Fitness

Planet Fitness, Inc. Announces Third Quarter 2017 Results

 

HAMPTON, N.H., Nov. 7, 2017 /PRNewswire/ — Planet Fitness, Inc. (NYSE: PLNT) today reported financial results for its third quarter ended September 30, 2017.

Third Quarter Fiscal 2017 Highlights

  • Total revenue increased from the prior year period by 12.1% to $97.5 million.
  • System-wide same store sales increased 9.3%.
  • Net income attributable to Planet Fitness, Inc. was $15.3 million, or $0.18 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $3.4 million, or $0.08 per diluted share in the prior year period.
  • Net income was $18.9 million, compared to net income of $14.9 million in the prior year period.
  • Adjusted net income(1) increased 17.9% to $18.7 million, or $0.19 per diluted share, compared to $15.9 million, or $0.16 per diluted share in the prior year period.
  • Adjusted EBITDA(1) increased 22.4% to $43.4 million from $35.4 million in the prior year period.
  • 31 new Planet Fitness franchise stores were opened during the period, bringing system-wide total stores to 1,432 as of September 30, 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 press release.

“The strong top and bottom line momentum we generated during the first half of the year carried into the third quarter highlighted by a 9.3% increase in system-wide same store sales and earnings per share that exceeded expectations,” commented Christopher Rondeau, Chief Executive Officer. “With the increased brand awareness and reach of our welcoming, non-intimidating fitness offering combined with our asset-light business model that includes our fast-growing, high-margin franchise segment, we continue to expand market share and generate significant profitability and cash flow. While this year marks Planet Fitness’ 25th anniversary, I believe we are just beginning to scratch the surface of the Company’s full potential.  My optimism is fueled by the long runway for store growth, the financial and operational strength of our franchisees, our growing national advertising fund and ability to continue to attract casual and first time gym users to our unique fitness experience, and the growing consumer shift towards health and wellness. I am confident that we are well positioned to capitalize on the many opportunities that lie ahead, deliver a strong finish to the year, and increase shareholder value over the long-term.”

Operating Results for the Third Quarter Ended September 30, 2017

For the third quarter 2017, total revenue increased $10.5 million or 12.1% to $97.5 million from $87.0 million in the prior year period. By segment:

  • Franchise segment revenue, which includes commission income, increased $8.3 million or 30.6% to $35.6 million from $27.2 million in the prior year period;
  • Corporate-owned stores segment revenue increased $1.9 million or 7.1% to $28.6 million from $26.7 million in the prior year period; and
  • Equipment segment revenue increased $0.3 million or 0.8% to $33.4 million from $33.1 million in the prior year period.

System-wide same store sales increased 9.3%. By segment, franchisee-owned same store sales increased 9.6% and corporate-owned same store sales increased 5.1%.

For the third quarter of 2017, net income was $18.9 million, or $0.18 per diluted share, compared to net income of $14.9 million, or $0.08 per diluted share, in the prior year period. Adjusted net income increased 17.9% to $18.7 million, or $0.19 per diluted share, from $15.9 million, or $0.16 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 year period and the 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 22.4% to $43.4 million from $35.4 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 $7.1 million or 31.2% to $29.9 million driven by royalties from new franchised stores opened since September 30, 2016, increased royalty rate and higher same store sales;
  • Corporate-owned stores segment EBITDA increased $1.5 million or 14.2% to $12.0 million driven primarily by higher monthly and annual revenue, including an increase in same store sales, and improved operating margin; and
  • Equipment segment EBITDA increased by $0.5 million or 7.4% to $7.7 million driven by an increase in replacement equipment sales to existing franchisee-owned stores.

2017 Outlook

For the year ending December 31, 2017, the Company now expects:

  • Total revenue between $425 million and $430 million;
  • System-wide same store sales growth in the 9.5% to 10% range; and
  • Adjusted net income of $79 million to $81 million, or $0.80 to $0.82 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 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 information presented in this press 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 in isolation or 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 ending December 31, 2017. 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 ending December 31, 2017.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on November 7, 2017 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 September 30, 2017, Planet Fitness had approximately 10.5 million members and 1,432 stores in 49 states, the District of Columbia, Puerto Rico, Canada and the Dominican Republic. 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 certain statements, approximations, estimates and projections with respect to our anticipated future performance, especially those under the heading “2017 Outlook,” (“forward-looking statements”). Forward-looking statements are neither historical facts nor 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, 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. 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 press release, whether as a result of new information, future developments or otherwise.

