43 per diluted share in the prior year.
  • Adjusted EBITDA (1) 22.8% to $123.5 million from $100.5 million in the prior year.
  • 209 new Planet Fitness stores were opened system-wide during the year.

(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 GAAP net income see “Non-GAAP Financial Measures” accompanying this release.

Christopher Rondeau, Chief Executive Officer, commented, “Our fourth quarter performance exceeded expectations, capping a terrific 2015 for Planet Fitness. This past year we increased system-wide same store sales 7.7% while adding 209 new stores, including our first international franchised locations. These achievements are the direct result of our affordable, non-intimidating fitness offering and powerful national advertising strategy—both significant competitive advantages, combined with our group of well capitalized franchisees which we are leveraging to rapidly expand our consumer reach. The current year is off to an exciting start as our lead sponsorship of the Times Square New Year’s Eve Celebration has helped fuel great momentum early on. We are very confident that our differentiated, asset light business model has our company well positioned to deliver profitable growth and increased shareholder returns over the long-term.”

Operating Results for the Fourth Quarter Ended December 31, 2015

For the fourth quarter 2015, total revenue increased $9.8 million or 10.2% to $105.8 million from $96.0 million in the prior year period. By segment:

  • Franchise segment revenue, which includes commission income, increased $3.6 million or 16.9% to $24.7 million from $21.1 million in the prior year period;
  • Corporate-owned stores segment revenue increased $2.5 million or 11.2% to $24.7 million from $22.2 million in the prior year period; and
  • Equipment segment revenue increased $3.8 million or 7.2% to $56.5 million from $52.7 million. The increase was driven by replacement equipment sales.

System-wide same store sales increased 6.2%. By segment, franchisee-owned same store sales increased 6.6% and corporate-owned same store sales increased 1.0%.

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 23.9% to $37.5 million from $30.3 million in the prior year period. EBITDA by segment:

  • Franchise segment EBITDA increased $5.5 million or 39.5% to $19.3 million driven by royalties from new stores opened since December 31, 2014 as well as higher same store sales;
  • Corporate-owned stores segment EBITDA increased $2.2 million or 29.6% to $9.7 million driven primarily by new corporate stores opened since the beginning of December 2014; and
  • Equipment segment EBITDA increased $1.8 million or 15.7% to $13.0 million driven by higher sales of replacement equipment from older franchise stores required to replace certain equipment.

For the fourth quarter of fiscal 2015, net income was $17.2 million compared to net income of $13.8 million in the prior year period. Pro forma adjusted net income (see “Non-GAAP Financial Measures”) increased 24.7% to $17.0 million, or $0.17 per diluted share, from $13.7 million, or $0.14 per diluted share, in the prior year period. Pro forma adjusted net income has been adjusted to exclude costs associated with the initial public offering of $0.5 million, reflect a normalized federal income tax rate of 39.4% as if we were a public company for the current and comparable prior year period and exclude amortization and other non-recurring costs and gains.

During the fourth quarter of 2015, we opened 84 new Planet Fitness franchise stores, bringing the system-wide total stores to 1,124 at December 31, 2015.

Operating Results for the Fiscal Year Ended December 31, 2015

For the fiscal year ended December 31, 2015, total revenue increased $50.8 million or 18.1% to $330.5 million from $279.8 million in the prior year. By segment:

  • Franchise segment revenue, which includes commission income, increased $16.3 million or 22.7% to $88.1 million from $71.8 million in the prior year period;
  • Corporate-owned stores segment revenue increased $13.3 million or 15.7% to $98.4 million from $85.0 million in the prior year period; and
  • Equipment segment revenue increased $21.1 million or 17.2% to $144.1 million from $122.9 million.

System-wide same store sales increased 7.7%. By segment, franchisee-owned same store sales increased 8.3% and corporate-owned same store sales increased 1.9%.

Adjusted EBITDA (see “Non-GAAP Financial Measures”) increased $22.9 million or 22.8% to $123.5 million in fiscal 2015 from $100.5 million in the prior year. EBITDA by segment:

  • Franchise segment EBITDA increased $12.9 million or 24.3% to $66.0 million, including the negative impact of $3.9 million of non-recurring expenses related to the transition of the company’s point-of-sale billing and processing (POS) system during 2015;
  • Corporate-owned stores segment EBITDA increased $4.4 million or 13.8% to $36.1 million; and
  • Equipment segment EBITDA increased $5.5 million or 20.8% to $31.9 million.

Net income increased by $0.8 million or 2.2% to $38.1 million from $37.3 million in the prior year period. Pro forma adjusted net income (see “Non-GAAP Financial Measures”) increased 26.2% to $53.2 million, or $0.54 per diluted share, from $42.2 million, or $0.43 per diluted share, in the prior year. Pro forma adjusted net income has been adjusted to exclude costs associated with the initial public offering of $13.9 million, reflect a normalized federal income tax rate of 39.4% as if we were a public company for the full year 2015 and 2014 and exclude amortization and other non-recurring costs and gains.

2016 Outlook

For the year ending December 31, 2016, the Company expects:

  • Total revenue between $355 million and $365 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 $59 million to $62 million, or $0.60 to $0.63 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 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 U.S. GAAP (“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 our 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.

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