Planet Fitness Inc. reported sales grew 37 percent in the fourth quarter ended December 31 and predicted sales would climb in the mid-50 percent range in 2022. For 2021, sales were up 44 percent.
“We exceeded our expectations for both members and new store growth in 2021, which we believe demonstrates that our message of fitness being essential to both physical and mental health is resonating with consumers,” said Chris Rondeau, Chief Executive Officer. “To date in the first quarter of 2022, we ended January with 15.6 million members surpassing our pre-pandemic first quarter 2020 membership peak. We also recently acquired Sunshine Fitness, a high-performing operator of more than 100 Planet Fitness locations, and we completed a successful debt refinancing. We believe there is long-term untapped opportunity for growth as the pandemic underscored the importance of overall fitness, and we offer a welcoming and safe environment for people looking to get off the couch to begin their fitness journey.”
Fourth Quarter Fiscal 2021 Highlights
- Total revenue increased from the prior-year period by 37.3 percent to $183.6 million;
- System-wide same-store sales increased 12.3 percent;
- Net income attributable to Planet Fitness, Inc. was $5.7 million, or $0.07 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $8.7 million, or $0.11 per diluted share, in the prior-year period;
- Net income was $6.3 million, compared to $9.7 million in the prior-year period;
- Adjusted net income increased 49.6 percent to $22.5 million, or $0.26 per diluted share, compared to $15.1 million, or $0.17 per diluted share, in the prior-year period;
- Adjusted EBITDA increased 23.3 percent to $63.0 million from $51.1 million in the prior-year period; and
- 62 new Planet Fitness stores were opened system-wide during the period, bringing total stores to 2,254 as of December 31, 2021.
Fiscal Year 2021 Highlights
- Total revenue increased from the prior year by 44.4 percent to $587.0 million;
- Net income (loss) attributable to Planet Fitness, Inc. was income of $42.8 million, or $0.51 per diluted share, compared to a loss of $15.0 million, or $(0.19) per diluted share, in the prior year;
- Net income (loss) was income of $46.1 million, compared to a loss of $15.2 million in the prior year;
- Adjusted net income increased to $71.5 million, or $0.82 per diluted share, compared to $3.1 million, or $0.04 per diluted share, in the prior year;
- Adjusted EBITDA increased 86.5 percent to $224.4 million from $120.4 million in the prior year; and
- 132 new Planet Fitness stores were opened system-wide during the year, bringing total stores to 2,254 as of December 31, 2021.
Operating Results for the Fourth Quarter Ended December 31, 2021
For the fourth quarter of 2021, total revenue increased $49.9 million or 37.3 percent to $183.6 million from $133.8 million in the prior-year period, including system-wide same-store sales growth of 12.3 percent.
By segment:
- Franchise segment revenue increased $11.5 million, or 17.3 percent to $78.4 million from $66.9 million, in the prior-year period. Of the increase, $6.2 million came from new stores and stores that opened in the current year period but temporarily closed in the prior-year period due to COVID-19, $5.5 million is attributable to the franchise same-store sales increase of 12.4 percent, $2.3 million is from higher equipment placement revenue, and $2.2 million is from higher franchise and other fees. These amounts were partially offset by lower National Advertising Fund (NAF) revenue of $2.9 million and lower annual fee revenue of $1.8 million as a result of catch up billings in the fourth quarter of 2020 as stores reopened from temporary COVID-19 closures;
- Corporate-owned stores segment revenue increased $5.9 million, or 15.3 percent to $44.9 million from $38.9 million, in the prior-year period. The $5.9 million increase was primarily a result of new stores and stores that were open in the current year period but temporarily closed in the prior-year period due to COVID-19 and a same-store sales increase of 10.1 percent, partially offset by lower annual fee revenue as a result of catch up billings in the fourth quarter of 2020 as stores reopened from temporary COVID-19 closures; and
- Equipment segment revenue increased $32.4 million, or 115.7 percent to $60.4 million from $28.0 million, in the prior-year period due to higher equipment sales to new and existing franchisee-owned stores. Also contributing to the increase was the 15 percent discount provided to franchisees on equipment sales in the prior year as a result of the COVID-19 pandemic.
For the fourth quarter of 2021, net income attributable to Planet Fitness, Inc. was $5.7 million, or $0.07 per diluted share, compared to $8.7 million, or $0.11 per diluted share, in the prior-year period. Net income was $6.3 million in the fourth quarter of 2021 compared to $9.7 million in the prior-year period. Both of the above amounts in 2021 include $17.5 million of credit loss expense related to the establishment of an allowance for credit losses on a held-to-maturity investment based upon facts and circumstances that existed as of December 31, 2021 related to the investee’s performance and overall financial condition. Adjusted net income increased 49.6 percent to $22.5 million, or $0.26 per diluted share, from $15.1 million, or $0.17 per diluted share, in the prior-year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 27.0 percent for the fourth quarter of 2021 and 26.6 percent 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.
