PLNT
$56.57
Planet Fitness
$.69
1.23%
Earnings Details
2nd Quarter June 2022
Tuesday, August 9, 2022 6:30:00 AM
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Summary

Planet Fitness Misses

Planet Fitness (PLNT) reported 2nd Quarter June 2022 earnings of $0.38 per share on revenue of $224.4 million. The consensus earnings estimate was $0.38 per share on revenue of $229.5 million. The Earnings Whisper number was $0.42 per share. Revenue grew 63.5% on a year-over-year basis.

The company said it continues to expect 2022 earnings of approximately $1.52 per share on revenue of approximately $909.9 million. The current consensus earnings estimate is $1.55 per share on revenue of $911.8 million for the year ending December 31, 2022.

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.

Results
Reported Earnings
$0.38
Earnings Whisper
$0.42
Consensus Estimate
$0.38
Reported Revenue
$224.4 Mil
Revenue Estimate
$229.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Planet Fitness, Inc. Announces Second Quarter 2022 Results

System-wide same store sales increased 13.6%

Ends second quarter with total membership of more than 16.5 million

More than 3.3 million High School Summer Pass participants through end of July

HAMPTON, N.H., Aug. 9, 2022 /PRNewswire/ -- Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its second quarter ended June 30, 2022.

"Our high-quality, affordable fitness experience resonates now more than ever as Americans are seeking value and feeling the rising costs of everyday items such as food and gas. We believe that people will continue to prioritize their health and wellness while being more cost-conscious, and we offer a welcoming environment for people of all fitness levels. During the second quarter, our join trend returned to pre-pandemic seasonality with the addition of approximately 300,000 net new members, ending the quarter with more than 16.5 million," said Chris Rondeau, Chief Executive Officer. "We now have more than 3.3 million teens enrolled in our High School Summer Pass, a program that offers teens a chance to work out for free at our gyms over the summer – an extremely important initiative given the ongoing and alarming teen mental health crisis. This is more than three times the number of participants than when we last ran the program in 2019. Nearly 15 percent of all high school-aged teens in the U.S. are either enrolled in the program or are a paying member at Planet Fitness. We're proud to be helping them establish healthy habits that they can build upon into the future."

Second Quarter Fiscal 2022 results

  • Total revenue increased from the prior year period by 63.5% to $224.4 million.
  • System-wide same store sales increased 13.6%.
  • System-wide sales increased $151 million to $1,019 million, from $868 million in the prior year period.
  • Net income attributable to Planet Fitness, Inc. was $22.3 million, or $0.26 per diluted share, compared to $14.0 million, or $0.17 per diluted share, in the prior year period.
  • Net income increased $10.1 million to $25.1 million, compared to $15.0 million in the prior year period.
  • Adjusted net income(1) increased $16.3 million to $34.5 million, or $0.38 per diluted share, compared to $18.2 million, or $0.21 per diluted share, in the prior year period.
  • Adjusted EBITDA(1)  increased $34.3 million to $89.9 million from $55.6 million in the prior year period.
  • 34 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 2,324 as of June 30, 2022.
  • Repurchased and retired approximately 697,000 shares of Class A common stock using $44.3 million of cash on hand.
  • Repaid in full its $75 million of borrowings under our Variable Funding Notes using cash on hand.
  • Cash of $446.3 million, which includes cash and cash equivalents of $383.5 million and restricted cash of $62.8 million.

(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.

Operating Results for the Second Quarter Ended June 30, 2022

For the second quarter 2022, total revenue increased $87.2 million or 63.5% to $224.4 million from $137.3 million in the prior year period, which included system-wide same store sales growth of 13.6%.  By segment:

