HAMPTON, N.H., Nov. 6,
2018 /PRNewswire/ -- Today, Planet Fitness, Inc. (NYSE: PLNT)
reported financial results for its third quarter ended September 30, 2018.
Third Quarter Fiscal 2018 Highlights
- Total revenue increased from the prior year period by 40.2% to
$136.7 million.
- System-wide same store sales increased 9.7%.
- Net income attributable to Planet Fitness, Inc. was
$17.5 million, or $0.20 per diluted share, compared to net income
attributable to Planet Fitness, Inc. of $15.3 million, or $0.18 per diluted share in the prior year
period.
- Net income was $20.5 million,
compared to net income of $18.9
million in the prior year period.
- Adjusted net income(1) increased 47.9% to
$27.7 million, or $0.28 per diluted share, compared to $18.7 million, or $0.19 per diluted share in the prior year
period.
- Adjusted EBITDA(1) increased 24.0% to $53.8 million from $43.4
million in the prior year period.
- 41 new Planet Fitness stores were opened during the period,
bringing system-wide total stores to 1,646 as of September 30, 2018.
(1) Adjusted net income and Adjusted EBITDA are
non-GAAP measures. For reconciliations of Adjusted EBITDA and
Adjusted net income to U.S. GAAP ("GAAP") net income see "Non-GAAP
Financial Measures" accompanying this press release.
"I am very pleased with our third quarter performance as revenue
in each of our three operating segments once again increased
double-digits year-over-year," stated Chris
Rondeau, Chief Executive Officer. "The combination of our
high value, low cost, non-intimidating fitness concept and
differentiated business model continues to drive solid top and
bottom line improvement. Planet Fitness is 1,646 locations and
12 million plus members strong and getting even stronger. Our group
of experienced franchisees are investing in expanding their
footprints and each new member join is fueling an increase in our
local and national advertising funds. With the potential to
increase our U.S. presence to approximately 4,000 stores while at
the same time enhancing the member experience through in-store
initiatives and brand partnerships, we believe the Company is well
positioned to deliver continued long-term profitable growth and
return greater value to shareholders in the years to come."
Operating Results for the Third Quarter Ended September 30, 2018
For the third quarter 2018, total revenue increased $39.2 million or 40.2% to $136.7 million from $97.5
million in the prior year period. $11.4 million, or 11.7% of the increase, is
national advertising fund revenue and is included in our franchise
segment. We began reporting national advertising fund contributions
as revenue and expense in 2018 in connection with the adoption of
the new U.S. GAAP revenue recognition standard. By segment:
- Franchise segment revenue increased $19.3 million or 54.2% to $54.8 million from $35.6
million in the prior year period, which includes commission
income and the above-mentioned $11.4
million of national advertising fund revenue;
- Corporate-owned stores segment revenue increased $6.8 million or 24.0% to $35.4 million from $28.6
million in the prior year period, $5.2 million of which is from new corporate-owned
stores opened or acquired since June 30,
2017; and
- Equipment segment revenue increased $13.1 million or 39.1% to $46.4 million from $33.4
million in the prior year period, 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 9.7%. By segment,
franchisee-owned same store sales increased 9.9% and
corporate-owned same store sales increased 6.1%.
For the third quarter of 2018, net income attributable to Planet
Fitness, Inc. was $17.5 million, or
$0.20 per diluted share, compared to
net income attributable to Planet Fitness, Inc. of $15.3 million, or $0.18 per diluted share in the prior year period.
Net income was $20.5 million in the
third quarter of 2018 compared to $18.9
million in the prior year period. Adjusted net income
increased 47.9% to $27.7 million, or
$0.28 per diluted share, from
$18.7 million, or $0.19 per diluted share in the prior year period.
Adjusted net income has been adjusted to reflect a normalized
federal income tax rate of 26.3% for the current year period and
39.5% for the comparable prior year period and excludes certain
non-cash and other items that we do not consider in the evaluation
of ongoing operational performance (see "Non-GAAP Financial
Measures").
Adjusted EBITDA, which is defined as net income before interest,
taxes, depreciation and amortization, adjusted for the impact of
certain non-cash and other items that we do not consider in the
evaluation of ongoing operational performance (see "Non-GAAP
Financial Measures"), increased 24.0% to $53.8 million from $43.4
million in the prior year period.
Segment EBITDA represents our Total Segment EBITDA broken down
by the Company's reportable segments. Total Segment EBITDA is equal
to EBITDA, which is defined as net income before interest, taxes,
depreciation and amortization (see "Non-GAAP Financial
Measures").
