Planet Fitness, Hampton, New Hampshire, reported third quarter 2021 revenue of $154.3 million, a 46.4 percent increase from $105.4 million in third quarter 2020, the company announced in its Nov. 4 financial earnings report.
Planet Fitness anticipates full-year revenue of between $570 million and $580 million, an increase over its 2020 revenue of $406.6 million. This outlook is up from its previous estimate of between $530 million and $540 million because the company revised upward its anticipated new store openings for the year to 110-120 new stores rather than the previous estimate of 75-100. Due to the higher new club openings, the company anticipates higher equipment placement sales, which should account for approximately 50 percent of its total equipment revenue for the year.
For third quarter 2021, the company’s system-wide same-store sales increased 7.2 percent, and Planet Fitness opened 24 new clubs to bring its total club number to 2,193 as of Sept. 30, 2021.
“The headline is things have bounced back faster than we expected, V versus U-shape,” Tom Fitzgerald, Planet Fitness CFO, said in a call with analysts. Franchisees and lenders have seen that, he added.
“The beauty of our organization is the fact that we have actually shrunk our number of franchisees in the system,” Planet Fitness CEO Chris Rondeau said in the analyst call. “A lot of consolidation. So we have the best of the best. We have the dream team of franchisees now, about 125 that run the entire system. And we don’t continue to bring in new franchisees to build out our stores every year. It’s built out with the existing franchisees.”
That means the franchisees opening new locations are more experienced and sophisticated than when Planet first started franchising, which benefits the company.
"We are emerging from the COVID-19 pandemic stronger than ever," Rondeau said.
He credited several factors to driving both near- and long-term growth opportunities: franchisees' enthusiasm to continue to invest in the brand, the transition from 16 national and local marketing agencies to one servicing the entire system to leverage the company’s size and scale, and the world's growing appreciation for the importance of improving overall health and wellness.
“With so much potential given the changing market dynamics and industry tailwinds, we believe that our non-judgmental and affordable model will be even more differentiated," Rondeau said.
In the third quarter, Planet Fitness returned to positive system-wide same store sales growth, had its highest franchise segment revenue on record and achieved the highest sequential net member growth of any third quarter in company history with memberships now numbering more than 15 million. Membership levels reaching 97 percent of its all-time peak.
“For the past several decades, we have democratized fitness with our differentiated model, breaking down the barriers of intimidation and affordability for the approximately 80 percent of the population that does not have a gym membership,” Rondeau said in a call with analysts.
In the third quarter, 40 percent of its new members were first-time gym members, he said.
“There is still tremendous untapped opportunity with 140 million non-gym members who live within 10 miles of a current Planet Fitness,” Rondeau said. “We also believe that the continued evolution of our digital offerings will serve as an important gateway to make the initial step to get off the couch easier and less intimidating.”
The growth reflects that Americans are waking up to the fact that they need to prioritize their health, Rondeau said. Members who are visiting the clubs are visiting more frequently than in the past.
“We believe this demonstrates a commitment to overall wellness,” he said.
Another potential long-term positive is that in 2021 Gen Z members are outpacing other age groups in terms of joins, which is notable as only half of the generation is even old enough to join, Rondeau said.
More Third Quarter Results
Franchise segment revenue increased $15.6 million or 26.1 percent to $75.4 million from $59.8 million in the prior year period, and franchise segment same store sales increased 7.4 percent. Franchise segment EBITDA increased $20.9 million to $52.0 million.
Planet Fitness attributed the increase in franchise segment revenue and franchise segment EBITDA in the quarter to a $10 million increase in franchise royalty revenue, a $1.3 million increase in national advertising fund (NAF) revenue, and a $3.2 million increase in franchise and other fees, primarily attributable to temporary store closures as a result of COVID-19 in the prior year period.
Additionally, NAF expense was $4.6 million lower in the quarter due to higher advertising and marketing expenses in the prior year period as a result of increased marketing efforts as stores reopened from COVID-19 related closures.
Corporate-owned stores segment revenue increased $15.6 million or 55.2 percent to $43.9 million from $28.3 million in the prior year period, and corporate-owned same store sales increased 3.1 percent. Corporate-owned stores segment EBITDA increased $8.4 million to $14.1 million. The increase for both revenue and EBITDA 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 July 1, 2020.
Equipment segment revenue increased $17.6 million or 101.7 percent to $35 million from $17.3 million in the prior year period while equipment segment EBITDA increased by $5.6 million to $7.9 million. The increases were driven by higher equipment sales to existing franchisee-owned stores in the third quarter, compared to the same period last year. Also contributing to the increases was the 15 percent discount provided to franchisees on equipment sales in the prior year as a result of the COVID-19 pandemic.
Net income attributable to Planet Fitness Inc. was $17.4 million, or $0.21 per diluted share, compared to a loss of $3.1 million, or $0.04 per diluted share, in the prior year period. Net income increased $21.9 million to $18.6 million, compared to a net loss of $3.3 million in the prior year period.
Adjusted net income increased $20.4 million to $22 million, or $0.25 per diluted share, compared to $1.6 million, or $0.02 per diluted share, in the prior year period. Adjusted EBITDA increased $30.2 million to $62.2 million from $32.0 million in the prior year period.
The company had cash of $585.5 million, which includes cash and cash equivalents of $527.3 million and restricted cash of $58.1 million.