  • Franchise segment revenue increased $9.7 million or 13.3% to $82.5 million from $72.8 million in the prior year period. The increase in franchise segment revenue for the second quarter of 2022 was primarily due to a $6.2 million increase in franchise royalty revenue, a $1.6 million increase in National Advertising Fund ("NAF") revenue, and a $1.7 million increase in placement revenue. Of the $6.2 million increase in royalty revenue, $5.9 million was attributable to a same store sales increase of 13.4% in franchisee-owned stores, $1.9 million was attributable to new stores opened since April 1, 2021 or stores that were not open for all of the prior year period due to COVID-related temporary closures, and $0.8 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $3.1 million 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") moving from the franchise segment to the corporate-owned segment;
  • Corporate-owned stores segment revenue increased $60.9 million or 150.0% to $101.5 million from $40.6 million in the prior year period. Of the increase, $49.5 million was attributable to the acquisition of 114 stores in the Sunshine Acquisition, $5.3 million was from the corporate-owned store same store sales increase of 15.7%, $4.0 million was from new stores opened since April 1, 2021 and stores that were not open for all of the prior year period due to COVID-related temporary closures, and the remainder due to higher annual fee revenue; and
  • Equipment segment revenue increased $16.6 million or 69.8% to $40.4 million from $23.8 million in the prior year period, driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2022 compared to the three months ended June 30, 2021. In the three months ended June 30, 2022, the Company had equipment sales to 26 new franchisee-owned stores compared to 19 in the prior year period.

For the second quarter of 2022, net income attributable to Planet Fitness, Inc. was $22.3 million, or $0.26 per diluted share, compared to $14.0 million, or $0.17 per diluted share, in the prior year period. Net income was $25.1 million in the second quarter of 2022 compared to $15.0 million in the prior year period. Adjusted net income increased $16.3 million to $34.5 million, or $0.38 per diluted share, from $18.2 million, or $0.21 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.7% and 26.6% 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 (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 $34.3 million to $89.9 million from $55.6 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 $2.6 million to $54.3 million. The increase in franchise segment EBITDA for the second quarter of 2022 was primarily due to the revenue increases described above. Partially offsetting these EBITDA increases, NAF expense was $5.4 million higher in the three months ended June 30, 2022 than in the prior year period;
  • Corporate-owned stores segment EBITDA increased $29.1 million to $39.5 million. Of the increase, $20.7 million was attributable to corporate-owned stores acquired in the Sunshine Acquisition and $9.8 million due to the same store sales increase of 15.7%, partially offset by higher corporate-owned store selling general and administrative expense primarily as a result of the Sunshine Acquisition; and
  • Equipment segment EBITDA increased by $4.6 million to $10.2 million driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2022 compared to the three months ended June 30, 2021, as described above.

Company Updates

This morning the Company announced that Dorvin Lively, President, has decided to retire and will transition through the next couple of months. Dorvin joined Planet Fitness in 2013 as the Company's Chief Financial Officer and was instrumental in developing its finance organization, preparing the Company to go public and then leading the IPO in 2015, and, more broadly, expanding the brand both domestically and globally. The Company has begun a search for a new President.

"We are grateful for Dorvin's leadership, friendship, passion for our member and franchisees, and significant contributions to the brand over the past nine years. Personally, I'd like to thank Dorvin for helping me lead Planet Fitness and I am forever grateful for his guidance and support," said Chris Rondeau, Chief Executive Officer.

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 includes the impact from the Sunshine Acquisition and assumes there is no significant worsening of the COVID-19 pandemic that seriously impacts performance, including prolonged store closures or other mandated operational restrictions:

  • New equipment placements of approximately 170 in franchisee-owned locations
  • 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
  • Adjusted earnings per share to increase in the mid-80 percent range, based on Adjusted diluted shares outstanding of approximately 90.7 million, inclusive of the issuance of equity as part of the Sunshine Acquisition and the second quarter share repurchase

The Company now expects 2022 net interest expense to be approximately $86 million as a result of its recent debt refinancing and upsizing.

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.

Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores, which is calculated for a given period by including only sales from stores that had sales in the comparable months of both years. We define the same store sales base to include those stores that have been open and for which monthly membership dues have been billed for longer than 12 months. We measure same store sales based solely upon monthly dues billed to members of our corporate-owned and franchisee-owned stores.

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 EBITDA 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, 2022. Accordingly, a reconciliation of the Company's guidance for Adjusted EBITDA and Adjusted net income per share, diluted, to the most directly comparable GAAP measure cannot be made available without unreasonable effort. 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, 2022.

