Planet Fitness, Inc. Announces Second Quarter 2021 Results
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Planet Fitness, Inc. Announces Second Quarter 2021 Results

  • Adds 700,000 net new members since end of first quarter, marking six consecutive months of net member growth
  • Ends second quarter with total membership of more than 14.8 million and over 98% of stores open globally


HAMPTON, N.H., Aug. 9, 2021 // PRNewswire // - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its second quarter ended June 30, 2021.

"Our membership momentum continues to defy our historical seasonal patterns, and, as of the end of July we had more than 15 million members. It's a testament to the strength of our brand that more than 13 million people remained members of Planet Fitness in the depths of the global pandemic when most of our gyms were temporarily closed. And today, with nearly all of our stores reopened, existing members are re-engaging with us, and net membership is continuing to climb as people realize the importance of fitness to their overall wellness," said Chris Rondeau, Chief Executive Officer. "There is a dislocation in the fitness industry with approximately 22 percent of U.S. gyms permanently closed due to the impact from COVID-19 through the end of the second quarter, while, at the same time, more Americans are realizing that fitness is essential to physical, mental, and emotional well-being. We believe Planet Fitness is the place that fills that gap with our affordable, non-intimidating workout environment, and, as a result, we are confident in achieving and possibly exceeding our long-term target of 4,000 locations in the U.S."

Second Quarter Fiscal 2021 results

  • Total revenue increased from the prior year period by 241.1% to $137.3 million.
  • Net income attributable to Planet Fitness, Inc. was $14.0 million, or $0.17 per diluted share, compared to a loss of $29.2 million, or $0.36 per diluted share in the prior year period.
  • Net income increased $47.0 million to $15.0 million, compared to a net loss of $32.0 million in the prior year period.
  • Adjusted net income(1)  increased $46.1 million to $18.2 million, or $0.21 per diluted share, compared to an Adjusted net loss of $27.9 million, or $0.32 per diluted share in the prior year period.
  • Adjusted EBITDA(1)  increased $64.8 million to $55.6 million from a loss of $9.3 million in the prior year period.
  • 24 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 2,170 as of June 30, 2021.
  • Cash of $527.4 million as of June 30, 2021, which includes cash and cash equivalents of $469.1 million and restricted cash of $58.2 million.

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

Operating Results for the Second Quarter Ended June 30, 2021

For the second quarter 2021, total revenue increased $97.0 million or 241.1% to $137.3 million from $40.2 million in the prior year period. By segment:

  • Franchise segment revenue increased $51.8 million or 246.9% to $72.8 million from $21.0 million in the prior year period. The increase in franchise segment revenue for the second quarter 2021 is primarily due to a $37.7 million increase in franchise royalty revenue, an $8.3 million increase in NAF revenue, and a $5.0 million increase in franchise and other fees, primarily attributable to temporary store closures as a result of COVID-19 in the prior year period;
  • Corporate-owned stores segment revenue increased $31.2 million or 330.8% to $40.6 million from $9.4 million in the prior year period. The increase was primarily due to temporary store closures as a result of COVID-19 in the prior year period, as well as the opening of seven new corporate-owned stores since April 1, 2020; and
  • Equipment segment revenue increased $14.0 million or 142.8% to $23.8 million from $9.8 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, 2021 compared to the three months ended June 30, 2020, primarily due to temporary store closures as a result of COVID-19 in the prior year period.