 

Planet Fitness, Inc. and subsidiaries

 

Condensed consolidated statements of operations

 

(Unaudited)

 

(Amounts in thousands, except per share amounts)

 

 

For the three months ended

 

September 30,

 

 

For the nine months ended

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Revenue:

 

 

Franchise

 

 

$

 

 

31,413

 

 

$

 

 

23,046

 

 

$

 

 

94,485

 

 

$

 

 

70,042

 

 

Commission income

 

 

4,149

 

 

4,179

 

 

15,668

 

 

14,338

 

 

Corporate-owned stores

 

 

28,560

 

 

26,675

 

 

83,886

 

 

78,756

 

 

Equipment

 

 

33,374

 

 

33,107

 

 

101,875

 

 

98,686

 

 

Total revenue

 

 

97,496

 

 

87,007

 

 

295,914

 

 

261,822

 

 

Operating costs and expenses:

 

 

Cost of revenue

 

 

25,819

 

 

25,925

 

 

78,395

 

 

77,365

 

 

Store operations

 

 

15,551

 

 

15,181

 

 

45,339

 

 

45,673

 

 

Selling, general and administrative

 

 

14,071

 

 

12,244

 

 

42,659

 

 

36,470

 

 

Depreciation and amortization

 

 

8,137

 

 

7,745

 

 

23,982

 

 

23,127

 

 

Other loss (gain)

 

 

(36)

 

 

(241)

 

 

280

 

 

(406)

 

 

Total operating costs and expenses

 

 

63,542

 

 

60,854

 

 

190,655

 

 

182,229

 

 

Income from operations

 

 

33,954

 

 

26,153

 

 

105,259

 

 

79,593

 

 

Other expense, net:

 

 

Interest expense, net

 

 

(8,920)

 

 

(6,291)

 

 

(26,711)

 

 

(18,819)

 

 

Other (expense) income

 

 

408

 

 

(204)

 

 

157

 

 

30

 

 

Total other expense, net

 

 

(8,512)

 

 

(6,495)

 

 

(26,554)

 

 

(18,789)

 

 

Income before income taxes

 

 

25,442

 

 

19,658

 

 

78,705

 

 

60,804

 

 

Provision for income taxes

 

 

6,540

 

 

4,795

 

 

23,933

 

 

11,504

 

 

Net income

 

 

18,902

 

 

14,863

 

 

54,772

 

 

49,300

 

 

Less net income attributable to non-controlling interests

 

 

3,557

 

 

11,438

 

 

18,173

 

 

38,374

 

 

Net income attributable to Planet Fitness, Inc.

 

 

$

 

 

15,345

 

 

$

 

 

3,425

 

 

$

 

 

36,599

 

 

$

 

 

10,926

 

 

Net income per share of Class A common stock:

 

 

Basic

 

 

$

 

 

0.18

 

 

$

 

 

0.08

 

 

$

 

 

0.48

 

 

$

 

 

0.28

 

 

Diluted

 

 

$

 

 

0.18

 

 

$

 

 

0.08

 

 

$

 

 

0.48

 

 

$

 

 

0.28

 

 

Weighted-average shares of Class A common stock outstanding:

 

 

Basic

 

 

85,663

 

 

44,669

 

 

76,391

 

 

39,394

 

 

Diluted

 

 

85,734

 

 

44,686

 

 

76,435

 

 

39,397

 

 

Planet Fitness, Inc. and subsidiaries

 

Condensed consolidated balance sheets

 

(Unaudited)

 

(Amounts in thousands, except per share amounts)

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

 

Assets

 

 

Current assets:

 

 

Cash and cash equivalents

 

 

$

 

 

93,267

 

 

$

 

 

40,393

 

 