Investor Conference Call

The Company will hold a conference call at 8:00 AM (ET) on August 9, 2022 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, NH, 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 June 30, 2022, Planet Fitness had more than 16.5 million members and 2,324 stores in 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia. 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 90% 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 "2022 Outlook," those attributed to the Company's Chief Executive Officer in this press release, including with respect to the Company's growth opportunities globally and long-term targets for U.S. store locations, and other statements, estimates and projections that do not relate solely to historical facts. Forward-looking statements can be identified by words such as "believe," "expect," "goal," plan," "will," "prospects," "future," "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 the duration and impact of COVID-19, which has resulted and may continue to result in store closures and a decrease in our net membership base and may give rise to or heighten one or more of the other risks and uncertainties described herein, competition in the fitness industry, the Company's and franchisees' ability to attract and retain members, the Company's and franchisees' ability to identify and secure suitable sites for new franchise stores, 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 increased indebtedness as a result of our refinancing and securitization transactions and our ability to incur additional indebtedness or refinance that indebtedness in the future, our future financial performance and our ability to pay principal and interest on our indebtedness, our corporate structure and tax receivable agreements, failures, interruptions or security breaches of the Company's information systems or technology, our ability to successfully integrate and realize the anticipated benefits from the Sunshine Acquisition, general economic conditions and the other factors described in the Company's annual report on Form 10-K for the year ended December 31, 2021, 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
Condensed Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share amounts)

 



For the three months ended

June 30,


For the six months ended

June 30,



2022


2021


2022


2021

Revenue:









Franchise


$        67,917


$        59,758


$      133,531


$      111,938

Commission income


41


70


544


342

National advertising fund revenue


14,585


13,021


28,552


24,630

Corporate-owned stores


101,453


40,579


177,610


78,456

Equipment


40,446


23,823


70,881


33,762

Total revenue


224,442


137,251


411,118


249,128

Operating costs and expenses:









Cost of revenue


32,544


18,497


54,905


26,482

Store operations


56,362


28,430


103,897


54,337

Selling, general and administrative


28,202


21,789


59,028


44,279

National advertising fund expense


18,889


13,529


33,436


26,282

Depreciation and amortization


32,172


15,036


57,855


30,510

Other (gains) losses, net


1,181


(282)


(1,752)


(2,420)

Total operating costs and expenses


169,350


96,999


307,369


179,470

Income from operations


55,092


40,252


103,749


69,658

Other expense, net:









Interest income


474


195


683


412

Interest expense


(21,979)


(20,125)


(44,610)


(40,369)

Other income (expense)


148


(147)


4,238


18

Total other expense, net


(21,357)


(20,077)


(39,689)


(39,939)

Income before income taxes


33,735


20,175


64,060


29,719

Equity earnings (losses) of unconsolidated entities, net of tax


(94)



(332)


Provision for income taxes


8,570


5,159


20,281


8,513

Net income


25,071


15,016


43,447


21,206

Less net income attributable to non-controlling interests


2,729


1,006


4,641


1,615

Net income attributable to Planet Fitness, Inc.


$        22,342


$        14,010


$        38,806


$        19,591

Net income per share of Class A common stock:









Basic


$             0.26


$             0.17


$             0.46


$             0.24

Diluted


$             0.26


$             0.17


$             0.46


$             0.23

Weighted-average shares of Class A common stock outstanding:









Basic


84,810


83,223


84,490


83,154

Diluted


85,197


83,837


84,919


83,771

 

Planet Fitness, Inc. and subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands, except per share amounts)

 



June 30, 2022


December 31, 2021

Assets





Current assets:





  Cash and cash equivalents


$              383,511


$               545,909

  Restricted cash


62,762


58,032

  Accounts receivable, net of allowance for bad debts of $0 and $0 at June 30, 2022 and December 31, 2021, respectively


23,274


27,257

  Inventory


3,040


1,155

  Restricted assets – national advertising fund


12,804


  Prepaid expenses


14,046


12,869

  Other receivables


21,310


13,519

  Income tax receivables


2,635


3,673

  Total current assets


523,382


662,414

Property and equipment, net of accumulated depreciation of $189,742 and $152,296 at June 30, 2022
   and December 31, 2021, respectively


334,661


173,687

Investments, net of allowance for expected credit losses of $15,617 and $17,462
   as of June 30, 2022 and December 31, 2021, respectively


21,186


18,760

Right of use assets, net


357,615


190,330

Intangible assets, net


441,278


200,937

Goodwill


714,153


228,569

Deferred income taxes


487,694


539,264

Other assets, net


4,117


2,022

  Total assets


$             2,884,086


$             2,015,983

Liabilities and stockholders' deficit





Current liabilities:





  Current maturities of long-term debt


$                  20,750


$                  17,500

  Accounts payable


22,312


27,892

  Accrued expenses


55,993


51,714

  Equipment deposits


22,861


6,036

  Deferred revenue, current


63,446


28,351

  Payable pursuant to tax benefit arrangements, current


35,894


20,302

  Other current liabilities


42,300


24,815

  Total current liabilities


263,556


176,610

Long-term debt, net of current maturities


1,985,730


1,665,273

Borrowings under Variable Funding Notes



75,000

Lease liabilities, net of current portion


351,462


197,682

Deferred revenue, net of current portion


33,032


33,428

Deferred tax liabilities


886


Payable pursuant to tax benefit arrangements, net of current portion


474,130


507,805

Other liabilities


4,298


3,030

  Total noncurrent liabilities


2,849,538


2,482,218

Stockholders' equity (deficit):





  Class A common stock, $0.0001 par value - 300,000 authorized, 84,230 and 83,804 shares issued and
  outstanding as of June 30, 2022 and December 31, 2021, respectively


8


8

  Class B common stock, $0.0001 par value - 100,000 authorized, 6,146 and 3,056 shares issued and
  outstanding as of June 30, 2022 and December 31, 2021, respectively


1


1

  Accumulated other comprehensive income


(110)


12

  Additional paid in capital


529,026


63,428

  Accumulated deficit


(714,297)


(708,804)

  Total stockholders' deficit attributable to Planet Fitness, Inc.


(185,372)


(645,355)

  Non-controlling interests


(43,636)


2,510

  Total stockholders' deficit


(229,008)


(642,845)

  Total liabilities and stockholders' deficit


$             2,884,086


$             2,015,983

 

Planet Fitness, Inc. and subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands, except per share amounts)

 



For the six months ended June 30,



2022


2021

Cash flows from operating activities:





Net income


$                  43,447


$                  21,206

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





Depreciation and amortization


57,855


30,510

Amortization of deferred financing costs


2,755


3,155

Write-off of deferred financing costs


1,583


Dividends accrued on investment


(914)


Deferred tax expense


18,843


7,210

Equity loss of unconsolidated entities, net of tax


332


Gain on adjustment of allowance for credit losses on held-to-maturity investment


(1,845)


Gain on re-measurement of tax benefit arrangement


(3,871)


(348)

Loss on reacquired franchise rights


1,160


Equity-based compensation


5,601


4,049

Other


65


(71)

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





Accounts receivable


3,884


1,006

Inventory


(1,885)


(724)

Other assets and other current assets


(7,683)


6,059

Restricted assets - national advertising fund


(12,804)


(8,362)

Accounts payable and accrued expenses


(19,949)


(102)

Other liabilities and other current liabilities


2,225


(3,725)

Income taxes


64


413

Payable pursuant to tax benefit arrangements


(14,211)


Equipment deposits


16,838


6,688

Deferred revenue


17,783


7,319

Leases and deferred rent


990


(17)

Net cash provided by operating activities


110,263


74,266

Cash flows from investing activities:





Additions to property and equipment


(41,423)


(19,395)

Acquisition of franchises, net of cash acquired


(424,940)


Proceeds from sale of property and equipment


60


1

Investments



(35,000)

Net cash used in investing activities


(466,303)


(54,394)

Cash flows from financing activities:





Principal payments on capital lease obligations


(132)


(104)

Proceeds from issuance of long-term debt


900,000


Proceeds from issuance of Variable Funding Notes


75,000


Repayment of long-term debt


(714,438)


(8,750)

Payment of deferred financing and other debt-related costs


(16,193)


Proceeds from issuance of Class A common stock


676


578

Repurchase and retirement of Class A common stock


(44,299)


Distributions to Continuing LLC Members


(2,023)


(145)

Net cash provided by (used in) financing activities


198,591


(8,421)

Effects of exchange rate changes on cash and cash equivalents


(219)


120

Net (decrease) increase in cash, cash equivalents and restricted cash


(157,668)


11,571

Cash, cash equivalents and restricted cash, beginning of period


603,941


515,800

Cash, cash equivalents and restricted cash, end of period


$                446,273


$                527,371

Supplemental cash flow information:





Net cash paid for income taxes


$                    1,353


$                       889

Cash paid for interest


$                  40,057


$                  37,536

Non-cash investing activities:





Non-cash additions to property and equipment


$                    9,608


$                    3,500

Fair value of common stock issued as consideration for acquisition


$                393,730


$                         —


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.