For the second quarter of 2021, net income attributable to Planet Fitness, Inc. was $14.0 million, or $0.17 per diluted share, compared to a net loss attributable to Planet Fitness, Inc. of $29.2 million, or $0.36 per diluted share in the prior year period. Net income was $15.0 million in the second quarter of 2021 compared to a net loss of $32.0 million in the prior year period. Adjusted net income increased $46.1 million to $18.2 million, or $0.21 per diluted share, from an Adjusted net loss of $27.9 million, or $0.32 per diluted share in the prior year period. Adjusted net income (loss) has been adjusted to reflect a normalized federal income tax rate of 26.6% and 26.8% 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 $64.8 million to $55.6 million from a loss of $9.3 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 $48.2 million to $51.8 million. The increase in franchise segment EBITDA for the second quarter 2021 was a result of higher royalty and national advertising fund collections in the three months ended June 30, 2021 consisting of a $37.7 million increase in franchise royalty revenue, a $8.3 million increase in NAF revenue, and a $5.0 million increase in franchise and other fees, primarily attributable to temporary store closures as a result of COVID-19 in the prior year period;
  • Corporate-owned stores segment EBITDA increased $16.7 million to $10.4 million. The increase was primarily due to temporary store closures as a result of COVID-19 in the prior year period, as well as the opening of seven new corporate-owned stores since April 1, 2020; and
  • Equipment segment EBITDA increased by $4.3 million to $5.6 million driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to temporary store closures as a result of COVID-19 in the prior year period.

2021 Outlook

For the year ending December 31, 2021, the Company expects the following, assuming there is no significant worsening of the COVID-19 pandemic that seriously impacts performance, including prolonged store closures or other mandated operational restrictions:

  • To be at the high-end of its 75 to 100 new store opening range
  • Full-year revenue will be between $530 million and $540 million
  • Selling, General & Administrative expenses will be in the low $90 million dollar range
  • Adjusted EBITDA will be between $200 million and $210 million
  • Adjusted net income per share, diluted, will be between $0.65 and $0.70

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 (loss) and Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) per share, diluted. The Company's presentation of Adjusted EBITDA, Adjusted net income (loss) and Adjusted net income (loss) 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 (loss), and Adjusted net income (loss) 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. As a result of the closure of all of our stores due to COVID-19 in March 2020, a majority of stores remained closed for a portion of the three and six months ended June 30, 2020. Because less than 50% of our stores in the same store sales base had membership billings in all of the months included in the three and six months ended June 30, 2020, we are not providing same store sales comparisons for the three and six months ended June 30, 2021 and 2020.

The non-GAAP financial measures used in our full-year outlook will differ from net income (loss) and net income (loss) 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 (loss) or net income (loss) 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, 2021. 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, 2021.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on August 9, 2021 to discuss the news announced in this press release.

 

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,

   

2021

 

2020

 

2021

 

2020

Revenue:

               

Franchise

 

$

59,758

   

$

16,214

   

$

111,938

   

$

65,125

 

Commission income

 

70

   

45

   

342

   

435

 

National advertising fund revenue

 

13,021

   

4,743

   

24,630

   

13,971

 

Corporate-owned stores

 

40,579

   

9,419

   

78,456

   

49,935

 

Equipment

 

23,823

   

9,813

   

33,762

   

37,998

 

Total revenue

 

137,251

   

40,234

   

249,128

   

167,464

 

Operating costs and expenses:

               

Cost of revenue

 

18,497

   

8,478

   

26,482

   

30,323

 

Store operations

 

28,430

   

14,681

   

54,337

   

40,838

 

Selling, general and administrative

 

21,789

   

15,896

   

44,279

   

32,848

 

National advertising fund expense

 

13,529

   

10,878

   

26,282

   

26,083

 

Depreciation and amortization

 

15,036

   

13,008

   

30,510

   

25,800

 

Other (gain) loss

 

(282)

   

15

   

(2,420)

   

26

 

Total operating costs and expenses

 

96,999

   

62,956

   

179,470

   

155,918

 

Income (loss) from operations

 

40,252

   

(22,722)

   

69,658

   

11,546

 

Other expense, net:

               

Interest income

 

195

   

359

   

412

   

2,286

 

Interest expense

 

(20,125)

   

(20,467)

   

(40,369)

   

(40,708)

 

Other income (expense)

 

(147)

   

(73)

   

18

   

(760)

 

Total other expense, net

 

(20,077)

   

(20,181)

   

(39,939)

   

(39,182)

 

Income (loss) before income taxes

 

20,175

   

(42,903)