Accounts receivable, net of allowance for bad debts of $95 and $687 at
   September 30, 2017 and December 31, 2016, respectively

 

 

16,358

 

 

26,873

 

 

Due from related parties

 

 

2,984

 

 

2,864

 

 

Inventory

 

 

550

 

 

1,802

 

 

Restricted assets – national advertising fund

 

 

3,014

 

 

3,074

 

 

Other receivables

 

 

10,768

 

 

7,935

 

 

Other current assets

 

 

8,623

 

 

8,284

 

 

Total current assets

 

 

135,564

 

 

91,225

 

 

Property and equipment, net of accumulated depreciation of $33,546 as of

 

   September 30, 2017 and $30,987 as of December 31, 2016

 

 

72,426

 

 

61,238

 

 

Intangible assets, net

 

 

239,741

 

 

253,862

 

 

Goodwill

 

 

176,981

 

 

176,981

 

 

Deferred income taxes

 

 

731,131

 

 

410,407

 

 

Other assets, net

 

 

10,177

 

 

7,729

 

 

Total assets

 

 

$

 

 

1,366,020

 

 

$

 

 

1,001,442

 

 

Liabilities and stockholders’ equity (deficit)

 

 

Current liabilities:

 

 

Current maturities of long-term debt

 

 

$

 

 

7,185

 

 

$

 

 

7,185

 

 

Accounts payable

 

 

12,826

 

 

28,507

 

 

Accrued expenses

 

 

13,357

 

 

19,190

 

 

Equipment deposits

 

 

8,121

 

 

2,170

 

 

Restricted liabilities – national advertising fund

 

 

3,008

 

 

134

 

 

Deferred revenue, current

 

 

17,124

 

 

17,780

 

 

Payable to related parties pursuant to tax benefit arrangements, current

 

 

24,487

 

 

8,072

 

 

Other current liabilities

 

 

438

 

 

235

 

 

Total current liabilities

 

 

86,546

 

 

83,273

 

 

Long-term debt, net of current maturities

 

 

697,876

 

 

702,003

 

 

Deferred rent, net of current portion

 

 

5,289

 

 

5,108

 

 

Deferred revenue, net of current portion

 

 

8,180

 

 

8,351

 

 

Deferred tax liabilities

 

 

751

 

 

1,238

 

 

Payable to related parties pursuant to tax benefit arrangements, net of current portion

 

 

702,906

 

 

410,999

 

 

Other liabilities

 

 

4,111

 

 

5,225

 

 

Total noncurrent liabilities

 

 

1,419,113

 

 

1,132,924

 

 

Commitments and contingencies (note 11)

 

 

Stockholders’ equity (deficit):

 

 

Class A common stock, $.0001 par value – 300,000 shares authorized, 85,682 and 61,314
   shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively

 

 

9

 

 

6

 

 

Class B common stock, $.0001 par value – 100,000 shares authorized, 12,682 and 37,185
   shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively

 

 

1

 

 

4

 

 

Accumulated other comprehensive loss

 

 

(1,013)

 

 

(1,174)

 

 

Additional paid in capital

 

 

11,693

 

 

34,467

 

 

Accumulated deficit

 

 

(127,513)

 

 

(164,062)

 

 

Total stockholders’ deficit attributable to Planet Fitness Inc.

 

 

(116,823)

 

 

(130,759)

 

 

Non-controlling interests

 

 

(22,816)

 

 

(83,996)

 

 

Total stockholders’ deficit

 

 

(139,639)

 

 

(214,755)

 

 

Total liabilities and stockholders’ deficit

 

 

$

 

 

1,366,020

 

 

$

 

 

1,001,442

 

 

Planet Fitness, Inc. and subsidiaries

 

Condensed consolidated statements of cash flows

 

(Unaudited)

 

(Amounts in thousands)

 

 

For the nine months ended

 

September 30,

 

 

2017

 

 

2016

 

 

Cash flows from operating activities:

 

 

Net income

 

 

$

 

 

54,772

 

 

$

 

 

49,300

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

Depreciation and amortization

 

 

23,982

 

 

23,127

 

 

Amortization of deferred financing costs

 

