Planet Fitness, Inc. Announces Fourth Quarter and Year-End 2019 Results
Company Added
Company Removed
Apply to Request List

Planet Fitness, Inc. Announces Fourth Quarter and Year-End 2019 Results

  • Fourth Quarter System-Wide Same Store Sales Increased 8.6%
  • Company Record 261 New Planet Fitness Stores Opened System-Wide in 2019
  • Executed $300 Million Accelerated Share Repurchase in Fourth Quarter

HAMPTON, N.H., Feb. 25, 2020 // PRNewswire // - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its fourth quarter ended December 31, 2019 and announced its full year 2020 outlook.

Fourth Quarter Fiscal 2019 Highlights

  • Total revenue increased from the prior year period by 9.8% to $191.5 million.
  • System-wide same store sales increased 8.6%.
  • Net income attributable to Planet Fitness, Inc. was $29.7 million, or $0.36 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $24.8 million, or $0.29 per diluted share, in the prior year period.
  • Net income was $34.3 million, compared to net income of $28.8 million in the prior year period.
  • Adjusted net income(1) increased 20.6% to $39.2 million, or $0.44 per diluted share, compared to $32.5 million, or $0.34 per diluted share, in the prior year period.
  • Adjusted EBITDA(1) increased 23.0% to $76.6 million from $62.3 million in the prior year period.
  • 102 new Planet Fitness stores were opened system-wide during the period, bringing system-wide total stores to 2,001 as of December 31, 2019.

Fiscal Year 2019 Highlights

  • Total revenue increased from the prior year by 20.2% to $688.8 million.
  • System-wide same store sales increased 8.8%.
  • Net income attributable to Planet Fitness, Inc. was $117.7 million, or $1.41 per diluted share, compared to $88.0 million, or $1.00 per diluted share, in the prior year.
  • Net income was $135.4 million, compared to $103.2 million in the prior year.
  • Adjusted net income(1) increased 22.7% to $146.7 million, or $1.59 per diluted share, compared to $119.5 million, or $1.22 per diluted share, in the prior year.
  • Adjusted EBITDA(1) increased 26.4% to $282.2 million from $223.2 million in the prior year.
  • 261 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 2,001 as of December 31, 2019.

"2019 was filled with many important milestones and financial achievements," said Chris Rondeau, Chief Executive Officer. "We opened a company record 261 new stores system-wide and ended the year with 2,001 Planet Fitness locations and approximately 14.4 million members. Our ability to attract casual, first time gym users to our welcoming, non-intimidating fitness concept, combined with higher black card pricing, fueled an 8.8% improvement in system-wide same store sales on top of a 10.2% increase in 2018. Revenue in all three of our operating segments - Franchise, Corporate-Owned Stores and Equipment - grew double-digits in 2019, with Franchise, our highest margin segment, growing the fastest, which along with the repurchase of 6.1 million shares, helped drive a 30% increase in Adjusted net income per share, diluted(1) year-over-year. We begin 2020 with great momentum in our business, a long runway for growth, and an experienced group of franchisees eager to capitalize on the many opportunities that still lie ahead."

(1) Adjusted net income, Adjusted EBITDA and Adjusted net income per share, diluted are non-GAAP measures. For reconciliations of Adjusted EBITDA and Adjusted net income to U.S. GAAP ("GAAP") net income and a computation of Adjusted net income per share, diluted, see "Non-GAAP Financial Measures" accompanying this press release.

Operating Results for the Fourth Quarter Ended December 31, 2019

For the fourth quarter of 2019, total revenue increased $17.2 million or 9.8% to $191.5 million from $174.4 million in the prior year period. By segment:

  • Franchise segment revenue increased $16.7 million or 29.6% to $73.3 million from $56.6 million in the prior year period;
  • Corporate-owned stores segment revenue increased $5.0 million or 13.7% to $41.2 million from $36.2 million in the prior year period, $3.1 million of which is from new corporate-owned stores opened or acquired since September 30, 2018; and
  • Equipment segment revenue decreased $4.6 million or 5.6% to $77.0 million from $81.6 million in the prior year period, driven by a decrease in replacement equipment sales to existing franchisee-owned stores, partially offset by higher equipment sales to new franchisee-owned stores.

