Planet Fitness, Inc. Announces Second Quarter 2020 Results

HAMPTON, N.H., Aug. 4, 2020 /PRNewswire/ -- Today, Planet Fitness, Inc. (NYSE: PLNT) reported financial results for its second quarter ended June 30, 2020.

"I am proud of how the entire Planet Fitness system is managing through this challenging time, especially the passion and commitment to take care of our members demonstrated by our store team members, headquarters employees and franchisees," said Chris Rondeau, Chief Executive Officer. "Following the temporary closure of all Planet Fitness stores in mid-March in response to the pandemic, 1,477 of our stores are reopened and operating to-date. This has been achieved through the execution of our expansive COVID-19 re-opening playbook designed to provide a safe and healthy in-store environment and strictly adhering to the guidelines laid out by state and local governments and health authorities. It continues to be a very fluid situation, with a number of states experiencing a spike in new cases as the third quarter got underway, which has resulted in certain stores re-closing pursuant to local mandates. We recently took additional steps to protect our members and staff by requiring everyone to wear a mask inside our stores except while actively working out, and we'll continue to proceed cautiously until there is greater certainty on when conditions will return to normal. While the near-term operating environment is likely to remain volatile and negatively affect our near-term revenue and profitability, I am confident that Planet Fitness is well positioned to capitalize on the industry consolidation that we believe will emerge over the next several years and increased focus on health & wellness."

Second Quarter Fiscal 2020 results

• Total revenue decreased from the prior year period by 77.9% to $40.2 million.
• Net (loss) income attributable to Planet Fitness, Inc. was a loss of $29.2 million, or $0.36 per diluted share, compared to  income of $34.8 million, or $0.41 per diluted share in the prior year period.
• Net (loss) income decreased 180.3% to a net loss of $32.0 million, compared to net income of $39.8 million in the prior year period.
• Adjusted net (loss) income⁽¹⁾  decreased 166.5% to an adjusted net loss of $27.9 million, or $0.32 per diluted share, compared to adjusted net income of $42.0 million, or $0.45 per diluted share in the prior year period.
• Adjusted EBITDA⁽¹⁾  decreased 112.1% to a loss of $9.3 million from earnings of $76.5 million in the prior year period.
• 21 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 2,059 as of June 30, 2020.
• Cash and cash equivalents as of June 30, 2020 was $423.6 million.

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

Operating Results for the Second Quarter Ended June 30, 2020

For the second quarter 2020, total revenue decreased $141.4 million or 77.9% to $40.2 million from $181.7 million in the prior year period.  By segment:

• Franchise segment revenue decreased $50.8 million or 70.8% to $21.0 million from $71.8 million in the prior year period. The decrease in franchise segment revenue for the second quarter 2020 is a result of temporary store closures related to COVID-19;
• Corporate-owned stores segment revenue decreased $30.3 million or 76.3% to $9.4 million from $39.7 million in the prior year period. The $30.3 million decrease was a result of temporary store closures related to COVID-19; and
• Equipment segment revenue decreased $60.3 million or 86.0% to $9.8 million from $70.2 million in the prior year period, due to lower equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2020 compared to the three months ended June 30, 2019 as a result of temporary store closures due to COVID-19.

For the second quarter of 2020, net loss attributable to Planet Fitness, Inc. was $29.2 million, or $0.36 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $34.8 million, or $0.41 per diluted share in the prior year period. Net loss was $32.0 million in the second quarter of 2020 compared to net income of $39.8 million in the prior year period. Adjusted net income decreased 166.5% to a loss of $27.9 million, or $0.32 per diluted share, from income of $42.0 million, or $0.45 per diluted share in the prior year period. Adjusted net (loss) income has been adjusted to reflect a normalized federal income tax rate of 26.8% for the current year period and 26.6% 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 (loss) 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"), decreased 112.1% to a loss of $9.3 million from earnings of $76.5 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 (loss) income before interest, taxes, depreciation and amortization (see "Non-GAAP Financial Measures").

• Franchise segment EBITDA decreased $46.3 million or 92.9% to $3.5 million. The decrease in franchise segment EBITDA for the second quarter 2020 is as a result of temporary store closures related to COVID-19.
• Corporate-owned stores segment EBITDA decreased $24.5 million or 135.0% to a loss of $6.3 million. The decrease in corporate-owned stores segment EBITDA for the second quarter 2020 is as a result of temporary store closures related to COVID-19; and
• Equipment segment EBITDA decreased by $15.5 million or 92.2% to $1.3 million driven by lower equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2020 compared to the three months ended June 30, 2019 as a result of temporary store closures due to COVID-19.