 

1,439

 

 

1,114

 

 

Amortization of favorable leases and asset retirement obligations

 

 

260

 

 

297

 

 

Amortization of interest rate caps

 

 

1,552

 

 

459

 

 

Deferred tax expense

 

 

21,344

 

 

11,062

 

 

Loss on extinguishment of debt

 

 

79

 

 

 

 

Third party debt refinancing expense

 

 

1,021

 

 

 

 

Gain on re-measurement of tax benefit arrangement

 

 

(541)

 

 

 

 

Provision for bad debts

 

 

44

 

 

44

 

 

Gain on disposal of property and equipment

 

 

(357)

 

 

(347)

 

 

Equity-based compensation

 

 

1,800

 

 

1,373

 

 

Changes in operating assets and liabilities, excluding effects of acquisitions:

 

 

Accounts receivable

 

 

11,099

 

 

4,898

 

 

Due to and due from related parties

 

 

(580)

 

 

8,494

 

 

Inventory

 

 

1,253

 

 

3,798

 

 

Other assets and other current assets

 

 

(2,413)

 

 

(1,635)

 

 

Accounts payable and accrued expenses

 

 

(16,985)

 

 

(10,172)

 

 

Other liabilities and other current liabilities

 

 

(724)

 

 

(30)

 

 

Income taxes

 

 

(1,462)

 

 

(7,543)

 

 

Payable to related parties pursuant to tax benefit arrangements

 

 

(7,909)

 

 

(6,007)

 

 

Equipment deposits

 

 

5,951

 

 

(1,609)

 

 

Deferred revenue

 

 

(958)

 

 

(1,264)

 

 

Deferred rent

 

 

361

 

 

379

 

 

Net cash provided by operating activities

 

 

93,028

 

 

75,738

 

 

Cash flows from investing activities:

 

 

Additions to property and equipment

 

 

(23,229)

 

 

(9,266)

 

 

Proceeds from sale of property and equipment

 

 

166

 

 

402

 

 

Net cash used in investing activities

 

 

(23,063)

 

 

(8,864)

 

 

Cash flows from financing activities:

 

 

Principal payments on capital lease obligations

 

 

 

 

(37)

 

 

Repayment of long-term debt

 

 

(5,388)

 

 

(3,825)

 

 

Payment of deferred financing and other debt-related costs

 

 

(1,278)

 

 

 

 

Premiums paid for interest rate caps

 

 

(366)

 

 

 

 

Proceeds from issuance of Class A common stock

 

 

172

 

 

79

 

 

Repurchase and retirement of Class B common stock

 

 

 

 

(1,583)

 

 

Dividend equivalent payments

 

 

(1,322)

 

 

 

 

Distributions to Continuing LLC Members

 

 

(9,308)

 

 

(27,071)

 

 

Net cash used in financing activities

 

 

(17,490)

 

 

(32,437)

 

 

Effects of exchange rate changes on cash and cash equivalents

 

 

399

 

 

87

 

 

Net increase in cash and cash equivalents

 

 

52,874

 

 

34,524

 

 

Cash and cash equivalents, beginning of period

 

 

40,393

 

 

31,430

 

 

Cash and cash equivalents, end of period

 

 

$

 

 

93,267

 

 

$

 

 

65,954

 

 

Supplemental cash flow information:

 

 

Net cash paid for income taxes

 

 

$

 

 

3,769

 

 

$

 

 

8,121

 

 

Cash paid for interest

 

 

$

 

 

23,637

 

 

$

 

 

17,187

 

 

Non-cash investing activities:

 

 

Non-cash additions to property and equipment

 

 

$

 

 

482

 

 

$

 

 

127

 

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, Total 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 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 in isolation or 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 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 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, stock offering-related costs, 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 Adjusted EBITDA to net income, the most directly comparable GAAP measure, is set forth below.

 

Three months ended
September
 30,

 

 

Nine months ended
September
 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Net income attributable to Planet Fitness, Inc.