- Franchise segment EBITDA increased $7.2
million or 23.9% to $37.1
million driven by royalties from new franchised stores
opened since June 30, 2017, a higher
average royalty rate and higher same store sales of 9.9%;
- Corporate-owned stores segment EBITDA increased $3.2 million or 26.8% to $15.3 million driven primarily by an increase in
same store sales, higher annual fees and from additional clubs
opened and acquired since June 30,
2017; and
- Equipment segment EBITDA increased by $2.0 million or 25.7% to $9.7 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
During the three months ended September
30, 2018, pursuant to our previously announced
board-authorized $500 million share
repurchase program, we purchased 824,312 shares of our Class A
common stock through a series of open market transactions. The
total cost for the purchases was $42.1
million.
2018 Outlook
For the year ending December 31,
2018, the Company now expects:
- Total revenue increase of approximately 33% as compared to the
year ended December 31, 2017;
- System-wide same store sales growth of approximately 10%;
and
- Adjusted net income and adjusted net income per diluted share
to increase approximately 43% as compared to the year ended
December 31, 2017.
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, 2018. 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, 2018.
Investor Conference Call
The Company will hold a conference call at 4:30 pm (ET) on November
6, 2018 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 September 30, 2018,
Planet Fitness had more than 12.2 million members and 1,646 stores
in 50 states, the District of
Columbia, Puerto Rico,
Canada, the Dominican Republic, Panama and Mexico. 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 "2018 Outlook," those attributed to the
Company's Chief Executive Officer in this press release and other
statements, estimates and projections that do not relate solely to
historical facts. Forward-looking statements can be identified by
words such as "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, 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, general economic conditions and the
other factors described in the Company's annual report on Form 10-K
for the year ended December 31, 2017,
and the Company's other filings with the Securities and Exchange
Commission. In light of the significant risks and uncertainties
inherent in forward-looking statements, investors should not place
undue reliance on forward-looking statements, which reflect the
Company's views only as of the date of this press release. Except
as required by law, neither the Company nor any of its affiliates
or representatives undertake any obligation to provide additional
information or to correct or update any information set forth in
this release, whether as a result of new information, future
developments or otherwise.
Planet Fitness,
Inc. and subsidiaries
Consolidated Statements of Operations
(Unaudited) (Amounts in thousands, except per share
amounts)
|
|
|
|
|
|
For the three
months ended
September 30,
|
|
For the nine
months ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
|
$
|
41,997
|
|
$
|
31,413
|
|
$
|
129,575
|
|
$
|
94,485
|
Commission
income
|
1,448
|
|
4,149
|
|
5,012
|
|
15,668
|
National advertising
fund revenue
|
11,377
|
|
—
|
|
32,997
|
|
—
|
Corporate-owned
stores
|
35,406
|
|
28,560
|
|
102,365
|
|
83,886
|
Equipment
|
46,428
|
|
33,374
|
|
128,589
|
|
101,875
|
Total
revenue
|
136,656
|
|
97,496
|
|
398,538
|
|
295,914
|
Operating costs and
expenses:
|
|
|
|
|
|
|
Cost of
revenue
|
36,871
|
|
25,819
|
|
100,114
|
|
78,395
|
Store
operations
|
18,751
|
|
15,551
|
|
55,154
|
|
45,339
|
Selling, general and
administrative
|
17,233
|
|
14,071
|
|
52,066
|
|
42,659
|
National advertising
fund expense
|
11,377
|
|
—
|
|
32,997
|
|
—
|
Depreciation and
amortization
|
8,863
|
|
8,137
|
|
25,947
|
|
23,982
|
Other loss
(gain)
|
(12)
|
|
(36)
|
|
958
|
|
280
|
Total operating costs
and expenses
|
93,083
|
|
63,542
|
|
267,236
|
|
190,655
|
Income from
operations
|
43,573
|
|
33,954
|
|
131,302
|
|
105,259
|
Other expense,
net:
|
|
|
|
|
|
|
Interest
income
|
2,025
|
|
18
|
|
2,480
|
|
24
|
Interest
expense
|
(17,909)
|
|
(8,938)
|
|
(35,725)
|
|
(26,735)
|
Other income
(expense)
|
(27)
|
|
408
|
|
(338)
|
|
157
|
Total other expense,
net
|
(15,911)
|
|
(8,512)
|
|
(33,583)
|
|
(26,554)
|
Income before income
taxes
|
27,662
|
|
25,442
|
|
97,719
|
|
78,705
|
Provision for income
taxes
|
7,190
|
|
6,540
|
|
23,335
|
|
23,933
|
Net income
|
20,472
|
|
18,902
|
|
74,384
|
|
54,772
|
Less net income
attributable to non-controlling interests
|
3,001
|
|
3,557
|
|
11,158
|
|
18,173
|
Net income
attributable to Planet Fitness, Inc.
