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Planet Fitness, Inc. Announces Third Quarter 2015 Results

NEWINGTON, N.H., Nov. 12, 2015 /PRNewswire/ -- Planet Fitness Inc. (PLNT) today reported financial results for its third quarter ended September 30, 2015.

Third Quarter Fiscal 2015 Highlights

  • Total revenue increased from the prior year period by 8.4% to $68.8 million.
  • System-wide same store sales increased 6.9%.
  • Net loss was $3.9 million compared to net income of $8.1 million in the prior year period.
  • Pro forma adjusted net income(1) increased 6.6% to $10.3 million, or $0.10 per diluted share, compared to $9.7 million, or $0.10 per diluted share in the prior year period.
  • Adjusted EBITDA(1) increased 11.8% to $26.5 million from $23.7 million in the prior year period.
  • 26 new Planet Fitness stores were opened system-wide during the period.

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, "We are very pleased with our third quarter results. Our performance was driven by the continued execution of our strategy: expansion of the Planet Fitness store base coupled with system-wide same store sales growth. Our unique fitness offering and powerful national advertising strategy continue to resonate with a broad consumer audience. Looking ahead, we see a long runway for growth. With our three operating segments – Franchise, Corporate Stores and Equipment – we are well positioned to generate strong top-line gains, margin expansion and significant free cash flow over the long-term."

Operating Results for the Third Quarter Ended September 30, 2015

For the third quarter 2015, total revenue increased $5.4 million or 8.4% to $68.8 million from $63.5 million in the prior year period. By segment:

  • Franchise segment revenue, which includes commission income, increased $4.0 million or 25.4% to $19.8 million from $15.8 million in the prior year period;
  • Corporate-owned stores segment revenue increased $2.5 million or 10.8% to $25.2 million from $22.7 million in the prior year period; and,
  • Equipment segment revenue decreased $1.1 million or 4.5% to $23.9 million from $25.0 million. The decrease was driven by expected changes in the timing of replacement equipment sales and new store equipment sales.

System-wide same store sales increased 6.9%. By segment, franchisee-owned same store sales increased 7.3% and corporate-owned same store sales increased 1.7%.

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 11.8% to $26.5 million from $23.7 million in the prior year period. EBITDA by segment:

  • Franchise segment EBITDA increased $3.6 million or 30.4% to $15.5 million;
  • Corporate-owned stores segment EBITDA decreased $0.2 million or 1.7% to $9.3 million driven primarily by changes in foreign currency exchange rates and lower profit contributions from the 4 corporate-owned stores opened during the last 12-months as they ramp to mature operating margins; and,
  • Equipment segment EBITDA decreased $0.8 million or 14.1% to $4.9 million driven by the combination of planned lower equipment sales, lower pricing, and a slight decrease in volume rebates.

For the third quarter of fiscal 2015, net loss was $3.9 million compared to net income of $8.1 million in the prior year period. Pro forma adjusted net income (see "Non-GAAP Financial Measures") increased 6.6% to $10.3 million, or $0.10 per diluted share, from $9.7 million, or $0.10 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 $8.3 million, reflect a normalized federal income tax rate of 40.3% as if we were a public company for all of the third quarter and excludes other non-recurring costs.

During the third quarter of 2015, we opened 26 new Planet Fitness franchise stores, bringing the system-wide total stores to 1,040 at September 30, 2015.

Operating Results for the Nine Months Ended September 30, 2015

For the nine months ended September 30, 2015, total revenue increased $40.9 million or 22.3% to $224.7 million from $183.8 million in the prior year period. By segment:

  • Franchise segment revenue, which includes commission income, increased $12.7 million or 25.1% to $63.4 million from $50.7 million in the prior year period;
  • Corporate-owned stores segment revenue increased $10.9 million or 17.3% to $73.7 million from $62.8 million in the prior year period; and,
  • Equipment segment revenue increased $17.4 million or 24.7% to $87.6 million from $70.2 million.

System-wide same store sales increased 8.3%. By segment, franchisee-owned same store sales increased 8.8% and corporate-owned same store sales increased 2.2%.

Adjusted EBITDA (see "Non-GAAP Financial Measures") increased $15.8 million or 22.4% to $86.0 million in the nine month period from $70.3 million in the prior year period. EBITDA by segment:

  • Franchise segment EBITDA increased $7.5 million or 19.0% to $46.8 million, including the negative impact of $3.9 million of non-recurring expenses related to a recent transition of the company's point-of-sale billing and processing (POS) system;
  • Corporate-owned stores segment EBITDA increased $2.1 million or 8.9% to $26.3 million; and,
  • Equipment segment EBITDA increased $3.7 million or 24.5% to $18.9 million.

Net income decreased by $7.0 million or 30.3% to $16.0 million from $23.0 million in the prior year period. Pro forma adjusted net income (see "Non-GAAP Financial Measures") increased 27.0% to $35.7 million, or $0.36 per diluted share, from $28.1 million, or $0.28 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 $13.4 million, reflect a normalized federal income tax rate of 40.3% as if we were a public company for the first nine months of 2015 and excludes other non-recurring costs.

Outlook

For the year ending December 31, 2015, the Company now expects:

  • Total revenue between $318 million and $321 million;
  • System-wide same store sales growth between 7.0% and 7.5%;
  • Between 192 and 197 new franchised stores and 3 new corporate stores; and,
  • Pro forma adjusted net income of $50.5 million to $51.5 million, or $0.51 to $0.52 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 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 U.S. GAAP net income and net income per share in ways similar to those described in the reconciliations at the end of this press release.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on November 12, 2015 to discuss the news announced in this press release. A...


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