 

 

$

 

 

15,345

 

 

$

 

 

3,425

 

 

$

 

 

36,599

 

 

$

 

 

10,926

 

 

Net income attributable to non-controlling interests

 

 

3,557

 

 

11,438

 

 

18,173

 

 

38,374

 

 

Net income

 

 

$

 

 

18,902

 

 

$

 

 

14,863

 

 

$

 

 

54,772

 

 

$

 

 

49,300

 

 

Interest expense, net

 

 

8,920

 

 

6,291

 

 

26,711

 

 

18,819

 

 

Provision for income taxes

 

 

6,540

 

 

4,795

 

 

23,933

 

 

11,504

 

 

Depreciation and amortization

 

 

8,137

 

 

7,745

 

 

23,982

 

 

23,127

 

 

EBITDA

 

 

42,499

 

 

33,694

 

 

129,398

 

 

102,750

 

 

Purchase accounting adjustments-revenue(1)

 

 

336

 

 

450

 

 

1,116

 

 

458

 

 

Purchase accounting adjustments-rent(2)

 

 

174

 

 

202

 

 

561

 

 

664

 

 

Transaction fees(3)

 

 

 

 

 

 

1,021

 

 

 

 

Stock offering-related costs(4)

 

 

41

 

 

1,078

 

 

977

 

 

2,105

 

 

Severance costs(5)

 

 

 

 

 

 

 

 

423

 

 

Pre-opening costs(6)

 

 

421

 

 

 

 

421

 

 

 

 

Equipment discount(7)

 

 

(107)

 

 

 

 

(107)

 

 

 

 

Early lease termination costs(8)

 

 

 

 

 

 

719

 

 

 

 

Other(9)

 

 

 

 

 

 

(573)

 

 

72

 

 

Adjusted EBITDA

 

 

$

 

 

43,364

 

 

$

 

 

35,424

 

 

$

 

 

133,533

 

 

$

 

 

106,472

 

 

(1)

 

 

Represents the impact of revenue-related purchase accounting adjustments associated with the acquisition of Pla-Fit Holdings on November 8, 2012 by TSG (the “2012 Acquisition”). At the time of the 2012 Acquisition, the Company maintained a deferred revenue account, which consisted of deferred area development agreement fees, deferred franchise fees, and deferred enrollment fees that the Company billed and collected up front but recognizes for GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these periods if the write-down to deferred revenue had not occurred in connection with the application of acquisition pushdown accounting.

 

 

(2)

 

 

Represents the impact of rent-related purchase accounting adjustments. In accordance with guidance in ASC 805 – Business Combinations, in connection with the 2012 Acquisition, the Company’s deferred rent liability was required to be written off as of the acquisition date and rent was recorded on a straight-line basis from the acquisition date through the end of the lease term. This resulted in higher overall recorded rent expense each period than would have otherwise been recorded had the deferred rent liability not been written off as a result of the acquisition push down accounting applied in accordance with ASC 805. Adjustments of $100, $105, $306, and $372 in the three and nine months ended September 30, 2017 and 2016, respectively, reflect the difference between the higher rent expense recorded in accordance with GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $75, $97, $255, and $292 for the three and nine months ended September 30, 2017 and 2016, respectively, are due to the amortization of favorable and unfavorable lease intangible assets which were recorded in connection with the 2012 Acquisition and the acquisition of eight franchisee-owned stores on March 31, 2014. All of the rent related purchase accounting adjustments are adjustments to rent expense which is included in store operations on our consolidated statements of operations.

 

 

(3)

 

 

Represents transaction fees and expenses related to the amendment of our credit facility in May of 2017.

 

 

(4)

 

 

Represents legal, accounting and other costs incurred in connection with offerings of the Company’s Class A common stock.

 

 

(5)

 

 

Represents severance expense recorded in connection with an equity award modification.

 

 

(6)

 

 

Represents costs associated with new corporate-owned stores incurred prior to the store opening, including payroll-related costs, rent and occupancy expenses, marketing and other store operating supply expenses.

 

 

(7)

 

 

Represents a gain recorded in connection with the write-off of a previously accrued deferred equipment discount that is no longer expected to be utilized. This amount was originally recognized through purchase accounting in connection with the acquisition of eight franchisee-owned stores on March 31, 2014.