|
$
|
17,471
|
|
$
|
15,345
|
|
$
|
63,226
|
|
$
|
36,599
|
Net income per share
of Class A common stock:
|
|
|
|
|
|
|
Basic
|
$
|
0.20
|
|
$
|
0.18
|
|
$
|
0.72
|
|
$
|
0.48
|
Diluted
|
$
|
0.20
|
|
$
|
0.18
|
|
$
|
0.72
|
|
$
|
0.48
|
Weighted-average
shares of Class A common stock outstanding:
|
|
|
|
|
|
|
Basic
|
88,047
|
|
85,663
|
|
87,727
|
|
76,391
|
Diluted
|
88,458
|
|
85,734
|
|
88,064
|
|
76,435
|
Planet Fitness,
Inc. and subsidiaries
Consolidated Balance Sheets
(Unaudited) (Amounts in thousands, except per share
amounts)
|
|
|
|
|
|
September
30,
|
|
December 31,
|
|
2018
|
|
2017
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$
|
572,731
|
|
$
|
113,080
|
Restricted
cash
|
35,915
|
|
—
|
Accounts receivable,
net of allowance for bad debts of $74 and $32 at
September 30, 2018 and December 31, 2017, respectively
|
26,145
|
|
37,272
|
Due from related
parties
|
—
|
|
3,020
|
Inventory
|
6,142
|
|
2,692
|
Restricted assets –
national advertising fund
|
3,418
|
|
499
|
Prepaid
expenses
|
3,813
|
|
3,929
|
Other
receivables
|
10,993
|
|
9,562
|
Other current
assets
|
6,318
|
|
6,947
|
Total current
assets
|
665,475
|
|
177,001
|
Property and
equipment, net of accumulated depreciation of $48,960, as of
September 30, 2018 and $36,228 as of December 31, 2017
|
97,240
|
|
83,327
|
Intangible assets,
net
|
237,896
|
|
235,657
|
Goodwill
|
199,513
|
|
176,981
|
Deferred income
taxes
|
416,707
|
|
407,782
|
Other assets,
net
|
4,608
|
|
11,717
|
Total
assets
|
$
|
1,621,439
|
|
$
|
1,092,465
|
Liabilities and
stockholders' deficit
|
|
|
Current
liabilities:
|
|
|
Current maturities of
long-term debt
|
$
|
12,000
|
|
$
|
7,185
|
Accounts
payable
|
23,400
|
|
28,648
|
Accrued
expenses
|
26,764
|
|
18,590
|
Equipment
deposits
|
11,449
|
|
6,498
|
Restricted liabilities
– national advertising fund
|
3,418
|
|
490
|
Deferred revenue,
current
|
21,959
|
|
19,083
|
Payable pursuant to tax
benefit arrangements, current
|
25,578
|
|
31,062
|
Other current
liabilities
|
456
|
|
474
|
Total current
liabilities
|
125,024
|
|
112,030
|
Long-term debt, net
of current maturities
|
1,161,712
|
|
696,576
|
Deferred rent, net of
current portion
|
10,297
|
|
6,127
|
Deferred revenue, net
of current portion
|
25,916
|
|
8,440
|
Deferred tax
liabilities
|
1,730
|
|
1,629
|
Payable pursuant to
tax benefit arrangements, net of current portion
|
405,577
|
|
400,298
|
Other
liabilities
|
1,331
|
|
4,302
|
Total noncurrent
liabilities
|
1,606,563
|
|
1,117,372
|
Stockholders' equity
(deficit):
|
|
|
Class A common stock,
$.0001 par value - 300,000 authorized, 88,085 and 87,188
shares issued and outstanding as of September 30, 2018 and December
31, 2017,
respectively
|
9
|
|
9
|
Class B common stock,
$.0001 par value - 100,000 authorized, 9,544 and 11,193
shares issued and outstanding as of September 30, 2018 December 31,
2017,
respectively
|
1
|
|
1
|
Accumulated other
comprehensive income (loss)
|
256
|
|
(648)
|
Additional paid in
capital
|
17,237
|
|
12,118
|
Accumulated
deficit
|
(118,964)
|
|
(130,966)
|
Total stockholders'
deficit attributable to Planet Fitness Inc.
