Planet Fitness Profits Surge on Strong Comps, Tax Reform

Planet Fitness‘ (NYSE:PLNT) $10-per-month memberships and non-intimidating atmosphere are proving popular with gym-goers, which, in turn, is driving robust revenue and earnings growth. The company reported first-quarter results this week.

Planet Fitness results: The raw numbers

DATA SOURCE: PLANET FITNESS Q1 2018 EARNINGS PRESS RELEASE.

What happened with Planet Fitness this quarter?

Planet Fitness’ systemwide same-store sales maintained their torrid rate of growth, rising a blistering 11.1%. Combined with the nearly 200  new stores Planet Fitness opened during the past year — including 47 locations in the first quarter — this helped to fuel a 33.2% rise in total revenue, to $121 million.

PLANET FITNESS EXPANDED ITS STORE COUNT TO 1,565 LOCATIONS IN THE FIRST QUARTER. IMAGE SOURCE: PLANET FITNESS.

“Our success is being fueled by the expansion of our high value, low cost non-intimidating fitness concept in existing and new markets combined with growing brand awareness from increased investments in national and local advertising,” CEO Chris Rondeau said in a press release.

Corporate-owned stores revenue jumped 21% to $32.7 million — driven by same-store sales growth and Planet Fitness’ acquisition of six franchisee-owned stores during the quarter — while equipment revenue leapt 24.8% to $34 million, boosted by new store openings.

Additionally, franchise segment revenue soared 48.4% to $54.6 million, though it should be noted that $10.5 million of this increase is from advertising revenue, which Planet Fitness began reporting in the first quarter in connection with its adoption of a new U.S. GAAP revenue recognition standard, and which the company uses to fund marketing campaigns on behalf of franchisees.

All told, adjusted net income, which benefited from a lower effective tax rate due to tax reform, climbed 42.3% to $26.2 million, or $0.27 per share. And adjusted EBITDA — or earnings before interest, taxes, depreciation, and amortization — increased 15.4% to $48.8 million.

Looking forward

Planet Fitness reiterated its full-year financial guidance, which includes:

• Total revenue growth of approximately 20%.
• Systemwide same-store sales growth in the “high single-digit range.”
• Adjusted net income and adjusted EPS growth of approximately 40%.

“We continue to explore ways to strengthen our offering, including utilizing technology to provide more immersive workout experiences and personalized workout recommendations,” Rondeau said. “By targeting casual and first-time gym users, we believe Planet Fitness has a long runway for growth based on the fact that the vast majority of the U.S. population does not own a gym membership.”