System-wide same store sales increased 8.6%. By segment, franchisee-owned same store sales increased 8.8% and corporate-owned same store sales increased 5.8%.

For the fourth quarter of 2019, net income attributable to Planet Fitness, Inc. was $29.7 million, or $0.36 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $24.8 million, or $0.29 per diluted share, in the prior year period. Net income was $34.3 million in the fourth quarter of 2019 compared to $28.8 million in the prior year period. Adjusted net income increased 20.6% to $39.2 million, or $0.44 per diluted share, from $32.5 million, or $0.34 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.8% for the fourth quarter of 2019 and 26.3% for the 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 23.0% to $76.6 million from $62.3 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 $12.0 million or 30.8% to $50.7 million, driven by royalties from new franchisee-owned stores opened since September 30, 2018, a higher average royalty rate by 46 basis points and higher same store sales of 8.8%;
  • Corporate-owned stores segment EBITDA increased $0.5 million or 3.6% to $15.1 million; and
  • Equipment segment EBITDA decreased by $0.3 million or 1.7% to $18.7 million.

Operating Results for the Fiscal Year Ended December 31, 2019

For the fiscal year ended December 31, 2019, total revenue increased $115.9 million or 20.2% to $688.8 million from $572.9 million in the prior year. By segment:

  • Franchise segment revenue increased $53.4 million or 23.8% to $277.6 million from $224.1 million in the prior year;
  • Corporate-owned stores segment revenue increased $21.1 million or 15.2% to $159.7 million from $138.6 million in the prior year, $10.7 million of which is from new corporate-owned stores opened or acquired since January 1, 2018; and
  • Equipment segment revenue increased $41.4 million or 19.7% to $251.5 million from $210.2 million in the prior year, driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.

System-wide same store sales increased 8.8%. By segment, franchisee-owned same store sales increased 9.0% and corporate-owned same store sales increased 6.1%.

For the year ended December 31, 2019, net income attributable to Planet Fitness, Inc. was $117.7 million, or $1.41 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $88.0 million, or $1.00 per diluted share, in the prior year. Net income was $135.4 million in 2019 compared to $103.2 million in the prior year. Adjusted net income increased 22.7% to $146.7 million, or $1.59 per diluted share, from $119.5 million, or $1.22 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.8% for the year ended December 31, 2019 and 26.3% for the 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 26.4% to $282.2 million from $223.2 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 $39.7 million or 26.0% to $192.3 million driven by royalties from new franchisee-owned stores opened since January 1, 2018, a higher average royalty rate and higher same store sales of 9.0%;
  • Corporate-owned stores segment EBITDA increased $8.9 million or 15.7% to $65.6 million, driven primarily by additional stores opened and acquired since January 1, 2018, an increase in same store sales of 6.1% and higher annual fees; and
  • Equipment segment EBITDA increased by $12.0 million or 25.2% to $59.6 million driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.

Share Repurchase Program

On December 4, 2019, we entered into a $300 million accelerated share repurchase agreement (the "2019 ASR Agreement") with JPMorgan Chase Bank, N.A. ("JPMC"). We acquired shares under the 2019 ASR Agreement as part of our 2019 $500 million share repurchase authorization (the "2019 Share Repurchase Authorization"). On December 5, 2019, we paid JPMC $300 million in cash and received approximately 3.3 million shares of our Class A common stock. At final settlement, JPMC may be required to deliver additional shares to us, or, under certain circumstances, we may be required to deliver shares of our Class A common stock or may elect to make a cash payment to JPMC, based generally on the average of the daily volume-weighted average prices of our Class A common stock during the term of the 2019 ASR Agreement. The 2019 ASR Agreement contains provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under which the 2019 ASR Agreement may be accelerated, extended or terminated early by JPMC and various acknowledgments, representations and warranties made by the parties to one another. Final settlement of the 2019 ASR Agreement is expected to be completed during the second quarter of 2020, although the settlement may be accelerated at JPMC's option. Following this accelerated share repurchase there will is approximately $200 million remaining on the 2019 Share Repurchase Authorization.