   

29,719

   

(27,636)

 

Provision (benefit) for income taxes

 

5,159

   

(10,918)

   

8,513

   

(6,034)

 

Net income (loss)

 

15,016

   

(31,985)

   

21,206

   

(21,602)

 

Less net income (loss) attributable to non-controlling interests

 

1,006

   

(2,808)

   

1,615

   

(1,032)

 

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

 

$

14,010

   

$

(29,177)

   

$

19,591

   

$

(20,570)

 

Net income (loss) per share of Class A common stock:

               

Basic

 

$

0.17

   

$

(0.36)

   

$

0.24

   

$

(0.26)

 

Diluted

 

$

0.17

   

$

(0.36)

   

$

0.23

   

$

(0.26)

 

Weighted-average shares of Class A common stock outstanding:

               

Basic

 

83,223

   

79,966

   

83,154

   

79,532

 

Diluted

 

83,837

   

79,966

   

83,771

   

79,532

 

 

Planet Fitness, Inc. and subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 
   

June 30, 2021

 

December 31, 2020

Assets

       

Current assets:

       

Cash and cash equivalents

 

$

469,137

   

$

439,478

 

Restricted cash

 

58,234

   

76,322

 

Accounts receivable, net of allowance for bad debts of $1 and $7 at June 30, 2021 and December 31,
2020, respectively

 

15,480

   

16,447

 

Inventory

 

1,197

   

473

 

Deferred expenses – national advertising fund

 

8,362

   

 

Prepaid expenses

 

12,019

   

11,881

 

Other receivables

 

11,836

   

16,754

 

Income tax receivables

 

4,990

   

5,461

 

Total current assets

 

581,255

   

566,816

 

Property and equipment, net of accumulated depreciation of $128,684 and $107,720 at June 30, 2021 and
December 31, 2020, respectively

 

160,071

   

160,677

 

Investments

 

35,000

   

 

Right of use assets, net

 

171,485

   

164,252

 

Intangible assets, net

 

208,757

   

217,075

 

Goodwill

 

227,821

   

227,821

 

Deferred income taxes

 

513,354

   

511,200

 

Other assets, net

 

1,856

   

1,896

 

Total assets

 

$

1,899,599

   

$

1,849,737

 

Liabilities and stockholders' deficit

       

Current liabilities:

       

Current maturities of long-term debt

 

$

17,500

   

$

17,500

 

Accounts payable

 

18,124

   

19,388

 

Accrued expenses

 

25,367

   

22,042

 

Equipment deposits

 

7,483

   

795

 

Deferred revenue, current

 

34,773

   

26,691

 

Payable pursuant to tax benefit arrangements, current

 

9,190

   

 

Other current liabilities

 

22,642

   

25,479

 

Total current liabilities

 

135,079

   

111,895

 

Long-term debt, net of current maturities

 

1,670,831

   

1,676,426

 

Borrowings under Variable Funding Notes

 

75,000

   

75,000

 

Lease liabilities, net of current portion

 

175,934

   

167,910

 

Deferred revenue, net of current portion

 

31,900

   

32,587

 

Deferred tax liabilities

 

767

   

881

 

Payable pursuant to tax benefit arrangements, net of current portion

 

486,953

   

488,200

 

Other liabilities

 

2,505

   

2,511

 

Total noncurrent liabilities

 

2,443,890

   

2,443,515

 

Stockholders' equity (deficit):

       

Class A common stock, $0.0001 par value - 300,000 authorized, 83,225 and 82,821 shares issued and
outstanding as of June 30, 2021 and December 31, 2020, respectively

 

8

   

8

 

Class B common stock, $0.0001 par value - 100,000 authorized, 3,363 and 3,722 shares issued and
outstanding as of June 30, 2021 and December 31, 2020, respectively

 

1

   

1

 

Accumulated other comprehensive income

 

56

   

27

 

Additional paid in capital

 

50,917

   

45,673

 

Accumulated deficit

 

(731,987)

   

(751,578)

 

Total stockholders' deficit attributable to Planet Fitness, Inc.