 

 

(8)

 

 

Represents charges and expenses incurred in connection with the early termination of the lease for our previous headquarters.

 

 

(9)

 

 

Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the nine months ended September 30, 2017, this amount includes a gain of $541 related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

 

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

 

Three months ended
September
 30,

 

 

Nine months ended
September
 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Segment EBITDA

 

 

Franchise

 

 

$

 

 

29,925

 

 

$

 

 

22,814

 

 

$

 

 

94,444

 

 

$

 

 

71,308

 

 

Corporate-owned stores

 

 

12,046

 

 

10,550

 

 

35,579

 

 

30,259

 

 

Equipment

 

 

7,683

 

 

7,153

 

 

23,587

 

 

21,330

 

 

Corporate and other

 

 

(7,155)

 

 

(6,823)

 

 

(24,212)

 

 

(20,147)

 

 

Total Segment EBITDA(1)

 

 

$

 

 

42,499

 

 

$

 

 

33,694

 

 

$

 

 

129,398

 

 

$

 

 

102,750

 

 

(1) Total Segment EBITDA is equal to EBITDA.

 

Adjusted Net Income and Adjusted Net Income per Diluted Share

As a result of the recapitalization transactions that occurred prior to our IPO, the limited liability company agreement of Pla-Fit Holdings that was amended and restated (the “New LLC Agreement”) designated Planet Fitness, Inc. as the sole managing member of Pla-Fit Holdings. As sole managing member, Planet Fitness, Inc. exclusively operates and controls the business and affairs of Pla-Fit Holdings, LLC. As a result of the recapitalization transactions and the New LLC Agreement, Planet Fitness, Inc. now consolidates Pla-Fit Holdings, and Pla-Fit Holdings is considered the predecessor to Planet Fitness, Inc. 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 Planet Fitness, Inc. resulting from the recapitalization transactions and the New LLC Agreement as if they had occurred on January 1, 2016. In addition, Adjusted net income assumes that all net income is attributable to Planet Fitness, Inc., which assumes the full exchange of all outstanding Holdings Units for shares of Class A common stock of Planet Fitness, Inc., 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 Holdings Units 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.

 

Three months ended
September
 30,

 

 

Nine months ended
September
 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

Net income attributable to Planet Fitness, Inc.

 

 

$

 

 

15,345

 

 

$

 

 

3,425

 

 

$

 

 

36,599

 

 

$

 

 

10,926

 

 

Net income attributable to non-controlling interests

 

 

3,557

 

 

11,438

 

 

18,173

 

 

38,374

 

 

Net income

 

 

$

 

 

18,902

 

 

$

 

 

14,863

 

 

$

 

 

54,772

 

 

$

 

 

49,300

 

 

Provision for income taxes, as reported

 

 

6,540

 

 

4,795

 

 

23,933

 

 

11,504

 

 

Purchase accounting adjustments-revenue(1)

 

 

336

 

 

450

 

 

1,116

 

 

458

 

 

Purchase accounting adjustments-rent(2)

 

 

174

 

 

202

 

 

561

 

 

664

 

 

Transaction fees(3)

 

 

 

 

 

 

1,021

 

 

 

 

Stock offering-related costs(4)

 

 

41

 

 

1,078

 

 

977

 

 

2,105

 

 

Severance costs(5)

 

 

 

 

 

 

 

 

423

 

 

Pre-opening costs(6)

 

 

421

 

 

 

 

421

 

 

 

 

Equipment discount(7)

 

 

(107)

 

 

 

 

(107)

 

 

 

 

Early lease termination costs(8)

 

 

 

 

 

 

1,143

 

 

 

 

Other(9)

 

 

 

 

 

 

(573)

 

 

72

 

 

Purchase accounting amortization(10)

 

 

4,622

 

 

4,843

 

 

13,867

 

 

14,528

 

 

Adjusted income before income taxes

 

 

$

 

 

30,929

 

 

$

 

 

26,231

 

 

$

 

 

97,131

 

 

$

 

 

79,054

 

 

Adjusted income taxes(11)

 

 

12,217

 

 

10,361

 

 

