Planet Fitness Sees Same-Store Sales Climb 16 Percent In First Quarter

Planet Fitness, Inc. reported earnings tripled on a 67 percent revenue gain for its first quarter ended March 31. System-wide, same-store sales increased 15.9 percent, and the fitness chain ended the period with more than 16.2 million members, up from 14.1 million a year ago.

“Over the past two-plus years of operating during the pandemic, we’ve learned to be nimble and resilient while staying true to our mission of providing a high-quality, affordable fitness experience in a welcoming, non-intimidating environment. During the first quarter, we completed the acquisition of Sunshine Fitness, one of our best-performing franchisees as well as a successful refinancing of a portion of our debt. We are bullish on the future and believe that the acquisition strengthens our powerful business model by enhancing our corporate store team and diversifying the geographic profile of our corporate-owned stores, and the refinancing further supports our business model, by locking in low rates on a significant portion our debt,” said Chris Rondeau, chief executive officer. “We are looking forward to the upcoming launch of the High School Summer Pass that offers teens a chance to workout for free at our gyms over the summer—an extremely important initiative given the alarming teen mental health crisis in the U.S. Additionally, we are excited about our entry into new markets such as New Zealand and the opening of our first stores in Mexico under the new development agreement we signed last year.”

First Quarter Fiscal 2022 results

• Total revenue increased from the prior-year period by 66.9 percent to $186.7 million;
• System-wide same-store sales increased 15.9 percent;
• System-wide sales increased $196 million to $961 million, from $765 million in the prior-year period;
• Net income attributable to Planet Fitness, Inc. was $16.5 million, or $0.19 per diluted share, compared to $5.6 million, or $0.07 per diluted share, in the prior-year period;
• Net income increased $12.2 million to $18.4 million, compared to $6.2 million in the prior-year period;
• Adjusted net income increased $20.0 million to $29.0 million, or $0.32 per diluted share, compared to $9.1 million, or $0.10 per diluted share, in the prior-year period;
• Adjusted EBITDA increased $33.6 million to $77.3 million from $43.7 million in the prior-year period;
• 37 new Planet Fitness stores opened during the period, bringing system-wide total stores to 2,291 as of March 31, 2022; and
• Cash of $536.7 million, which includes cash and cash equivalents of $471.2 million and restricted cash of $65.5 million.

Operating Results for the First Quarter Ended March 31, 2022
For the first quarter of 2022, total revenue increased by $74.8 million, or 66.9 percent, to $186.7 million from $111.9 million in the prior-year period, which included system-wide same-store sales growth of 15.9 percent. 

By segment:

• Franchise segment revenue increased by $16.0 million, or 25.0 percent, to $80.1 million from $64.1 million in the prior-year period. The increase in franchise segment revenue for the first quarter of 2022 was primarily due to a $9.9 million increase in franchise royalty revenue, a $2.4 million increase in National Advertising Fund (NAF) revenue, a $2.0 million increase in franchise and other fees, and a $1.5 million increase in placement revenue. Of the $9.9 million increase in royalty revenue, $5.7 million was primarily attributable to a same-store sales increase of 15.8 percent in franchisee-owned stores, $4.5 million was attributable to new stores opened since January 1, 2021 and stores that were not open for all of the prior-year period due to COVID-related temporary closures, and $1.2 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $1.6 million as a result of 114 franchisee-owned stores becoming corporate-owned stores as a result of the acquisition of Sunshine Fitness Growth Holdings, LLC in the first quarter of 2022 (“Sunshine Acquisition”);
• Corporate-owned stores segment revenue increased by $38.3 million, or 101.1 percent, to $76.2 million from $37.9 million in the prior-year period. Of the increase, $28.7 million was attributable to the acquisition of 114 stores in the Sunshine Acquisition, $5.0 million was from new stores opened since January 1, 2021 and stores that were not open for all of the prior-year period due to COVID-related temporary closures and $4.6 million was from the corporate-owned store same-store sales increase of 17.0 percent; and
• Equipment segment revenue increased $20.5 million, or 206.2 percent,t to $30.4 million from $9.9 million in the prior-year period, driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. In the three months ended March 31, 2022, the company had equipment sales to 33 new franchisee-owned stores compared to 18 in the prior-year period.

For the first quarter of 2022, net income attributable to Planet Fitness, Inc. was $16.5 million, or $0.19 per diluted share, compared to $5.6 million, or $0.07 per diluted share, in the prior-year period. Net income was $18.4 million in the first quarter of 2022 compared to $6.2 million in the prior-year period. Adjusted net income increased $20.0 million to $29.0 million, or $0.32 per diluted share, from $9.1 million, or $0.10 per diluted share, in the prior-year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.2 percent and 26.6 percent for the current and prior-year period, respectively, and excludes certain non-cash and other items that we do not consider in the evaluation of ongoing operational performance (“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 it does not consider in the evaluation of ongoing operational performance (“Non-GAAP Financial Measures”), increased $33.6 million to $77.3 million from $43.7 million in the prior-year period.

Segment EBITDA represents its 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 (“Non-GAAP Financial Measures”).

• Franchise segment EBITDA increased $18.9 million to $60.1 million. The increase in franchise segment EBITDA for the first quarter of 2022 was primarily due to the revenue increases described above. Additionally, the franchise selling general and administrative expense was $2.9 million lower than the prior-year period as a result of lower franchise selling general and administrative spend to support its franchisees compared to the prior year. Partially offsetting these EBITDA increases, NAF expense was $1.8 million higher in the three months ended March 31, 2022 than in the prior-year period;
• Corporate-owned stores segment’s EBITDA increased $12.7 million to $23.4 million. The increase was primarily attributable to higher corporate-owned store four-wall EBITDA, partially offset by a higher corporate-owned store selling general and administrative expenses, both as a result of the Sunshine Acquisition; and
• Equipment segment EBITDA increased by $6.8 million to $8.7 million driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, as described above.

2022 Outlook
For the year ending December 31, 2022, the company is reiterating the following expectations as compared to the company’s 2021 results, which include the impact of the Sunshine Acquisition and assumes there is no significant worsening of the pandemic that seriously impacts performance, including prolonged store closures or other mandated operational restrictions:

• New equipment placements of approximately 170 in franchisee-owned locations; and
• System-wide same-store sales in the low double-digit percentage range.

The following are 2022 growth expectations over the company’s 2021 results:

• Revenue to increase in the mid-50 percent range;
• Adjusted EBITDA to increase in the high-50 percent range;
• Adjusted Net Income to increase in the low-90 percent range; and
• Adjusted earnings per share to increase in the mid-80 percent range, based on Adjusted diluted shares outstanding of approximately 91.1 million, inclusive of the issuance of equity as part of the Sunshine Acquisition.

The company continues to expect 2022 net interest expense to be approximately $89 million as a result of its recent debt refinancing and upsizing.

Photo courtesy Planet Fitness