Planet Fitness raises guidance slightly for strong third quarter

Planet Fitness, Inc. slightly raised its earnings and sales outlook for the year as systemwide same-store sales in the third quarter ended Sept. 30 rose 8.2 percent.

Chris Rondeau, CEO, said: “We continue our steady recovery from the pandemic and ended the quarter with more than 16.6 million members, an all-time record for Planet Fitness. Member trends remained strong during the quarter, joining historical pre-pandemic seasonality. Additionally, members who do attend the gym continue to visit more often and cancellations are lower than in 2019, which we believe are signs that members are generally more committed to the gym. We are focused on our efforts to continue to increase our penetration of all generations with a strong focus on the Gen Z demographic, converting teenagers from our recent high school summer pass program and their parents and guardians to paying members.”

Fiscal 2022 Q3 Results

  • Total revenue increased 58.4 percent year-over-year to $244.4 million.
  • System-wide same-store sales rose 8.2 percent.
  • Systemwide sales increased $98 million to $968 million from $870 million in the prior period.
  • Net income attributable to Planet Fitness, Inc. was $26.9 million, or $0.32 per diluted share, compared to $17.4 million, or $0.21 per diluted share, in the prior period.
  • Net income increased $12.0 million to $30.7 million, compared to $18.6 million in the prior period.
  • Adjusted net income increased $16.6 million to $38.2 million, or $0.42 per diluted share, compared to $21.7 million, or $0.25 per diluted share, in the prior year period.
  • Adjusted EBITDA increased $32.2 million to $93.9 million from $61.7 million in the prior period.
  • 29 new Planet Fitness stores opened during the period, bringing the system-wide store total to 2,353 as of September 30, 2022.
  • Repurchased and retired approximately 831,029 shares of Class A common stock using $50 million of available cash.
  • Cash of $467.2 million, which includes cash and cash equivalents of $404.5 million and restricted cash of $62.7 million.

Operating Results for the Third Quarter Ended September 30, 2022
For the third quarter of 2022, total revenue increased $90.1 million, or 58.4 percent, to $244.4 million from $154.3 million in the prior-year period, which included full-year same-store sales growth system of 8.2 percent. By segment:

  • Franchise segment revenue increased $5.4 million, or 7.1 percent, to $80.7 million from $75.4 million in the prior-year period. The increase in Franchise segment revenue for the third quarter of 2022 was primarily due to a $2.8 million increase in franchise royalty revenue, a $1.7 million increase in equipment placement revenue and an increase of 0. $7 million in National Advertising Fund (“NAF”) revenue. Of the $2.8 million increase in franchise royalty revenue, $3.7 million was due to an 8.1 percent increase in same-store sales at franchisee-owned stores, and $1.7 million was due to of new stores opened after July 1, 2021. Partially offsetting the increases in royalty revenue was a decrease of approximately $2.6 million primarily as a result of the stores acquired in the acquisition of Sunshine Fitness Growth Holdings, LLC in the first quarter of 2022 (the “Sunshine Acquisition”), became Corporate Stores. The $1.7 million increase in placement revenue was primarily due to higher replacement equipment placements in the three months ended September 30, 2022 compared to the three months ended September 30, 2021;
  • Corporate Stores segment revenue increased $57.4 million, or 130.8 percent, to $101.3 million from $43.9 million in the prior-year period. Of the increase, $50.4 million was due to the acquisition of 114 stores in the Sunshine Acquisition, $3.5 million was from a 9.7 percent increase in corporate store same-store sales, $3.4 million was from new stores opened after July 1, 2021; and
  • Equipment segment revenue increased $27.3 million, or 78.2 percent, to $62.3 million from $35.0 million in the prior-year period, driven by higher equipment sales of $27.7 million of existing franchisee-owned stores for the three months ended September 30, 2022, compared to the three months ended September 30, 2021. For both the three months ended September 30, 2022 and September 30, 2021 ., we had equipment sales at 28 new franchisee-owned stores.

For the third quarter of 2022, net income attributable to Planet Fitness, Inc. was $26.9 million, or $0.32 per diluted share, compared to $17.4 million, or $0.21 per diluted share in the prior year period. Net income was $30.7 million in the third quarter of 2022, compared to $18.6 million in the prior-year period. Adjusted net income increased $16.6 million to $38.2 million, or $0.42 per diluted share, from $21.7 million, or $0.25 per diluted share, in the year-ago period. Adjusted net income is adjusted to reflect a standardized federal income tax rate of 25.9 percent and 26.6 percent for the current and prior year periods, respectively, and excludes certain non-cash and other items that we do not consider in estimating current operational performance.

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 evaluating current operating performance, increased $32.2 million to 93, $9 million from $61.7 million in the prior period.

  • Franchise segment EBITDA increased $1.4 million to $53.5 million. The increase in franchise segment EBITDA for the third quarter of 2022 was primarily due to increases in franchise revenue as described above, partially offset by higher NAF expenses of $1.4 million, higher franchise segment selling and administrative expenses of $1.4 million and higher equipment placement costs of $1.1 million in the three months ended September 30, 2022, compared to the prior year period;
  • Corporate Stores segment EBITDA increased $26.3 million to $40.4 million. Of the increase, $24.9 million was due to corporate stores acquired in the Sunshine Acquisition, $2.6 million was due to a 9.7 percent increase in same-store sales, and $1.3 million was due to the gain on the sale of corporate stores. Partially offsetting these increases were higher selling general and administrative expenses of $2.2 million, primarily as a result of the Sunshine acquisition; and
  • Equipment segment EBITDA increased $7.9 million to $15.8 million, primarily driven by higher equipment sales at existing franchisee-owned stores in the three months ended September 30, 2022, in compared to the three months ended September 30, 2021 as described above.

Share repurchase program
On November 4, the company’s board of directors authorized a new share repurchase program of $500 million to replace the existing share repurchase program, which was authorized in 2019 and had approximately $106 million remaining.

Forecast for 2022
For the year ending December 31, 2022, the company reiterates and updates the following expectations, which include the impact of the Sunshine acquisition and assumes that there is no significant deterioration of the pandemic that would materially affect performance, including prolonged store closures or other mandatory operations Limits:

  • New equipment placements of approximately 150 to 160 at franchisee-owned sites, up from approximately 170 placements previously expected, reflecting a worsening HVAC supply chain issue; and
  • It continues to expect system-wide same-store sales growth in the low double-digit percentage range.

The company has updated the following growth expectations for 2022 relative to its 2021 results:

  • Revenues to increase in the high 50 percent range, previously expected to grow in the middle 50 percent range;
  • Adjusted EBITDA to increase approximately 60 percent, previously expected growth in the high 50 percent range;
  • Adjusted net income to increase in the low 100 percent range, previously expected growth in the low 90 percent range; and
  • Adjusted earnings per share will increase in the mid-point range of 90 percent, based on adjusted diluted shares outstanding of approximately 90.5 million, including the issuance of capital as part of the Sunshine acquisition and share repurchases in the third quarter. The company had previously expected growth in the 80 percent range on average.

The company continues to expect net interest expense for 2022 to be approximately $86 million, reflecting the refinancing and increase in debt in the first quarter.

Photo courtesy of Planet Fitness

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