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, increased 23.3 percent to $63.0 million from $51.1 million in the prior-year period.
Segment EBITDA represents the 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.
- Franchise segment EBITDA increased $5.7 million or 13.2 percent to $49.3 million. The increase is primarily a result of higher revenue of $11.5 million as described above, partially offset by higher franchise-related payroll and operational expenses and higher NAF expenses in the current year period;
- Corporate-owned stores segment EBITDA increased $1.7 million or 14.1 percent to $14.0 million. The increase is primarily due to higher corporate-owned store revenue as described above, partially offset by higher operating expenses as a result of COVID-19-related closures in the prior-year period and the opening of nine new corporate-owned stores since October 1, 2020; and
- Equipment segment EBITDA increased by $11.2 million or 354.9 percent to $14.3 million, due to higher equipment sales to new and existing franchisee-owned stores. Also contributing to the increase was the 15 percent discount provided to franchisees on equipment sales in the prior year as a result of the pandemic.
Operating Results for the Fiscal Year Ended December 31, 2021
For the fiscal year ended December 31, 2021, total revenue increased $180.4 million or 44.4 percent to $587.0 million from $406.6 million in the prior year.
By segment:
- Franchise segment revenue increased $84.6 million or 41.0 percent to $290.7 million from $206.2 million in the prior year primarily from higher royalty revenue and NAF revenue as a result of temporary store closures related to COVID-19 beginning in March 2020, as well as higher equipment placement revenue;
- Corporate-owned stores segment revenue increased $50.1 million or 42.7 percent to $167.2 million from $117.1 million in the prior year, primarily as a result of temporary store closures related to COVID-19 beginning in March 2020 and the opening of 12 new corporate-owned stores since January 1, 2020; and
- Equipment segment revenue increased $45.8 million or 54.9 percent to $129.1 million from $83.3 million in the prior year, driven by higher equipment sales to new and existing franchisee-owned stores. Also contributing to the increase was the 15 percent discount provided to franchisees on equipment sales in the prior. year as a result of the pandemic.
For the year ended December 31, 2021, net income (loss) attributable to Planet Fitness, Inc. was income of $42.8 million, or $0.51 per diluted share, compared to a loss of $15.0 million, or $(0.19) per diluted share, in the prior year. Net income (loss) was an income of $46.1 million in 2021 compared to a loss of $15.2 million in the prior year. Both of the above amounts in 2021 include $17.5 million of credit loss expense related to the establishment of an allowance for credit losses on a held-to-maturity investment based upon facts and circumstances that existed as of December 31, 2021 related to the investee’s performance and overall financial condition. Adjusted net income increased to $71.5 million, or $0.82 per diluted share, from $3.1 million, or $0.04 per diluted share, in the prior-year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 27.0 percent for the year ended December 31, 2021 and 26.6 percent 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.
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, increased 86.5 percent to $224.4 million from $120.4 million in the prior-year period.
Segment EBITDA represents our Total Segment EBITDA broken down by the company’s reportable segments. Total Segment EBITDA is equal to EBITDA, which is defined as net income before interest, taxes, depreciation, and amortization.
- Franchise segment EBITDA increased $79.3 million or 69.0 percent to $194.3 million primarily due to temporary store closures related to COVID-19 beginning in March 2020, higher NAF revenue and lower NAF expense, partially offset by higher franchise-related payroll and operational expenses;
- Corporate-owned stores segment EBITDA increased $25.5 million or 107.8 percent to $49.2 million, primarily due to temporary store closures related to COVID-19 beginning in March 2020, as well as the opening of 12 new corporate-owned stores since January 1, 2020; and
- Equipment segment EBITDA increased by $16.6 million or 126.6 percent to $29.7 million driven by higher equipment sales to new and existing franchisee-owned stores and the 15 percent discount offered to franchisees on equipment sales in the prior year as a result of the COVID-19 pandemic.
2022 Outlook
For the year ending December 31, 2022, the company expects the following, which includes the impact from the Sunshine Fitness acquisition and assumes there is no significant worsening of the pandemic that impacts performance, including prolonged store closures or other mandated operational restrictions.
- New equipment placements of approximately 170 in franchisee-owned locations; and
- 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; and
- Adjusted earnings per share to increase in the mid-80 percent range, based on Adjusted diluted shares outstanding of approximately 91.1 million, inclusive of the issuance of equity as part of the Sunshine Fitness acquisition
The company also expects the 2022 net interest expense to be approximately $89 million as a result of its recent debt refinancing and upsizing.
Photo courtesy Planet Fitness