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

 

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

 



Three months ended June 30,


Six months ended June 30,



2022


2021


2022


2021

(in thousands)









Net income


$          25,071


$          15,016


$          43,447


$          21,206

Interest income


(474)


(195)


(683)


(412)

Interest expense(1)


21,979


20,125


44,610


40,369

Provision for income taxes


8,570


5,159


20,281


8,513

Depreciation and amortization


32,172


15,036


57,855


30,510

EBITDA


$          87,318


$          55,141


$        165,510


$        100,186

Purchase accounting adjustments-revenue(2)


71


128


129


197

Purchase accounting adjustments-rent(3)


109


97


219


214

Loss on reacquired franchise rights(4)




1,160


Gain on settlement of preexisting contract with acquiree(5)




(2,059)


Transaction fees and acquisition-related costs(6)


525



4,948


Loss (gain) on adjustment of allowance for credit losses on held-to-maturity investments(7)


265



(1,845)


Dividend income on held-to-maturity investments(8)


(463)



(914)


Pre-opening costs(9)


783


481


1,439


847

Legal matters(10)


898


(325)


951


(2,500)

Tax benefit arrangement remeasurement(11)


(83)



(3,871)


(348)

Other(12)


500


54


1,600


688

Adjusted EBITDA


$          89,923


$          55,576


$        167,267


$          99,284

(1)

Includes a $1,583 loss on extinguishment of debt in the six months ended June 30, 2022.

(2)

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 upfront but recognizes for U.S. 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.

(3)

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 $45, $33, $90 and $82 in the three and six months ended June 30, 2022 and 2021, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $64, $64, $129, and $132 in the three and six months ended June 30, 2022 and 2021, respectively, are due to the amortization of favorable and unfavorable leases. 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.

(4)

Represents the impact of a non-cash loss recorded in accordance with ASC 805 – Business Combinations related to our acquisition of franchisee-owned stores. The loss recorded under U.S. GAAP represents the difference between the fair value and the contractual terms of the reacquired franchise rights and is included in other (gains) losses, net on our consolidated statement of operations.

(5)

Represents a gain on settlement of deferred revenue from existing contracts with acquired franchisee-stores recorded in accordance with ASC 805 – Business Combinations, and is included in other (gains) losses, net on our consolidated statement of operations.

(6)

Represents transaction fees and acquisition-related costs incurred in connection with our acquisition of franchisee-owned stores.

(7)

Represents a loss (gain) on the adjustment of the allowance for credit losses on the Company's held-to-maturity investments.

(8)

Represents dividend income on held-to-maturity investments.

(9)

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.

(10)

In the three and six months ended June 30, 2022, the amounts represent a reserve against an indemnification receivable related to a legal matter. In the three and six months ended June 30, 2021, the amounts represent an insurance recovery of previously recognized expenses related to the settlement of legal claims.

(11)

Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our deferred state tax rate.

(12)

Represents certain other charges and gains that we do not believe reflect our underlying business performance.



 

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

 



Three months ended June 30,

(in thousands)


2022


2021

Segment EBITDA





Franchise


$          54,329


$          51,756

Corporate-owned stores


39,477


10,372

Equipment


10,182


5,608

Corporate and other


(16,670)


(12,595)

Total Segment EBITDA(1)


$          87,318


$          55,141

(1)

Total Segment EBITDA is equal to EBITDA.



Adjusted Net Income and Adjusted Net Income per Diluted Share

Our presentation of 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.

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

 



Three months ended June 30,


Six months ended June 30,

(in thousands, except per share amounts)


2022


2021


2022


2021

Net income


$          25,071


$          15,016


$          43,447


$          21,206

Provision for income taxes, as reported


8,570


5,159


20,281


8,513

Purchase accounting adjustments-revenue(1)


71


128


129


197

Purchase accounting adjustments-rent(2)


109


97


219


214

Loss on reacquired franchise rights(3)




1,160


Gain on settlement of preexisting contract with acquiree(4)




(2,059)


Transaction fees and acquisition-related costs(5)


525



4,948


Loss on extinguishment of debt(6)




1,583


Loss (gain) on adjustment of allowance for credit losses on held-to-maturity investments(7)


265



(1,845)


Dividend income on held-to-maturity investments(8)


(463)



(914)


Pre-opening costs(9)


783


481


1,439


847

Legal matters(10)


898


(325)


951


(2,500)

Tax benefit arrangement remeasurement(11)


(83)



(3,871)