2020 Outlook

For the year ending December 31, 2020, the Company expects:

  • Total revenue increase of approximately 12% as compared to the year ended December 31, 2019;
  • System-wide same store sales of approximately 8%;
  • Adjusted net income to increase approximately 10% as compared to the year ended December 31, 2019; and
  • Adjusted net income per diluted share to increase approximately 16% as compared to the year ended December 31, 2019.

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, 2020. 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, 2020.

Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores. 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.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on February 25, 2020 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 December 31, 2019, Planet Fitness had approximately 14.4 million members and 2,001 stores in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, 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 95% of Planet Fitness stores are owned and operated by independent business men and women.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include the Company's statements with respect to expected future performance presented under the heading "2020 Outlook," those attributed to the Company's Chief Executive Officer in this press release, the Company's statements about its share repurchase program 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 competition in the fitness industry, the Company's and franchisees' ability to attract and retain new 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, general economic conditions and the other factors described in the Company's annual report on Form 10-K for the year ended December 31, 2018 and, once available, the Company's annual report on Form 10-K for the year ended December 31, 2019, as well as 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

Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except per share amounts)

 
   

For the three months ended
December 31,

 

For the year ended December 31,

   

2019

 

2018

 

2019

 

2018

Revenue:

               

Franchise

 

$

58,515

   

$

45,739

   

$

223,139

   

$

175,314

 

Commission income

 

1,615

   

1,620

   

4,288

   

6,632

 

National advertising fund revenue

 

13,169

   

9,197

   

50,155

   

42,194

 

Corporate-owned stores

 

41,216

   

36,234

   

159,697

   

138,599

 

Equipment

 

76,996

   

81,570

   

251,524

   

210,159

 

Total revenue

 

191,511

   

174,360

   

688,803

   

572,898

 

Operating costs and expenses:

               

Cost of revenue

 

59,378

   

62,532

   

194,449

   

162,646

 

Store operations

 

22,745

   

19,851

   

86,108

   

75,005

 

Selling, general and administrative

 

20,874

   

20,380

   

78,818

   

72,446

 

National advertising fund expense

 

13,167

   

9,622

   

50,153

   

42,619

 

Depreciation and amortization

 

12,030

   

9,313

   

44,346

   

35,260

 

Other loss (gain)

 

1,747

   

(80)

   

1,846

   

878

 

Total operating costs and expenses

 

129,941

   

121,618

   

455,720

   

388,854

 

Income from operations

 

61,570

   

52,742

   

233,083

   

184,044

 

Other expense, net:

               

Interest income

 

1,468

   

2,201

   

7,053

   

4,681

 

Interest expense

 

(16,660)

   

(15,021)

   

(60,852)

   

(50,746)

 

Other expense

 

(1,283)

   

(5,837)

   

(6,107)

   

(6,175)

 

Total other expense, net

 

(16,475)

   

(18,657)

   

(59,906)

   

(52,240)

 

Income before income taxes

 

45,095

   

34,085

   

173,177

   

131,804

 

Provision for income taxes

 

10,840

   

5,307

   

37,764

   

28,642

 

Net income

 

34,255

   

28,778

   

135,413

   

103,162

 

Less net income attributable to non-controlling interests

 

4,590

   

3,983

   

17,718

   

15,141

 

Net income attributable to Planet Fitness, Inc.