|
(101,461)
|
|
(119,486)
|
Non-controlling
interests
|
(8,687)
|
|
(17,451)
|
Total stockholders'
deficit
|
(110,148)
|
|
(136,937)
|
Total liabilities and
stockholders' deficit
|
$
|
1,621,439
|
|
$
|
1,092,465
|
Planet Fitness,
Inc. and subsidiaries
Consolidated Statements of Cash Flows
(Unaudited) (Amounts in thousands, except per share
amounts)
|
|
|
|
For the nine
months ended
September 30,
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
74,384
|
|
|
$
|
54,772
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
25,947
|
|
|
23,982
|
|
Amortization of
deferred financing costs
|
2,041
|
|
|
1,439
|
|
Amortization of
favorable leases and asset retirement obligations
|
280
|
|
|
260
|
|
Amortization of
interest rate caps
|
1,170
|
|
|
1,552
|
|
Deferred tax
expense
|
19,654
|
|
|
21,344
|
|
Loss on
extinguishment of debt
|
4,570
|
|
|
79
|
|
Third party debt
refinancing expense
|
—
|
|
|
1,021
|
|
Gain on
re-measurement of tax benefit arrangement
|
(354)
|
|
|
(541)
|
|
Provision for bad
debts
|
8
|
|
|
44
|
|
Loss on reacquired
franchise rights
|
360
|
|
|
—
|
|
Loss (gain) on
disposal of property and equipment
|
542
|
|
|
(357)
|
|
Equity-based
compensation
|
4,137
|
|
|
1,800
|
|
Changes in operating
assets and liabilities, excluding effects of
acquisitions:
|
|
|
|
Accounts
receivable
|
10,922
|
|
|
11,099
|
|
Due to and due from
related parties
|
3,174
|
|
|
(580)
|
|
Inventory
|
(3,450)
|
|
|
1,253
|
|
Other assets and
other current assets
|
4,972
|
|
|
(2,413)
|
|
Accounts payable and
accrued expenses
|
2,426
|
|
|
(16,985)
|
|
Other liabilities and
other current liabilities
|
(2,869)
|
|
|
(724)
|
|
Income
taxes
|
1,028
|
|
|
(1,462)
|
|
Payable pursuant to
tax benefit arrangements
|
(21,706)
|
|
|
(7,909)
|
|
Equipment
deposits
|
4,950
|
|
|
5,951
|
|
Deferred
revenue
|
7,544
|
|
|
(958)
|
|
Deferred
rent
|
4,156
|
|
|
361
|
|
Net cash provided by
operating activities
|
143,886
|
|
|
93,028
|
|
Cash flows from
investing activities:
|
|
|
|
Additions to property
and equipment
|
(18,601)
|
|
|
(23,229)
|
|
Acquisition of
franchises
|
(45,752)
|
|
|
—
|
|
Proceeds from sale of
property and equipment
|
196
|
|
|
166
|
|
Net cash used in
investing activities
|
(64,157)
|
|
|
(23,063)
|
|
Cash flows from
financing activities:
|
|
|
|
Principal payments on
capital lease obligations
|
(35)
|
|
|
—
|
|
Proceeds from
issuance of long-term debt
|
1,200,000
|
|
|
—
|
|
Repayment of
long-term debt
|
(709,469)
|
|
|
(5,388)
|
|
Payment of deferred
financing and other debt-related costs
|
(27,191)
|
|
|
(1,278)
|
|
Premiums paid for
interest rate caps
|
—
|
|
|
(366)
|
|
Proceeds from
issuance of Class A common stock
|
1,106
|
|
|
172
|
|
Repurchase and
retirement of Class A common stock
|
(42,090)
|
|
|
—
|
|
Dividend equivalent
payments
|
(881)
|
|
|
(1,322)
|
|
Distributions to
Continuing LLC Members
|
(5,369)
|
|
|
(9,308)
|
|
Net cash provided by
(used in) financing activities
|
416,071
|
|
|
(17,490)
|
|
Effects of exchange
rate changes on cash and cash equivalents
|
(234)
|
|
|
399
|
|
Net increase in cash,
cash equivalents and restricted cash
|
495,566
|
|
|
52,874
|
|
Cash, cash
equivalents and restricted cash, beginning of period
|
113,080
|
|
|
40,393
|
|
Cash, cash
equivalents and restricted cash, end of period
|
$
|
608,646
|
|
|
$
|
93,267
|
|
Supplemental cash
flow information:
|
|
|
|
Net cash paid for
income taxes
|
$
|
3,777
|
|
|
$
|
3,769
|
|
Cash paid for
interest
|
$
|
20,015
|
|
|
$
|
23,637
|
|
Non-cash investing
activities:
|
|
|
|
Non-cash additions to
property and equipment
|
$
|
2,217
|
|
|
$
|
482
|
|
Planet Fitness, Inc. and subsidiaries
Non-GAAP Financial Measures
(Unaudited)
(Amounts in thousands, except per share
amounts)
To supplement its consolidated financial statements, which are
prepared and presented in accordance with GAAP, the Company uses
the following non-GAAP financial measures: EBITDA, Total Segment
EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net
income per share, diluted (collectively, the "non-GAAP financial
measures"). The Company believes that these non-GAAP financial
measures, when used in conjunction with GAAP financial measures,
are useful to investors in evaluating our operating performance.