38,367

 

 

31,226

 

 

Adjusted net income

 

 

$

 

 

18,712

 

 

$

 

 

15,870

 

 

$

 

 

58,764

 

 

$

 

 

47,828

 

 

Adjusted net income per share, diluted

 

 

$

 

 

0.19

 

 

$

 

 

0.16

 

 

$

 

 

0.60

 

 

$

 

 

0.48

 

 

Adjusted weighted-average shares outstanding(12)

 

 

98,428

 

 

98,572

 

 

98,445

 

 

98,615

 

 

(1)

 

 

Represents the impact of revenue-related purchase accounting adjustments associated with the 2012 Acquisition. At the time of the 2012 Acquisition, the Company maintained a deferred revenue account, which consisted of deferred area development agreement fees, deferred franchise fees, and deferred enrollment fees that the Company billed and collected up front but recognizes for GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these periods if the write-down to deferred revenue had not occurred in connection with the application of acquisition pushdown accounting.

 

 

(2)

 

 

Represents the impact of rent-related purchase accounting adjustments. In accordance with guidance in ASC 805 – Business Combinations, in connection with the 2012 Acquisition, the Company’s deferred rent liability was required to be written off as of the acquisition date and rent was recorded on a straight-line basis from the acquisition date through the end of the lease term. This resulted in higher overall recorded rent expense each period than would have otherwise been recorded had the deferred rent liability not been written off as a result of the acquisition push down accounting applied in accordance with ASC 805. Adjustments of $100, $105, $306, and $372 in the three and nine months ended September 30, 2017 and 2016, respectively, reflect the difference between the higher rent expense recorded in accordance with GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $75, $97, $255, and $292 for the three and nine months ended September 30, 2017 and 2016, respectively, are due to the amortization of favorable and unfavorable lease intangible assets which were recorded in connection with the 2012 Acquisition and the acquisition of eight franchisee-owned stores on March 31, 2014. All of the rent related purchase accounting adjustments are adjustments to rent expense which is included in store operations on our consolidated statements of operations. 

 

 

(3)

 

 

Represents transaction fees and expenses related to the amendment of our credit facility in May of 2017.

 

 

(4)

 

 

Represents legal, accounting and other costs incurred in connection with offerings of the Company’s Class A common stock.

 

 

(5)

 

 

Represents severance expense recorded in connection with an equity award modification.

 

 

(6)

 

 

Represents costs associated with new corporate-owned stores incurred prior to the store opening, including payroll-related costs, rent and occupancy expenses, marketing and other store operating supply expenses.

 

 

(7)

 

 

Represents a gain recorded in connection with the write-off of a previously accrued deferred equipment discount that is no longer expected to be utilized. This amount was originally recognized through purchase accounting in connection with the acquisition of eight franchisee-owned stores on March 31, 2014.

 

 

(8)

 

 

Represents charges and expenses incurred in connection with the early termination of the lease for our previous headquarters.

 

 

(9)

 

 

Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the nine months ended September 30, 2017, this amount includes a gain of $541 related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

 

 

(10)

 

 

Includes $4,086, $4,218, $12,258 and $12,655 of amortization of intangible assets, other than favorable leases, for the three and nine months ended September 30, 2017 and 2016, respectively, recorded in connection with the 2012 Acquisition, and $536, $624, $1,609 and $1,873 of amortization of intangible assets for the three and nine months ended September 30, 2017 and 2016, respectively, recorded in connection with the acquisition of eight franchisee-owned stores on March 31, 2014. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with GAAP, in each period.

 

 

(11)

 

 

Represents corporate income taxes at an assumed effective tax rate of 39.5% for the three and nine months ended September 30, 2017 and 2016 applied to adjusted income before income taxes.

 

 

(12)

 

 

Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc.