 

$

29,665

   

$

24,795

   

$

117,695

   

$

88,021

 

Net income per share of Class A common stock:

               

Basic

 

$

0.37

   

$

0.29

   

$

1.42

   

$

1.01

 

Diluted

 

$

0.36

   

$

0.29

   

$

1.41

   

$

1.00

 

Weighted-average shares of Class A common stock outstanding:

               

Basic

 

80,831

   

85,774

   

82,977

   

87,235

 

Diluted

 

81,453

   

86,302

   

83,619

   

87,675

 

 

Planet Fitness, Inc. and subsidiaries

Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except per share amounts)

 
   

December 31,

 

December 31,

   

2019

 

2018

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

436,256

   

$

289,431

 

Restricted cash

 

42,539

   

30,708

 

Accounts receivable, net of allowance for bad debts of $111 and $84 at
  December 31, 2019 and 2018, respectively

 

42,268

   

38,960

 

Inventory

 

877

   

5,122

 

Prepaid expenses

 

8,025

   

4,947

 

Other receivables

 

9,226

   

12,548

 

Income tax receivable

 

947

   

6,824

 

Total current assets

 

540,138

   

388,540

 

Property and equipment, net of accumulated depreciation of $73,621, as of December 31,

   2019 and $53,086 as of December 31, 2018

 

145,481

   

114,367

 

Right-of-use assets, net

 

155,633

   

 

Intangible assets, net

 

233,921

   

234,330

 

Goodwill

 

227,821

   

199,513

 

Deferred income taxes

 

412,293

   

414,841

 

Other assets, net

 

1,903

   

1,825

 

Total assets

 

$

1,717,190

   

$

1,353,416

 

Liabilities and stockholders' deficit

       

Current liabilities:

       

Current maturities of long-term debt

 

$

17,500

   

$

12,000

 

Accounts payable

 

21,267

   

30,428

 

Accrued expenses

 

31,623

   

32,384

 

Equipment deposits

 

3,008

   

7,908

 

Deferred revenue, current

 

27,596

   

23,488

 

Payable pursuant to tax benefit arrangements, current

 

26,468

   

24,765

 

Other current liabilities

 

18,016

   

430

 

Total current liabilities

 

145,478

   

131,403

 

Long-term debt, net of current maturities

 

1,687,505

   

1,160,127

 

Deferred rent, net of current portion

 

   

10,083

 

Lease liabilities, net of current portion

 

152,920

   

 

Deferred revenue, net of current portion

 

34,458

   

26,374

 

Deferred tax liabilities

 

1,116

   

2,303

 

Payable pursuant to tax benefit arrangements, net of current portion

 

400,748

   

404,468

 

Other liabilities

 

2,719

   

1,447

 

Total noncurrent liabilities

 

2,279,466

   

1,604,802

 

Stockholders' equity (deficit):

       

Class A common stock, $.0001 par value - 300,000 shares authorized, 78,525 and 83,584
  shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

8

   

9

 

Class B common stock, $.0001 par value - 100,000 shares authorized, 8,562 and 9,448
  shares issued and outstanding as of December 31, 2019 and 2018, respectively

 

1

   

1

 

Accumulated other comprehensive income

 

303

   

94

 

Additional paid in capital

 

29,820

   

19,732

 

Accumulated deficit

 

(736,587)

   

(394,410)

 

Total stockholders' deficit attributable to Planet Fitness Inc.

 

(706,455)

   

(374,574)

 

Non-controlling interests

 

(1,299)

   

(8,215)

 

Total stockholders' deficit

 

(707,754)

   

(382,789)

 

Total liabilities and stockholders' deficit

 

$

1,717,190

   

$

1,353,416

 

 

Planet Fitness, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands, except per share amounts)

 
 

For the Year Ended December 31,

 

2019

 

2018

Cash flows from operating activities:

     

Net income

$

135,413

   

$

103,162

 

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

     

Depreciation and amortization

44,346

   

35,260

 

Amortization of deferred financing costs

5,454

   

3,400

 

Amortization of favorable leases and asset retirement obligations

237

   

375

 