2020 Outlook

For the year ending December 31, 2020, the Company previously withdrew guidance as a result of uncertainty due to the COVID-19 pandemic. The Company is not providing an update at this time.

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 (loss) income and Adjusted net (loss) 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 (loss) 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 (loss) income and Adjusted net (loss) income per share, diluted. The Company's presentation of Adjusted EBITDA, Adjusted net (loss) income and Adjusted net (loss) 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 (loss) income, and Adjusted net (loss) income 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 these periods.

The non-GAAP financial measures used in our full-year outlook will differ from net (loss) income and net (loss) 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 (loss) income or net (loss) income per share, diluted, determined in accordance with GAAP or a reconciliation of guidance for Adjusted net (loss) income and Adjusted net (loss) 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 (loss) income and net (loss) income per share, diluted, for the year ending December 31, 2020. These items are uncertain, depend on many factors and could have a material impact on our net (loss) income and net (loss) income per share, diluted, for the year ending December 31, 2020.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on August 4, 2020 to discuss the news announced in this press release. A live webcast of the conference call will be accessible at www.planetfitness.com  via the "Investor Relations" link. The webcast will be archived on the website for one year.

About Planet Fitness

Founded in 1992 in Dover, NH, Planet Fitness is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations. As of June 30, 2020, Planet Fitness had more than 15.2 million members and 2,059 stores in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama, Mexico and Australia. The Company's mission is to enhance people's lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which we call the Judgement Free Zone®. More than 95% of Planet Fitness stores are owned and operated by independent business men and women.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws, which involve risks and uncertainties.  Forward-looking statements include the Company's statements with respect to expected future performance presented under the heading "2020 Outlook," those attributed to the Company's Chief Executive Officer in this press release, and other statements, estimates and projections that do not relate solely to historical facts. Forward-looking statements can be identified by words such as "believe," "expect," "goal," plan," "will," "prospects," "future," "strategy" and similar references to future periods, although not all forward-looking statements include these identifying words.  Forward-looking statements are not assurances of future performance. Instead, they are based only on the Company's current beliefs, expectations and assumptions regarding the future of the business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of the Company's control. Actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results to differ materially include risks and uncertainties associated with the duration and impact of COVID-19, which has resulted in store closures and a decrease in our net membership base and may give rise to or heighten one or more of the other risks and uncertainties described herein, competition in the fitness industry, the Company's and franchisees' ability to attract and retain members, the Company's and franchisees' ability to identify and secure suitable sites for new franchise stores, changes in consumer demand, changes in equipment costs, the Company's ability to expand into new markets domestically and internationally, operating costs for the Company and franchisees generally, availability and cost of capital for franchisees, acquisition activity, developments and changes in laws and regulations, our substantial increased indebtedness as a result of our refinancing and securitization transactions and our ability to incur additional indebtedness or refinance that indebtedness in the future, our future financial performance and our ability to pay principal and interest on our indebtedness, our corporate structure and tax receivable agreements, failures, interruptions or security breaches of the Company's information systems or technology, general economic conditions and the other factors described in the Company's annual report on Form 10-K for the year ended December 31, 2019, the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2020, 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
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 (loss) income and Adjusted net (loss) 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 (loss) 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 (loss) income and Adjusted net (loss) income per share, diluted. The Company's presentation of Adjusted EBITDA, Adjusted net (loss) income, and Adjusted net (loss) 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 (loss) 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 (loss) 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.

Adjusted Net Income and Adjusted Net Income per Diluted Share

Our presentation of Adjusted net (loss) income assumes that all net (loss) 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 (loss) income per share, diluted, is calculated by dividing Adjusted net (loss) 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 (loss) income and Adjusted net (loss) income per share, diluted, are supplemental measures of operating performance that do not represent, and should not be considered, alternatives to net (loss) income and earnings per share, as calculated in accordance with GAAP. We believe Adjusted net (loss) income and Adjusted net (loss) income per share, diluted, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period. A reconciliation of Adjusted net (loss) income to net (loss) income, the most directly comparable GAAP measure, and the computation of Adjusted net (loss) income per share, diluted, are set forth below.

SOURCE Planet Fitness, Inc.