Planet Fitness, Inc. Announces Fourth Quarter and Fiscal Year 2017 Results

HAMPTON, N.H., Feb. 22, 2018 /PRNewswire/ -- Planet Fitness, Inc. (NYSE: PLNT) today reported financial results for its fourth quarter and fiscal year ended December 31, 2017 and announced full year 2018 outlook.

Fourth Quarter Fiscal 2017 Highlights

• Total revenue increased from the prior year period by 15.1% to $134.0 million.
• System-wide same store sales increased 11.6%.
• Net loss attributable to Planet Fitness, Inc. was $3.5 million, or $0.04 per diluted share, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company's deferred tax assets and tax benefit arrangements due to recent tax reform, compared to net income attributable to Planet Fitness, Inc. of $10.6 million, or $0.18 per diluted share in the prior year period.
• Net income was $0.8 million, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company's deferred tax assets and tax benefit arrangements due to recent tax reform, compared to $21.9 million in the prior year period.
• Adjusted net income(1) increased 19.1% to $23.5 million, or $0.24 per diluted share, compared to $19.7 million, or $0.20 per diluted share in the prior year period.
• Adjusted EBITDA(1) increased 16.0% to $51.2 million from $44.1 million in the prior year period.
• 88 new Planet Fitness stores were opened system-wide during the period, bringing system-wide total stores to 1,518 at December 31, 2017.

Fiscal Year 2017 Highlights  

• Total revenue increased from the prior year by 13.7% to $429.9 million.
• System-wide same store sales increased 10.2%.
• Net income attributable to Planet Fitness, Inc. was $33.1 million, or $0.42 per diluted share, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company's deferred tax assets and tax benefit arrangements due to recent tax reform, compared to $21.5 million, or $0.50 per diluted share, in the prior year period.
• Net income was $55.6 million, which includes the net negative impact of approximately $17.2 million related to the remeasurement of the Company's deferred tax assets and tax benefit arrangements due to recent tax reform, compared to $71.2 million in the prior year.
• Adjusted net income(1) increased 21.8% to $82.3 million, or $0.84 per diluted share, compared to $67.6 million, or $0.69 per diluted share in the prior year.
• Adjusted EBITDA(1) increased 22.7% to $184.7 million from $150.6 million in the prior year.
• 210 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 1,518 at December 31, 2017.

(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 release.

Christopher Rondeau, Chief Executive Officer, commented, "We completed our 11th consecutive year of positive system-wide same store sales growth with a fourth quarter gain of 11.6%, our largest quarterly percentage increase of 2017. Our business has continued to accelerate, which is a testament to the growing strength of our brand and the appeal of our affordable, non-intimidating fitness offering, especially with casual and first-time gym users. With the addition of 1.7 million net new members and a record 210 new store openings system-wide in 2017, we've continued to build on our leading market share position through effective national and local advertising programs and expanding our geographic footprint in new and existing markets. We begin the New Year with great brand momentum and numerous opportunities to further grow our business in the near and long-term, including significant store development opportunities, increased brand and marketing investments, and using technology to enhance member experiences."

Operating Results for the Fourth Quarter Ended December 31, 2017

For the fourth quarter of 2017, total revenue increased $17.6 million or 15.1% to $134.0 million from $116.4 million in the prior year period. By segment:

• Franchise segment revenue, which includes commission income, increased $7.9 million or 24.6% to $40.0 million from $32.1 million in the prior year period;
• Corporate-owned stores segment revenue increased $2.3 million or 8.7% to $28.2 million from $26.0 million in the prior year period; and
• Equipment segment revenue increased $7.5 million or 12.8% to $65.8 million from $58.3 million.

System-wide same store sales increased 11.6%. By segment, franchisee-owned same store sales increased 11.9% and corporate-owned same store sales increased 5.6%.

For the fourth quarter of fiscal 2017, net income was $0.8 million and net income attributable to Planet Fitness Inc. was a loss of $3.5 million, or $0.04 per diluted share, compared to net income of $21.9 million and net income attributable to Planet Fitness Inc. of $10.6 million, or $0.18 per diluted share in the prior year period. Both amounts in 2017 include the net negative impact of approximately $17.2 million related to the remeasurement of the Company's deferred tax assets and tax benefit arrangements due to recent tax reform. Adjusted net income (see "Non-GAAP Financial Measures") increased 19.1% to $23.5 million, or $0.24 per diluted share, from $19.7 million, or $0.20 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 39.5% for the current and 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 16.0% to $51.2 million from $44.1 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 $6.1 million or 23.4% to $32.0 million driven by royalties from both new stores and higher same store sales;
• Corporate-owned stores segment EBITDA increased $0.7 million or 6.5% to $11.3 million driven by higher same store sales and annual fee revenue, partially offset by higher pre-opening costs associated with four corporate-owned stores opened during the fourth quarter; and
• Equipment segment EBITDA decreased $0.2 million or 1.0% to $15.0 million. In the fourth quarter of 2016, equipment segment EBITDA included a gain of $1.8 million recorded in connection with the write-off of a previously accrued equipment discount.