Amortization of interest rate caps

   

1,170

 

Deferred tax expense

21,625

   

23,933

 

Loss on re-measurement of tax benefit arrangement

5,966

   

4,765

 

Provision for bad debts

87

   

19

 

(Gain) Loss on disposal of property and equipment

(159)

   

462

 

Loss on extinguishment of debt

   

4,570

 

Loss on reacquired franchise rights

1,810

   

360

 

Equity-based compensation

4,826

   

5,479

 

Changes in operating assets and liabilities:

     

Accounts receivable

(895)

   

(1,923)

 

Due from related parties

(472)

   

3,598

 

Inventory

4,244

   

(2,430)

 

Other assets and other current assets

(3,198)

   

5,778

 

Accounts payable and accrued expenses

(6,268)

   

14,506

 

Other liabilities and other current liabilities

1,687

   

(2,835)

 

Income taxes

6,231

   

194

 

Payments pursuant to tax benefit arrangements

(24,998)

   

(30,493)

 

Equipment deposits

(4,900)

   

1,410

 

Deferred revenue

11,452

   

9,640

 

Deferred rent

1,823

   

3,999

 

Net cash provided by operating activities

204,311

   

184,399

 

Cash flows from investing activities:

     

Additions to property and equipment

(57,890)

   

(40,860)

 

Acquisitions of franchises

(52,613)

   

(45,752)

 

Proceeds from sale of property and equipment

109

   

196

 

Purchase of intellectual property

(300)

   

 

Net cash used in investing activities

(110,694)

   

(86,416)

 

Cash flows from financing activities:

     

Proceeds from issuance of long-term debt

550,000

   

1,200,000

 

Proceeds from issuance of Class A common stock

2,863

   

1,209

 

Principal payments on capital lease obligations

(93)

   

(47)

 

Repayment of long-term debt

(12,000)

   

(712,469)

 

Payment of deferred financing and other debt-related costs

(10,577)

   

(27,133)

 

Repurchase and retirement of Class A common stock

(458,166)

   

(342,383)

 

Dividend equivalent paid to members of Pla-Fit Holdings

(243)

   

(957)

 

Distributions to members of Pla-Fit Holdings

(7,436)

   

(8,300)

 

Net cash used in financing activities

64,348

   

109,920

 

Effects of exchange rate changes on cash and cash equivalents

691

   

(844)

 

Net increase in cash, cash equivalents and restricted cash

158,656

   

207,059

 

Cash, cash equivalents and restricted cash, beginning of period

320,139

   

113,080

 

Cash, cash equivalents and restricted cash, end of period

$

478,795

   

$

320,139

 

Supplemental cash flow information:

     

Net cash paid for income taxes

$

10,001

   

$

5,016

 

Cash paid for interest

$

53,713

   

$

38,624

 

Non-cash investing activities:

     

Non-cash additions to property and equipment

$

2,827

   

$

5,451

 

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 December 31,

 

Year ended December 31,

   

2019

 

2018

 

2019

 

2018

(in thousands)

               

Net income

 

$

34,255

   

$

28,778

   

$

135,413

   

$

103,162

 

Interest income

 

(1,468)

   

(2,201)

   

(7,053)

   

(4,681)

 

Interest expense(1)

 

16,660

   

15,021

   

60,852

   

50,746

 

Provision for income taxes

 

10,840

   

5,307

   

37,764

   

28,642

 

Depreciation and amortization

 

12,030

   

9,313

   

44,346

   

35,260

 

EBITDA

 

$

72,317

   

$

56,218

   

$

271,322

   

$

213,129

 

Purchase accounting adjustments-revenue(2)

 

244

   

78

   

768

   

1,019

 

Purchase accounting adjustments-rent(3)

 

122

   

184

   

470

   

732

 

Loss on reacquired franchise rights(4)

 

1,810

   

   

1,810

   

360

 

Transaction fees(5)

 

   

17

   

   

307

 