These non-GAAP financial measures presented in this release are
supplemental measures of the Company's performance that are neither
required by, nor presented in accordance with GAAP. These financial
measures should not be considered in isolation or as substitutes
for GAAP financial measures such as net income or any other
performance measures derived in accordance with GAAP. In addition,
in the future, the Company may incur expenses or charges such as
those added back to calculate Adjusted EBITDA, Adjusted net income
and Adjusted net income per share, diluted. The Company's
presentation of Adjusted EBITDA, Adjusted net income, and Adjusted
net income per share, diluted, should not be construed as an
inference that the Company's future results will be unaffected by
unusual or nonrecurring items.
EBITDA, Segment EBITDA and Adjusted EBITDA
We refer to EBITDA and Adjusted EBITDA as we use these measures
to evaluate our operating performance and we believe these measures
provide useful information to investors in evaluating our
performance. We have also disclosed Segment EBITDA as an important
financial metric utilized by the Company to evaluate performance
and allocate resources to segments in accordance with ASC 280,
Segment Reporting. We define EBITDA as net income before
interest, taxes, depreciation and amortization. Segment EBITDA sums
to Total Segment EBITDA which is equal to the Non-GAAP financial
metric EBITDA. We believe that EBITDA, which eliminates the impact
of certain expenses that we do not believe reflect our underlying
business performance, provides useful information to investors to
assess the performance of our segments as well as the business as a
whole. Our Board of Directors also uses EBITDA as a key metric to
assess the performance of management. We define Adjusted EBITDA as
net income before interest, taxes, depreciation and amortization,
adjusted for the impact of certain additional non-cash and other
items that we do not consider in our evaluation of ongoing
performance of the Company's core operations. These items include
certain purchase accounting adjustments, stock offering-related
costs, and certain other charges and gains. We believe that
Adjusted EBITDA is an appropriate measure of operating performance
in addition to EBITDA because it eliminates the impact of other
items that we believe reduce the comparability of our underlying
core business performance from period to period and is therefore
useful to our investors in comparing the core performance of our
business from period to period.
A reconciliation of Adjusted EBITDA to net income, the most
directly comparable GAAP measure, is set forth below.
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
20,472
|
|
$
|
18,902
|
|
$
|
74,384
|
|
$
|
54,772
|
Interest
income
|
(2,025)
|
|
(18)
|
|
(2,480)
|
|
(24)
|
Interest
expense
|
17,909
|
|
8,938
|
|
35,725
|
|
26,735
|
Provision for income
taxes
|
7,190
|
|
6,540
|
|
23,335
|
|
23,933
|
Depreciation and
amortization
|
8,863
|
|
8,137
|
|
25,947
|
|
23,982
|
EBITDA
|
$
|
52,409
|
|
$
|
42,499
|
|
$
|
156,911
|
|
$
|
129,398
|
Purchase accounting
adjustments-revenue(1)
|
527
|
|
336
|
|
941
|
|
1,116
|
Purchase accounting
adjustments-rent(2)
|
198
|
|
174
|
|
548
|
|
561
|
Loss on reacquired
franchise rights(3)
|
10
|
|
—
|
|
360
|
|
—
|
Transaction
fees(4)
|
254
|
|
—
|
|
290
|
|
1,021
|
Stock offering-related
costs(5)
|
—
|
|
41
|
|
—
|
|
977
|
Severance
costs(6)
|
—
|
|
—
|
|
352
|
|
—
|
Pre-opening
costs(7)
|
370
|
|
421
|
|
853
|
|
421
|
Equipment
discount(8)
|
—
|
|
(107)
|
|
—
|
|
(107)
|
Early lease
termination costs(9)
|
—
|
|
—
|
|
—
|
|
719
|
Other(10)
|
19
|
|
—
|
|
685
|
|
(573)
|
Adjusted
EBITDA
|
$
|
53,787
|
|
$
|
43,364
|
|
$
|
160,940
|
|
$
|
133,533
|
(1)
|
Represents the impact
of revenue-related purchase accounting adjustments associated with
the acquisition of Pla-Fit Holdings on November 8, 2012 by TSG (the
"2012 Acquisition"). At the time of the 2012 Acquisition, the
Company maintained a deferred revenue account, which consisted of
deferred area development agreement fees, deferred franchise fees,
and deferred enrollment fees that the Company billed and collected
up front but recognizes for GAAP purposes at a later date. In
connection with the 2012 Acquisition, it was determined that the
carrying amount of deferred revenue was greater than the fair value
assessed in accordance with ASC 805—Business Combinations, which
resulted in a write-down of the carrying value of the deferred
revenue balance upon application of acquisition push-down
accounting under ASC 805. These amounts represent the additional
revenue that would have been recognized in these periods if the
write-down to deferred revenue had not occurred in connection with
the application of acquisition pushdown accounting.