(348)

Other(12)


500


54


1,600


688

Purchase accounting amortization(13)


10,781


4,159


19,299


8,318

Adjusted income before income taxes


$          47,027


$          24,769


$          86,367


$          37,135

Adjusted income taxes(14)


12,556


6,589


23,060


9,878

Adjusted net income


$          34,471


$          18,180


$          63,307


$          27,257










Adjusted net income per share, diluted


$               0.38


$               0.21


$               0.70


$               0.31










Adjusted weighted-average shares outstanding(15)


91,343


87,200


90,503


87,188

(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 upfront but recognizes for U.S. 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 $45, $33, $90 and $82 in the three and six months ended June 30, 2022 and 2021, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $64, $64, $129, and $132 in the three and six months ended June 30, 2022 and 2021, respectively, are due to the amortization of favorable and unfavorable leases. 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 the impact of a non-cash loss recorded in accordance with ASC 805 – Business Combinations related to our acquisition of franchisee-owned stores. The loss recorded under U.S. GAAP represents the difference between the fair value and the contractual terms of the reacquired franchise rights and is included in other (gains) losses, net on our consolidated statement of operations.

(4)

Represents a gain on settlement of deferred revenue from existing contracts with acquired franchisee-stores recorded in accordance with ASC 805 – Business Combinations, and is included in other (gains) losses, net on our consolidated statement of operations.

(5)

Represents transaction fees and acquisition-related costs incurred in connection with our acquisition of franchisee-owned stores.

(6)

Represents a loss on extinguishment of debt in the six months ended June 30, 2022.

(7)

Represents a loss (gain) on the adjustment of the allowance for credit losses on the Company's held-to-maturity investments.

(8)

Represents dividend income on held-to-maturity investments.

(9)

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.

(10)

In the three and six months ended June 30, 2022, the amounts represent a reserve against an indemnification receivable related to a legal matter. In the three and six months ended June 30, 2021, the amounts represent an insurance recovery of previously recognized expenses related to the settlement of legal claims.

(11)

Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our deferred state tax rate.

(12)

Represents certain other charges and gains that we do not believe reflect our underlying business performance.

(13)

Includes $3,096, $3,096, $6,192 and $6,192 of amortization of intangible assets, for the three and six months ended June 30, 2022 and 2021, recorded in connection with the 2012 Acquisition, and $7,685, $1,063, $13,107, and $2,216 of amortization of intangible assets for the three and six months ended June 30, 2022 and 2021, respectively, recorded in connection with historical acquisitions of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with U.S. GAAP, in each period.

(14)

Represents corporate income taxes at an assumed blended tax rate of 26.7% for the three and six months ended June 30, 2022 and 26.6% for the three and six months ended June 30, 2021, applied to adjusted income before income taxes.

(15)

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 six months ended June 30, 2022 and 2021:

 



For the three months ended

June 30, 2022


For the three months ended

June 30, 2021

(in thousands, except per share amounts)


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)


$     22,342


85,197


$         0.26


$     14,010


83,837


$         0.17

Assumed exchange of shares(2)


2,729


6,146




1,006


3,363



Net income


25,071






15,016





Adjustments to arrive at adjusted income

   before income taxes(3)


21,956






9,753





Adjusted income before income taxes


47,027






24,769





Adjusted income tax expense(4)


12,556






6,589





Adjusted net income


$     34,471


91,343


$         0.38


$     18,180


87,200


$         0.21

(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 blended tax rate of 26.7% and 26.6% for the three months ended June 30, 2022 and 2021, respectively, applied to adjusted income before income taxes.

 



For the six months ended

June 30, 2022


For the six months ended

June 30, 2021

(in thousands, except per share amounts)


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)


$     38,806


84,919


$         0.46


$     19,591


83,771


$         0.23

Assumed exchange of shares(2)


4,641


5,584




1,615


3,417



Net income


43,447






21,206





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


42,920






15,929





Adjusted income before income taxes


86,367






37,135





Adjusted income tax expense(4)


23,060






9,878





Adjusted net income


$     63,307


90,503


$         0.70


$     27,257


87,188


$         0.31

(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 blended tax rate of 26.7% and 26.6% for the six months ended June 30, 2022 and 2021, respectively, applied to adjusted income before income taxes.

 

Planet Fitness logo. (PRNewsFoto/Planet Fitness)

 

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SOURCE Planet Fitness, Inc.