 

A reconciliation of net income per share, diluted, to Adjusted net income per share, diluted is set forth below for the three and nine months ended September 30, 2017 and 2016:

 

For the three months ended

 

September 30, 2017

 

 

For the three months ended

 

September 30, 2016

 

 

Net
income

 

 

Weighted
Average
Shares

 

 

Net
income
per share,
diluted

 

 

Net
income

 

 

Weighted
Average
Shares

 

 

Net
income
per share,
diluted

 

 

Net income attributable to Planet Fitness, Inc.(1)

 

 

$

 

 

15,345

 

 

85,734

 

 

$

 

 

0.18

 

 

$

 

 

3,425

 

 

44,669

 

 

$

 

 

0.08

 

 

Assumed exchange of shares(2)

 

 

3,557

 

 

12,694

 

 

11,438

 

 

53,903

 

 

Net Income

 

 

18,902

 

 

14,863

 

 

Adjustments to arrive at adjusted income
before income taxes(3)

 

 

12,027

 

 

11,368

 

 

Adjusted income before income taxes

 

 

30,929

 

 

26,231

 

 

Adjusted income taxes(4)

 

 

12,217

 

 

10,361

 

 

Adjusted Net Income

 

 

$

 

 

18,712

 

 

98,428

 

 

$

 

 

0.19

 

 

$

 

 

15,870

 

 

98,572

 

 

$

 

 

0.16

 

 

(1)

 

 

Represents net income attributable to Planet Fitness, Inc. and the associated weighted average shares, diluted of Class A common stock outstanding.

 

 

(2)

 

 

Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc. Also assumes the addition of net income attributable to non-controlling interests corresponding with the assumed exchange of Holdings Units and Class B common shares for shares of Class A common stock.

 

 

(3)

 

 

Represents the total impact of all adjustments identified in the adjusted net income table above to arrive at adjusted income before income taxes.

 

 

(4)

 

 

Represents corporate income taxes at an assumed effective tax rate of 39.5% for the three months ended September 30, 2017 and 2016, applied to adjusted income before income taxes.

 

 

For the nine months ended

 

September 30, 2017

 

 

For the nine months ended

 

September 30, 2016

 

 

Net
income

 

 

Weighted
Average
Shares

 

 

Net
income
per share,
diluted

 

 

Net
income

 

 

Weighted
Average
Shares

 

 

Net
income
per share,
diluted

 

 

Net income attributable to Planet Fitness, Inc.(1)

 

 

$

 

 

36,599

 

 

76,435

 

 

$

 

 

0.48

 

 

$

 

 

10,926

 

 

39,394

 

 

$

 

 

0.28

 

 

Assumed exchange of shares(2)

 

 

18,173

 

 

22,010

 

 

38,374

 

 

59,221

 

 

Net Income

 

 

54,772

 

 

49,300

 

 

Adjustments to arrive at adjusted income
   before income taxes(3)

 

 

42,359

 

 

29,754

 

 

Adjusted income before income taxes

 

 

97,131

 

 

79,054

 

 

Adjusted income taxes(4)

 

 

38,367

 

 

31,226

 

 

Adjusted Net Income

 

 

$

 

 

58,764

 

 

98,445

 

 

$

 

 

0.60

 

 

$

 

 

47,828

 

 

98,615

 

 

$

 

 

0.48

 

 

(1)

 

 

Represents net income attributable to Planet Fitness, Inc. and the associated weighted average shares, diluted of Class A common stock outstanding.

 

 

(2)

 

 

Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc. Also assumes the addition of net income attributable to non-controlling interests corresponding with the assumed exchange of Holdings Units and Class B common shares for shares of Class A common stock.

 

 

(3)

 

 

Represents the total impact of all adjustments identified in the adjusted net income table above to arrive at adjusted income before income taxes.

 

 

(4)

 

 

Represents corporate income taxes at an assumed effective tax rate of 39.5% for the nine months ended September 30, 2017 and 2016, applied to adjusted income before income taxes.

 

View original content with multimedia:http://www.prnewswire.com/news-releases/planet-fitness-inc-announces-third-quarter-2017-results-300551201.html

SOURCE Planet Fitness, Inc.

Investor Contact: Brendon Frey, ICR, brendon.frey@icrinc.com, 203-682-8200; Media Contacts: McCall Gosselin, Planet Fitness, mccall.gosselin@pfhq.com, 603-957-4650, Julia Young, ICR, julia.young@icrinc.com, 646-277-1280

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