|
(2)
|
Represents the impact
of rent-related purchase accounting adjustments. In accordance with
guidance in ASC 805 – Business Combinations, in connection with the
2012 Acquisition, the Company's deferred rent liability was
required to be written off as of the acquisition date and rent was
recorded on a straight-line basis from the acquisition date through
the end of the lease term. This resulted in higher overall recorded
rent expense each period than would have otherwise been recorded
had the deferred rent liability not been written off as a result of
the acquisition push down accounting applied in accordance with ASC
805. Adjustments of $105, $100, $272 and $306 in the three and nine
months ended September 30, 2018 and 2017, 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 $93, $75, $276 and $255 in the three and
nine months ended September 30, 2018 and 2017, 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 six franchisee-owned
stores on January 1, 2018 and our acquisition of four
franchisee-owned stores on August 10, 2018. 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 related to the issuance of the Series
2018-1 Senior Notes in 2018 and the amendment of our previous
credit facilities in 2017.
|
(5)
|
Represents legal,
accounting and other costs incurred in connection with offerings of
the Company's Class A common stock.
|
(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 gain
recorded in connection with the write-off of a previously accrued
deferred equipment discount that can no longer be utilized. This
amount was originally recognized through purchase accounting in
connection with the acquisition of eight franchisee-owned stores on
March 31, 2014.
|
(9)
|
Represents charges
and expenses incurred in connection with the early termination of
the lease for our previous headquarters.
|
(10)
|
Represents certain
other charges and gains that we do not believe reflect our
underlying business performance. In the nine months ended
September 30, 2018, this amount includes $342 related to the
reversal of a tax indemnification receivable. In the nine months
ended September 30, 2018 and 2017, this amount includes a gain
of $354 and $541, respectively, related to the adjustment of our
tax benefit arrangements primarily due to changes in our effective
tax rate. Additionally, in the nine months ended September 30,
2018, this amount includes expense of $590 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
September 30,
|
|
Nine months
ended
September 30,
|
(in
thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Segment
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
Franchise
|
$
|
37,075
|
|
$
|
29,925
|
|
$
|
113,793
|
|
$
|
94,444
|
Corporate-owned
stores
|
15,279
|
|
12,046
|
|
42,115
|
|
35,579
|
Equipment
|
9,654
|
|
7,683
|
|
28,579
|
|
23,587
|
Corporate and
other
|
(9,599)
|
|
(7,155)
|
|
(27,576)
|
|
(24,212)
|
Total Segment
EBITDA(1)
|
$
|
52,409
|
|
$
|
42,499
|
|
$
|
156,911
|
|
$
|
129,398
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Total Segment
EBITDA is equal to EBITDA.
|
|
|
|
|
|
|
|
|
Adjusted Net Income and Adjusted Net Income per Diluted
Share
As a result of the recapitalization transactions that occurred
prior to our IPO, the limited liability company agreement of
Pla-Fit Holdings that was amended and restated (the "LLC
Agreement") designated Planet Fitness, Inc. as the sole managing
member of Pla-Fit Holdings. As sole managing member, Planet
Fitness, Inc. exclusively operates and controls the business and
affairs of Pla-Fit Holdings, LLC. As a result of the
recapitalization transactions and the LLC Agreement, Planet
Fitness, Inc. now consolidates Pla-Fit Holdings, and Pla-Fit
Holdings is considered the predecessor to Planet Fitness, Inc. for
accounting purposes. Our presentation of Adjusted net income and
Adjusted net income per share, diluted, gives effect to the
consolidation of Pla-Fit Holdings with Planet Fitness, Inc.
resulting from the recapitalization transactions and the LLC
Agreement as if they had occurred on January
1, 2017. In addition, Adjusted net income assumes that all
net income is attributable to Planet Fitness, Inc., which assumes
the full exchange of all outstanding Holdings Units for shares of
Class A common stock of Planet Fitness, Inc., adjusted for certain
non-recurring items that we do not believe directly reflect our
core operations. Adjusted net income per share, diluted, is
calculated by dividing Adjusted net income by the total shares of
Class A common stock outstanding plus any dilutive options and
restricted stock units as calculated in accordance with GAAP and
assuming the full exchange of all outstanding Holdings Units and
corresponding Class B common stock as of the beginning of each
period presented. Adjusted net income and Adjusted net income per
share, diluted, are supplemental measures of operating performance
that do not represent, and should not be considered, alternatives
to net income and earnings per share, as calculated in accordance
with GAAP. We believe Adjusted net income and Adjusted net income
per share, diluted, supplement GAAP measures and enable us to more
effectively evaluate our performance period-over-period. A
reconciliation of Adjusted net income to net income, the most
directly comparable GAAP measure, and the computation of Adjusted
net income per share, diluted, are set forth below.