Severance costs(6)

 

   

   

   

352

 

Pre-opening costs(7)

 

772

   

608

   

1,793

   

1,461

 

Indemnification receivable(8)

 

   

342

   

   

342

 

Tax benefit arrangement remeasurement(9)

 

1,328

   

4,765

   

5,966

   

4,765

 

Other(14)

 

(7)

   

48

   

48

   

733

 

Adjusted EBITDA

 

$

76,586

   

$

62,260

   

$

282,177

   

$

223,200

 

(1)

Includes $4.6 million of loss on extinguishment of debt in the year ended December 31, 2018.

(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 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.

(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 $0.1 million, $0.1 million, $0.2 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, 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 $0.1 million, $0.1 million, $0.3 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, are due to the amortization of favorable and unfavorable lease intangible assets. 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 12 franchisee-owned stores in December 2019. The loss recorded under GAAP represents the difference between the fair value of the reacquired franchise rights and the contractual terms of the reacquired franchise rights and is included in other (gain) loss on our consolidated statements of operations.

(5)

Represents transaction fees and expenses that could not be capitalized related to the securitized debt transaction in 2018.

(6)

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

(7)

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.

(8)

Represents a receivable recorded in connection with a contractual obligation of the Company's co-founders to indemnify the Company with respect to pre-IPO tax liabilities pursuant to the 2012 Acquisition.

(9)

Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

(10)

Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the year ended December 31, 2018 this amount included expense of $0.6 million related to the write off of certain assets that were being tested for potential use across the system.

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

   

Three months ended December 31,

 

Year ended December 31,

(in thousands)

 

2019

 

2018

 

2019

 

2018

Segment EBITDA

               

Franchise

 

$

50,734

   

$

38,778

   

$

192,281

   

$

152,571

 

Corporate-owned stores

 

15,108

   

14,589

   

65,613

   

56,704

 

Equipment

 

18,698

   

19,028

   

59,618

   

47,607

 

Corporate and other

 

(12,222)

   

(16,177)

   

(46,190)

   

(43,753)

 

Total Segment EBITDA(1)

 

$

72,318

   

$

56,218

   

$

271,322

   

$

213,129

 
   

(1)

Total Segment EBITDA is equal to EBITDA.

Adjusted Net Income and Adjusted Net Income per Diluted Share

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 December 31,

 

Year ended December 31,

(in thousands, except per share amounts)

 

2019

 

2018

 

2019

 

2018

Net income

 

$

34,255

   

$

28,778

   

$

135,413

   

$

103,162

 

Provision for income taxes, as reported

 

10,840

   

5,307

   

37,764

   

28,642

 

Purchase accounting adjustments-revenue(1)

 

244

   

78

   

768

   

1,019

 

Purchase accounting adjustments-rent(2)

 

122

   

184

   

470

   

732

 

Loss on reacquired franchise rights(3)

 

1,810

   

   

1,810

   

360

 

Transaction fees(4)

 

   

17

   

   

307

 

Loss on extinguishment of debt(5)

 

   

   

   

4,570

 

Severance costs(6)

 

   

   

   

352

 

Pre-opening costs(7)

 

772

   

608

   

1,793

   

1,461

 

Indemnification receivable(8)

 

   

342

   

   

342

 

Tax benefit arrangement remeasurement(9)

 

1,328

   

4,765

   

5,966

   

4,765

 

Other(10)

 

(7)

   

48

   

48

   

733

 

Purchase accounting amortization(11)

 

4,164

   

3,940

   

16,318

   

15,716

 

Adjusted income before income taxes

 

$

53,528

   

$

44,067

   

$

200,350

   

$

162,161

 

Adjusted income taxes(12)

 

14,346

   

11,590

   

53,694

   

42,648

 

Adjusted net income

 

$

39,182

   

$

32,477

   

$

146,656

   

$

119,513

 
                 

Adjusted net income per share, diluted

 

$

0.44

   

$

0.34

   

$

1.59

   

$

1.22

 
                 

Adjusted weighted-average shares outstanding(13)

 

90,015

   

95,758

   

92,358

   

97,950

 

(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 $0.1 million, $0.1 million, $0.2 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, 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 $0.1 million, $0.1 million, $0.3 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, are due to the amortization of favorable and unfavorable lease intangible assets. 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 12 franchisee-owned stores in December 2019. The loss recorded under GAAP represents the difference between the fair value of the reacquired franchise rights and the contractual terms of the reacquired franchise rights and is included in other (gain) loss on our consolidated statements of operations.