 

(681,005)

   

(705,869)

 

Non-controlling interests

 

1,635

   

196

 

Total stockholders' deficit

 

(679,370)

   

(705,673)

 

Total liabilities and stockholders' deficit

 

$

1,899,599

   

$

1,849,737

 

 

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,

   

2021

 

2020

Cash flows from operating activities:

       

Net income (loss)

 

$

21,206

   

$

(21,602)

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:

       

Depreciation and amortization

 

30,510

   

25,800

 

Amortization of deferred financing costs

 

3,155

   

3,187

 

Amortization of asset retirement obligations

 

38

   

33

 

Deferred tax expense (benefit)

 

7,210

   

(3,713)

 

Gain on re-measurement of tax benefit arrangement

 

(348)

   

(502)

 

Provision for bad debts

 

   

(28)

 

(Gain) loss on disposal of property and equipment

 

(27)

   

 

Equity-based compensation

 

4,049

   

2,493

 

Other

 

(82)

   

434

 

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

       

Accounts receivable

 

1,006

   

26,917

 

Inventory

 

(724)

   

(1,900)

 

Other assets and other current assets

 

6,059

   

(16,323)

 

National advertising fund

 

(8,362)

   

(7,941)

 

Accounts payable and accrued expenses

 

(102)

   

(22,354)

 

Other liabilities and other current liabilities

 

(3,725)

   

1,472

 

Income taxes

 

413

   

(4,485)

 

Equipment deposits

 

6,688

   

824

 

Deferred revenue

 

7,319

   

3,820

 

Leases and deferred rent

 

(17)

   

884

 

Net cash provided by (used in) operating activities

 

74,266

   

(12,984)

 

Cash flows from investing activities:

       

Additions to property and equipment

 

(19,395)

   

(21,161)

 

Proceeds from sale of property and equipment

 

1

   

169

 

Investments

 

(35,000)

   

 

Net cash used in investing activities

 

(54,394)

   

(20,992)

 

Cash flows from financing activities:

       

Principal payments on capital lease obligations

 

(104)

   

(84)

 

Proceeds from borrowings under Variable Funding Notes

 

   

75,000

 

Repayment of long-term debt

 

(8,750)

   

(8,750)

 

Proceeds from issuance of Class A common stock

 

578

   

1,583

 

Dividend equivalent payments

 

   

(174)

 

Distributions to Continuing LLC Members

 

(145)

   

(1,600)

 

Net cash (used in) provided by financing activities

 

(8,421)

   

65,975

 

Effects of exchange rate changes on cash and cash equivalents

 

120

   

(834)

 

Net increase in cash, cash equivalents and restricted cash

 

11,571

   

31,165

 

Cash, cash equivalents and restricted cash, beginning of period

 

515,800

   

478,795

 

Cash, cash equivalents and restricted cash, end of period

 

$

527,371

   

$

509,960

 

Supplemental cash flow information:

       

Net cash paid for income taxes

 

$

889

   

$

2,155

 

Cash paid for interest

 

$

37,536

   

$

37,724

 

Non-cash investing activities:

       

Non-cash additions to property and equipment

 

$

3,500

   

$

2,099

 

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 (loss) and Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) per share, diluted. The Company's presentation of Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) 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 (loss), the most directly comparable GAAP measure, is set forth below.

   

Three months ended June 30,

 

Six months ended June 30,

   

2021

 

2020

 

2021

 

2020

(in thousands)

               

Net income (loss)

 

$

15,016

   

$

(31,985)

   

$

21,206

   

$

(21,602)

 

Interest income

 

(195)

   

(359)

   

(412)

   

(2,286)

 

Interest expense

 

20,125

   

20,467

   

40,369

   

40,708

 

Provision (benefit) for income taxes

 

5,159

   

(10,918)

   

8,513

   

(6,034)

 

Depreciation and amortization

 

15,036

   

13,008

   

30,510

   