Operating Results for the Fiscal Year Ended December 31, 2017

For the fiscal year ended December 31, 2017, total revenue increased $51.7 million or 13.7% to $429.9 million from $378.2 million in the prior year. By segment:  

• Franchise segment revenue, which includes commission income, increased $33.7 million or 28.9% to $150.2 million from $116.5 million in the prior year;
• Corporate-owned stores segment revenue increased $7.4 million or 7.1% to $112.1 million from $104.7 million in the prior year; and
• Equipment segment revenue increased $10.6 million or 6.8% to $167.7 million from $157.0 million in the prior year.

System-wide same store sales increased 10.2% from the prior year. By segment, franchisee-owned same store sales increased 10.5% and corporate-owned same store sales increased 4.9% from the prior year.

For full year fiscal 2017, net income was $55.6 million and net income attributable to Planet Fitness Inc. was $33.1 million, or $0.42 per diluted share, compared to net income of $71.2 million and net income attributable to Planet Fitness, Inc. of $21.5 million, or $0.50 per diluted share in the prior year. Both amounts in 2017 include the net negative impact of approximately $17.2 million related to the remeasurement of the Company's deferred tax assets and tax benefit arrangements due to recent tax reform.  Adjusted net income (see "Non-GAAP Financial Measures") increased 21.8% to $82.3 million, or $0.84 per diluted share, from $67.6 million, or $0.69 per diluted share, in the prior year. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 39.5% for the current year and 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 (see "Non-GAAP Financial Measures") increased $34.1 million or 22.7% to $184.7 million in 2017 from $150.6 million in the prior year.

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 $29.2 million or 30.0% to $126.5 million;
• Corporate-owned stores segment EBITDA increased $6.0 million or 14.7% to $46.9 million; and
• Equipment segment EBITDA increased $2.1 million or 5.8% to $38.5 million. In 2016, equipment segment EBITDA included a gain of $1.8 million recorded in connection with the write-off of a previously accrued equipment discount.

Share Repurchase Program

The Company announced that its Board of Directors approved an increase of $80 million to its current $20 million share repurchase program, bringing the total authorized amount available for repurchase to $100 million. The timing of the purchases and the amount of stock repurchased is subject to the Company's discretion and will depend on market and business conditions, the Company's general working capital needs, stock price, applicable legal requirements and other factors. Our ability to repurchase shares at any particular time is also subject to continued compliance with the terms of our credit agreement. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing. Planet Fitness is not obligated under the program to acquire any particular amount of stock and can suspend or terminate the program at any time.

2018 Outlook

For the year ending December 31, 2018, the Company expects:

• Total revenue increase of approximately 20%;
• System-wide same store sales growth in the high single digit percentage range; and
• Adjusted net income and adjusted net income per diluted share to increase approximately 40%.

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 results in periods prior to the IPO and related recapitalization transactions are of Pla-Fit Holdings, as the predecessor to the Company for accounting and reporting purposes. Accordingly, these historical results do not purport to reflect what the results of operations of the Company or Pla-Fit Holdings would have been had the IPO and related recapitalization transactions occurred prior to August 2015.

The financial information presented in this 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 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 ended 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 ended December 31, 2018.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on February 22, 2018 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.planetfitness.com via the "Investor Relations" link. The webcast will be archived on the website for one year.

About Planet Fitness

Founded in 1992 in Dover, N.H., Planet Fitness is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations. As of December 31, 2017, Planet Fitness had approximately 10.6 million members and more than 1,500 stores in all 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic and Panama. The Company's mission is to enhance people's lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which we call the Judgement Free Zone®. More than 95% of Planet Fitness stores are owned and operated by independent business men and women.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws, which involve risks and uncertainties.  Forward-looking statements include the Company's statements with respect to expected future performance presented under the heading "2018 Outlook," those attributed to the Company's Chief Executive Officer in this press release and other statements, estimates and projections that do not relate solely to historical facts.. Forward-looking statements can be identified by words such as "expect," "goal," plan," "will," "strategy" and similar references to future periods, although not all forward-looking statements include these identifying words.  Forward-looking statements are not assurances of future performance. Instead, they are based only on the Company's current beliefs, expectations and assumptions regarding the future of the business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company's control. Actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results to differ materially include risks and uncertainties associated with competition in the fitness industry, the Company's and franchisees' ability to attract and retain new members, changes in consumer demand, changes in equipment costs, the Company's ability to expand into new markets domestically and internationally, operating costs for the Company and franchisees generally, availability and cost of capital for franchisees, acquisition activity, developments and changes in laws and regulations, our substantial indebtedness, our corporate structure and tax receivable agreements, general economic conditions and the other factors described in the Company's annual report on Form 10-K for the year ended December 31, 2016, and the Company's other filings with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in forward-looking statements, investors should not place undue reliance on forward-looking statements, which reflect the Company's views only as of the date of this press release. Except as required by law, neither the Company nor any of its affiliates or representatives undertake any obligation to provide additional information or to correct or update any information set forth in this release, whether as a result of new information, future developments or otherwise.