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
(in thousands,
except per share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income
|
$
|
20,472
|
|
|
$
|
18,902
|
|
|
$
|
74,384
|
|
|
$
|
54,772
|
|
Provision for income
taxes, as reported
|
7,190
|
|
|
6,540
|
|
|
23,335
|
|
|
23,933
|
|
Purchase accounting
adjustments-revenue(1)
|
527
|
|
|
336
|
|
|
941
|
|
|
1,116
|
|
Purchase accounting
adjustments-rent(2)
|
198
|
|
|
174
|
|
|
548
|
|
|
561
|
|
Loss on reacquired
franchise rights(3)
|
10
|
|
|
—
|
|
|
360
|
|
|
—
|
|
Transaction
fees(4)
|
254
|
|
|
—
|
|
|
290
|
|
|
1,021
|
|
Loss on extinguishment
of debt(5)
|
4,570
|
|
|
—
|
|
|
4,570
|
|
|
—
|
|
Stock offering-related
costs(6)
|
—
|
|
|
41
|
|
|
—
|
|
|
977
|
|
Severance
costs(7)
|
—
|
|
|
—
|
|
|
352
|
|
|
—
|
|
Pre-opening
costs(8)
|
370
|
|
|
421
|
|
|
853
|
|
|
421
|
|
Equipment
discount(9)
|
—
|
|
|
(107)
|
|
|
—
|
|
|
(107)
|
|
Early lease
termination costs(10)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,143
|
|
Other(11)
|
19
|
|
|
—
|
|
|
685
|
|
|
(573)
|
|
Purchase accounting
amortization(12)
|
3,934
|
|
|
4,622
|
|
|
11,776
|
|
|
13,867
|
|
Adjusted income
before income taxes
|
$
|
37,544
|
|
|
$
|
30,929
|
|
|
$
|
118,094
|
|
|
$
|
97,131
|
|
Adjusted income
taxes(13)
|
9,874
|
|
|
12,217
|
|
|
31,059
|
|
|
38,367
|
|
Adjusted net
income
|
$
|
27,670
|
|
|
$
|
18,712
|
|
|
$
|
87,035
|
|
|
$
|
58,764
|
|
|
|
|
|
|
|
|
|
Adjusted net income
per share, diluted
|
$
|
0.28
|
|
|
$
|
0.19
|
|
|
$
|
0.88
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted-average shares outstanding(14)
|
98,462
|
|
|
98,428
|
|
|
98,615
|
|
|
98,445
|
|
(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 $105, $100, $272 and $306 in the three and nine
months ended September 30, 2018 and 2017, 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 $93, $75, $276 and $255 in the three and
nine months ended September 30, 2018 and 2017, 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 six franchisee-owned
stores on January 1, 2018 and our acquisition of four
franchisee-owned stores on August 10, 2018. 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 related to the issuance of the Series
2018-1 Senior Notes in 2018 and the amendment of our previous
credit facilities in 2017.
|
(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 legal,
accounting and other costs incurred in connection with offerings of
the Company's Class A common stock.
|
(7)
|
Represents severance
expense recorded in connection with an equity award
modification.
|
(8)
|
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.
|
(9)
|
Represents a gain
recorded in connection with the write-off of a previously accrued
deferred equipment discount that can no longer be utilized. This
amount was originally recognized through purchase accounting in
connection with the acquisition of eight franchisee-owned stores on
March 31, 2014.
|
(10)
|
Represents charges
and expenses incurred in connection with the early termination of
the lease for our previous headquarters.
|
(11)
|
Represents certain
other charges and gains that we do not believe reflect our
underlying business performance. In the nine months ended
September 30, 2018, this amount includes $342 related to the
reversal of a tax indemnification receivable. In the nine months
ended September 30, 2018 and 2017, this amount includes a gain
of $354 and $541, respectively, related to the adjustment of our
tax benefit arrangements primarily due to changes in our effective
tax rate. Additionally, in the nine months ended September 30,
2018, this amount includes expense of $590 related to the write off
of certain assets that were being tested for potential use across
the system.