25,800

 

EBITDA

 

$

55,141

   

$

(9,787)

   

$

100,186

   

$

36,586

 

Purchase accounting adjustments-revenue(1)

 

128

   

79

   

197

   

146

 

Purchase accounting adjustments-rent(2)

 

97

   

129

   

214

   

271

 

Severance costs(3)

 

   

159

   

   

159

 

Pre-opening costs(4)

 

481

   

154

   

847

   

515

 

Insurance recovery(5)

 

(325)

   

   

(2,500)

   

 

Tax benefit arrangement remeasurement(6)

 

   

   

(348)

   

(502)

 

Other(7)

 

54

   

   

688

   

93

 

Adjusted EBITDA

 

$

55,576

   

$

(9,266)

   

$

99,284

   

$

37,268

 
   

(1)

Represents the impact of revenue-related purchase accounting adjustments associated with the acquisition of Pla-Fit Holdings on November 8, 2012 by TSG (the "2012 Acquisition"). At the time of the 2012 Acquisition, the Company maintained a deferred revenue account, which consisted of deferred ADA 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 $33, $41, $82, and $82 in the three and six months ended June 30, 2021 and 2020, 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, $88, $132 and $189 in the three and six months ended June 30, 2021 and 2020, 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 severance expense recorded in connection with an equity award modification.

(4)

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.

(5)

Represents an insurance recovery of previously recognized expenses related to the settlement of legal claims.

(6)

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

(7)

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,

 

Six months ended June 30,

(in thousands)

 

2021

 

2020

 

2021

 

2020

Segment EBITDA

               

Franchise

 

$

51,756

   

$

3,529

   

$

92,936

   

$

40,275

 

Corporate-owned stores

 

10,372

   

(6,342)

   

21,062

   

5,665

 

Equipment

 

5,608

   

1,311

   

7,438

   

7,677

 

Corporate and other

 

(12,595)

   

(8,285)

   

(21,250)

   

(17,031)

 

Total Segment EBITDA(1)

 

$

55,141

   

$

(9,787)

   

$

100,186

   

$

36,586

 
   

(1)

Total Segment EBITDA is equal to EBITDA.

Adjusted Net Income (loss) and Adjusted Net Income (loss) per Diluted Share

Our presentation of Adjusted net income (loss) assumes that all net income (loss) 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 (loss) per share, diluted, is calculated by dividing Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) per share, diluted, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period. A reconciliation of Adjusted net income (loss) to net income (loss), the most directly comparable GAAP measure, and the computation of Adjusted net income (loss) per share, diluted, are set forth below.

   

Three months ended June 30,

 

Six months ended June 30,

(in thousands, except per share amounts)

 

2021

 

2020

 

2021

 

2020

Net income (loss)

 

$

15,016

   

$

(31,985)

   

$

21,206

   

$

(21,602)

 

Provision for income taxes, as reported

 

5,159

   

(10,918)

   

8,513

   

(6,034)

 

Purchase accounting adjustments-revenue(1)

 

128

   

79

   

197

   

146

 

Purchase accounting adjustments-rent(2)

 

97

   

129

   

214

   

271

 

Severance costs(3)

 

   

159

   

   

159

 

Pre-opening costs(4)

 

481

   

154

   

847

   

515

 

Insurance recovery(5)

 

(325)

   

   

(2,500)

   

 

Tax benefit arrangement remeasurement(6)

 

   

   

(348)

   

(502)

 

Other(7)

 

54

   

   

688

   

93

 

Purchase accounting amortization(8)

 

4,159

   

4,211

   

8,318

   

8,424

 

Adjusted income (loss) before income taxes

 

$

24,769

   

$

(38,171)

   

$

37,135

   

$

(18,530)

 

Adjusted income taxes(9)

 

6,589

   

(10,230)

   

9,878

   

(4,966)

 

Adjusted net income (loss)

 

$

18,180

   

$

(27,941)

   

$

27,257

   

$

(13,564)

 
                 

Adjusted net income (loss) per share, diluted

 

$

0.21

   

$

(0.32)

   

$

0.31

   

$

(0.16)

 
                 

Adjusted weighted-average shares outstanding(10)

 

87,200

   

86,467

   

87,188

   

86,671

 
   

(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 ADA 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 $33, $41, $82, and $82 in the three and six months ended June 30, 2021 and 2020, 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, $88, $132 and $189 in the three and six months ended June 30, 2021 and 2020, 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 severance expense recorded in connection with an equity award modification.