(4)

Represents transaction fees and expenses that could not be capitalized related to the securitized debt transaction in 2018.

(5)

Represents a loss on extinguishment of debt related to the write-off of deferred financing costs associated with the Term Loan B which the Company repaid in August 2018.

(6)

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

(7)

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.

(8)

Represents a receivable recorded in connection with a contractual obligation of the Company's co-founders to indemnify the Company with respect to pre-IPO tax liabilities pursuant to the 2012 Acquisition.

(9)

Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

(10)

Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the year ended December 31, 2018 this amount included expense of $0.6 million related to the write-off of certain assets that were being tested for potential use across the system.

(11)

Includes $3.1 million, $3.1 million, $12.4 million and $12.4 million of amortization of intangible assets, other than favorable leases, for the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively recorded in connection with the 2012 Acquisition, and $1.1 million, $0.8 million, $4.0 million and $3.3 million of amortization of intangible assets for the three months ended  December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, created in connection with historical acquisitions of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with GAAP, in each period.

(12)

Represents corporate income taxes at an assumed effective tax rate of 26.8% for the three months and year ended December 31, 2019 and 26.3% for the three months and year ended December 31, 2018, applied to adjusted income before income taxes.

(13)

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 months and years ended December 31, 2019 and 2018:

   

For the three months ended
December 31, 2019

 

For the three months ended
December 31, 2018

(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)

 

$

29,665

   

81,453

   

$

0.36

   

$

24,795

   

86,302

   

$

0.29

 

Assumed exchange of shares(2)

 

4,590

   

8,562

       

3,983

   

9,456

     

Net Income

 

34,255

           

28,778

         

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

 

19,273

           

15,289

         

Adjusted income before income taxes

 

53,528

           

44,067

         

Adjusted income taxes(4)

 

14,346

           

11,590

         

Adjusted Net Income

 

$

39,182

   

90,015

   

$

0.44

   

$

32,477

   

95,758

   

$

0.34

 
   

(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 share of Class B common stock 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 26.8% and 26.3% for the three months ended December 31, 2019 and 2018, respectively, applied to adjusted income before income taxes.

   

Year Ended December 31, 2019

 

Year Ended December 31, 2018

(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)

 

$

117,695

   

83,619

   

$

1.41

   

$

88,021

   

87,675

   

$

1.00

 

Assumed exchange of shares(2)

 

17,718

   

8,739

       

15,141

   

10,275

     

Net Income

 

135,413

           

103,162

         

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

 

64,937

           

58,999

         

Adjusted income before income taxes

 

200,350

           

162,161

         

Adjusted income taxes(4)

 

53,694

           

42,648

         

Adjusted Net Income

 

$

146,656

   

92,358

   

$

1.59

   

$

119,513

   

97,950

   

$

1.22

 
   

(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 shares of Class B common stock 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 26.8% and 26.3% for the years ended December 31, 2019 and 2018, respectively, applied to adjusted income before income taxes.

SOURCE Planet Fitness, Inc.

###

Comments:

comments powered by Disqus
Share This Page

Subscribe to Our Newsletters

A Franchise Update Media Production
Franchise Update Media
P.O. Box 20547
San Jose, CA 95160
PH. (408) 402-5681
In Loving Memory Of Timothy Gardner (1987-2014)

Copyright © 2001 - 2020.
All Rights Reserved.