 

 

 

 

 

 

 

Planet Fitness, Inc. and subsidiaries Non-GAAP Financial Measures (Unaudited) (Amounts in thousands, except per share amounts)

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses the following non-GAAP financial measures: EBITDA, Segment EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per share, diluted (collectively, the "non-GAAP financial measures"). The Company believes that these non-GAAP financial measures, when used in conjunction with GAAP financial measures, are useful to investors in evaluating our operating 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 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 and recognize income or gains 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 unusual or nonrecurring items.

EBITDA, Segment EBITDA and Adjusted EBITDA

We refer to EBITDA and Adjusted EBITDA as we use these measures to evaluate our operating performance and we believe these measures provide useful information to investors in evaluating our performance. We have also disclosed Segment EBITDA as an important financial metric utilized by the Company to evaluate performance and allocate resources to segments in accordance with ASC 280, Segment Reporting. We define EBITDA as net income before interest, taxes, depreciation and amortization. Segment EBITDA for each of our segments sums to Total Segment EBITDA which is equal to the Non-GAAP financial metric EBITDA. We believe that EBITDA, which eliminates the impact of certain expenses that we do not believe reflect our underlying business performance, provides useful information to investors to assess the performance of our segments as well as the business as a whole. Our Board of Directors also uses EBITDA as a key metric to assess the performance of management. We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, adjusted for the impact of certain additional non-cash and other items that we do not consider in our evaluation of ongoing performance of the Company's core operations. These items include certain purchase accounting adjustments, acquisition transaction fees, stock offering-related costs, pre-opening costs, tax benefit arrangement remeasurement and certain other charges and gains. We believe that Adjusted EBITDA is an appropriate measure of operating performance in addition to EBITDA because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.

A reconciliation of EBITDA and Adjusted EBITDA to net income, the most directly comparable GAAP measure, is set forth below:

 

A reconciliation of Segment EBITDA to Total Segment EBITDA is set forth below.

 

Adjusted Net Income and Adjusted Net Income per Diluted Share

As a result of the recapitalization transactions that occurred prior to our IPO, the Company was designated as the sole managing member of Pla-Fit Holdings. As the sole managing member, the Company exclusively operates and controls the business and affairs of Pla-Fit Holdings. As a result of the recapitalization transactions, the Company consolidates Pla-Fit Holdings, and Pla-Fit Holdings is considered the predecessor to the Company for accounting purposes. Our presentation of Adjusted net income and Adjusted net income per share, diluted, gives effect to the consolidation of Pla-Fit Holdings with the Company resulting from the recapitalization transactions as if they had occurred on January 1, 2016. In addition, Adjusted net income assumes that all net income is attributable to the Company, which assumes the full exchange of all outstanding common units of Pla-Fit Holdings for shares of the Company's Class A common stock, adjusted for certain non-recurring items that we do not believe directly reflect our core operations. Adjusted net income per share, diluted, is calculated by dividing Adjusted net income by the total shares of Class A common stock outstanding plus any dilutive options and restricted stock units as calculated in accordance with GAAP and assuming the full exchange of all outstanding common units of Pla-Fit Holdings and corresponding Class B common stock as of the beginning of each period presented. Adjusted net income and Adjusted net income per share, diluted, are supplemental measures of operating performance that do not represent, and should not be considered, alternatives to net income and earnings per share, as calculated in accordance with GAAP. We believe Adjusted net income and Adjusted net income per share, diluted, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period.

A reconciliation of Adjusted net income to net income, the most directly comparable GAAP measure, and the computation of Adjusted net income per share, diluted, are set forth below.

 

A reconciliation of net income per share, diluted, to Adjusted net income per share, diluted is set forth below for the three months and years ended December 31, 2017 and 2016:

 

 

 

 

 

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SOURCE Planet Fitness, Inc.