(4)

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.

(5)

Represents an insurance recovery of previously recognized expenses related to the settlement of legal claims.

(6)

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

(7)

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

(8)

Includes $3,096, $3,096, $6,192 and $6,192 of amortization of intangible assets, for the three and six months ended June 30, 2021 and 2020, recorded in connection with the 2012 Acquisition, and $1,063, $1,116, $2,126 and $2,231 of amortization of intangible assets for the three months ended June 30, 2021 and 2020, 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.

(9)

Represents corporate income taxes at an assumed effective tax rate of 26.6% for the three and six months ended June 30, 2021 and 26.8% for the three and six months ended June 30, 2020, applied to adjusted income before income (loss) taxes.

(10)

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 (loss) per share, diluted, to Adjusted net income (loss) per share, diluted is set forth below for the three and six months ended June 30, 2021 and 2020:

   

For the three months ended

June 30, 2021

 

For the three months ended

June 30, 2020

(in thousands, except per share amounts)

 

Net income

 

Weighted
Average
Shares

 

Net income
per share,
diluted

 

Net loss

 

Weighted
Average
Shares

 

Net loss
per share,
diluted

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

 

$

14,010

   

83,837

   

$

0.17

   

$

(29,177)

   

79,966

   

$

(0.36)

 

Assumed exchange of shares(2)

 

1,006

   

3,363

       

(2,808)

   

6,501

     

Net income (loss)

 

15,016

           

(31,985)

         

Adjustments to arrive at adjusted income

   (loss) before income taxes(3)

 

9,753

           

(6,186)

         

Adjusted income (loss) before income taxes

 

24,769

           

(38,171)

         

Adjusted income tax expense (benefit)(4)

 

6,589

           

(10,230)

         

Adjusted net income (loss)

 

$

18,180

   

87,200

   

$

0.21

   

$

(27,941)

   

86,467

   

$

(0.32)

 
   

(1)

Represents net income (loss) 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 (loss) 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 (loss) table above to arrive at adjusted income (loss) before income taxes.

(4)

Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.8% for the three months ended June 30, 2021 and 2020, respectively, applied to adjusted income (loss) before income taxes.

   

For the six months ended

June 30, 2021

 

For the six months ended

June 30, 2020

(in thousands, except per share amounts)

 

Net income

 

Weighted
Average
Shares

 

Net income
per share,
diluted

 

Net loss

 

Weighted
Average
Shares

 

Net loss
per share,
diluted

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

 

$

19,591

   

83,771

   

$

0.23

   

$

(20,570)

   

79,532

   

$

(0.26)

 

Assumed exchange of shares(2)

 

1,615

   

3,417

       

(1,032)

   

7,139

     

Net income (loss)

 

21,206

           

(21,602)

         

Adjustments to arrive at adjusted income

   (loss) before income taxes(3)

 

15,929

           

3,072

         

Adjusted income (loss) before income taxes

 

37,135

           

(18,530)

         

Adjusted income tax expense (benefit)(4)

 

9,878

           

(4,966)

         

Adjusted net income (loss)

 

$

27,257

   

87,188

   

$

0.31

   

$

(13,564)

   

86,671

   

$

(0.16)

 
   

(1)

Represents net income (loss) 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 (loss) 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 (loss) table above to arrive at adjusted income (loss) before income taxes.

(4)

Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.8% for the six months ended June 30, 2021 and 2020, respectively, applied to adjusted income (loss) before income taxes.

SOURCE Planet Fitness

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