|
(12)
|
Includes $3,096,
$4,086, $9,288 and $12,258 of amortization of intangible assets,
other than favorable leases, for the three and nine months ended
September 30, 2018 and 2017, respectively, recorded in
connection with the 2012 Acquisition, and $838, $536, $2,488 and
$1,609 of amortization of intangible assets for the three months
ended September 30, 2018 and 2017, 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.
|
(13)
|
Represents corporate
income taxes at an assumed effective tax rate of 26.3% and 39.5%
for the three and nine months ended September 30, 2018 and
2017, respectively, applied to adjusted income before income
taxes.
|
(14)
|
Assumes the full
exchange of all outstanding Holdings Units and corresponding shares
of Class B common stock for shares of Class A common stock of
Planet Fitness, Inc.
|
A reconciliation of net income per share, diluted, to Adjusted
net income per share, diluted is set forth below for the three and
nine months ended September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three
months ended
September 30, 2018
|
|
For the three
months ended
September 30, 2017
|
(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)
|
$
|
17,471
|
|
88,458
|
|
$
|
0.20
|
|
$
|
15,345
|
|
85,734
|
|
$
|
0.18
|
Assumed exchange of
shares(2)
|
3,001
|
|
10,004
|
|
|
|
3,557
|
|
12,694
|
|
|
Net Income
|
20,472
|
|
|
|
|
|
18,902
|
|
|
|
|
Adjustments to arrive
at adjusted income
before
income taxes(3)
|
17,072
|
|
|
|
|
|
12,027
|
|
|
|
|
Adjusted income
before income taxes
|
37,544
|
|
|
|
|
|
30,929
|
|
|
|
|
Adjusted income
taxes(4)
|
9,874
|
|
|
|
|
|
12,217
|
|
|
|
|
Adjusted Net
Income
|
$
|
27,670
|
|
98,462
|
|
$
|
0.28
|
|
$
|
18,712
|
|
98,428
|
|
$
|
0.19
|
(1)
|
Represents net income
attributable to Planet Fitness, Inc. and the associated weighted
average shares, diluted of Class A common stock
outstanding.
|
(2)
|
Assumes the full
exchange of all outstanding Holdings Units and corresponding shares
of Class B common stock for shares of Class A common stock of
Planet Fitness, Inc. Also assumes the addition of net income
attributable to non-controlling interests corresponding with the
assumed exchange of Holdings Units and Class B common shares for
shares of Class A common stock.
|
(3)
|
Represents the total
impact of all adjustments identified in the adjusted net income
table above to arrive at adjusted income before income
taxes.
|
(4)
|
Represents corporate
income taxes at an assumed effective tax rate of 26.3% and 39.5%
for the three months ended September 30, 2018 and 2017,
respectively, applied to adjusted income before income
taxes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine
months ended
September 30, 2018
|
|
For the nine
months ended
September 30, 2017
|
(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)
|
$
|
63,226
|
|
88,064
|
|
$
|
0.72
|
|
$
|
36,599
|
|
76,435
|
|
$
|
0.48
|
Assumed exchange of
shares(2)
|
11,158
|
|
10,551
|
|
|
|
18,173
|
|
22,010
|
|
|
Net Income
|
74,384
|
|
|
|
|
|
54,772
|
|
|
|
|
Adjustments to arrive
at adjusted income
before
income taxes(3)
|
43,710
|
|
|
|
|
|
42,359
|
|
|
|
|
Adjusted income
before income taxes
|
118,094
|
|
|
|
|
|
97,131
|
|
|
|
|
Adjusted income
taxes(4)
|
31,059
|
|
|
|
|
|
38,367
|
|
|
|
|
Adjusted Net
Income
|
$
|
87,035
|
|
98,615
|
|
$
|
0.88
|
|
$
|
58,764
|
|
98,445
|
|
$
|
0.60
|
(1)
|
Represents net income
attributable to Planet Fitness, Inc. and the associated weighted
average shares, diluted of Class A common stock
outstanding.
|
(2)
|
Assumes the full
exchange of all outstanding Holdings Units and corresponding shares
of Class B common stock for shares of Class A common stock of
Planet Fitness, Inc. Also assumes the addition of net income
attributable to non-controlling interests corresponding with the
assumed exchange of Holdings Units and Class B common shares for
shares of Class A common stock.
|
(3)
|
Represents the total
impact of all adjustments identified in the adjusted net income
table above to arrive at adjusted income before income
taxes.
|
(4)
|
Represents corporate
income taxes at an assumed effective tax rate of 26.3% and 39.5%
for the nine months ended September 30, 2018 and 2017,
respectively, applied to adjusted income before income
taxes.
|
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SOURCE Planet Fitness, Inc.