Planet Fitness Inc., Hampton, New Hampshire, generated second quarter 2022 revenue of $224.4 million, a 63.5 percent increase from the prior year period, according to financials released by Planet Fitness on Aug. 9.
Despite that increase, revenue just missed estimates of $232 million.
System-wide same store sales increased 13.6 percent. Adjusted EBITDA increased $34.3 million to $89.9 million from $55.6 million in the prior year period.
Planet opened 34 clubs during the quarter, bringing system-wide total stores to 2,324 as of June 30, 2022 and helping to increase system-wide sales by $151 million to $1.019 billion from $868 million in the prior year period.
Total membership came in at more than 16.5 million with 300,000 net new members in the quarter. Membership signups returned to pre-pandemic seasonality levels, according to Planet Fitness CEO Chris Rondeau.
During the second quarter, 34 percent of mature clubs for the brand were at or above pre-COVID membership levels, Rondeau shared with analysts on an Aug. 9 call.
“We continue to see consistent momentum toward full recovery the longer our stores have been open since the temporary COVID closures,” he said.
System-wide, Planet Fitness clubs are 6 percent below pre-COVID membership levels, and they have added more than 330 new locations since the beginning of 2020.
In addition to the increased number of clubs helping membership numbers, membership growth for the quarter included more than 3.3 million teens enrolled in the company’s High School Summer Pass, a program that offers teens a chance to work out for free at the gyms during the summer. This number is more than three times the number of participants enrolled in the program in 2019, the last year the company ran the program. Nearly 15 percent of all high school-aged teens in the country are either enrolled in the program or are a paying member at Planet Fitness, Rondeau said.
"Our high-quality, affordable fitness experience resonates now more than ever as Americans are seeking value and feeling the rising costs of everyday items such as food and gas,” Rondeau said in a media release. “We believe that people will continue to prioritize their health and wellness while being more cost-conscious, and we offer a welcoming environment for people of all fitness levels.”
Rondeau said that the company is well-positioned should there be a recession.
“During the most recent financial crisis, from 2007 to 2009, we added 1.1 million members, grew same-store sales by double digits and nearly doubled our store count,” he said in the analyst call. “Even though we were a much smaller brand at that time, this gives us confidence that should the economy worsen, we are well positioned to continue to grow.”
Despite a possible recession, Planet Fitness increased by $2 its Black Card membership price for new joiners starting in May. The system-wide rollout of the increase has so far outperformed the test results across key metrics, such as acquisition rates, retention, average monthly dues per member and margin, Rondeau said. During the second quarter, Black Card membership penetration was 63.5 percent compared to 62.2 percent in the second quarter 2021.
Planet Fitness broke down revenue into its three segments.
Franchise segment revenue increased $9.7 million or 13.3 percent to $82.5 million from $72.8 million in the prior year period. The increase in franchise segment revenue for the second quarter was primarily due to a $6.2 million increase in franchise royalty revenue, a $1.6 million increase in National Advertising Fund (NAF) revenue, and a $1.7 million increase in placement revenue, the company said. Of the $6.2 million increase in royalty revenue, $5.9 million was attributable to a same store sales increase of 13.4 percent in franchisee-owned stores, $1.9 million was attributable to new stores opened since April 1, 2021, or stores that were not open for all of the prior year period due to COVID-related temporary closures, and $0.8 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $3.1 million as a result of the stores acquired in the acquisition of Sunshine Fitness Growth Holdings LLC in first quarter 2022 moving from the franchise segment to the corporate-owned segment. Franchise segment EBITDA increased $2.6 million to $54.3 million.
Corporate-owned stores segment revenue increased $60.9 million or 150.0 percent to $101.5 million from $40.6 million in the prior year period. Of the increase, $49.5 million was attributable to the acquisition of the 114 clubs in the Sunshine Acquisition, $5.3 million was from the corporate-owned store same store sales increase of 15.7 percent, $4 million was from new stores opened since April 1, 2021, and stores that were not open for all of the prior year period due to COVID-related temporary closures, and the remainder was due to higher annual fee revenue. Corporate-owned stores segment EBITDA increased $29.1 million to $39.5 million.
Equipment segment revenue increased $16.6 million or 69.8 percent to $40.4 million from $23.8 million in the prior year period, driven by higher equipment sales to new and existing franchisee-owned stores in the quarter compared to second quarter 2021. In the three months ended June 30, 2022, the company had equipment sales to 26 new franchisee-owned stores compared to 19 in the prior year period. Equipment segment EBITDA increased by $4.6 million to $10.2 million driven by higher equipment sales to new and existing franchisee-owned stores in the quarter compared to the same quarter last year.
Outlook for 2022
Assuming there is no significant worsening of the COVID-19 pandemic, Planet Fitness expects that for full-year 2022, revenue will increase in the mid-50 percent range while adjusted EBITDA will increase in the high-50 percent range. It expects adjusted net income to increase in the low-90 percent range.
New equipment placements of approximately 170 in franchisee-owned locations is anticipated, and system-wide same store sales are expected in the low double-digit percentage range.
Planet Fitness repurchased and retired approximately 697,000 shares of Class A common stock using $44.3 million of cash on hand.
It also repaid in full its $75 million of borrowings under its Variable Funding Notes using cash on hand.
Planet Fitness now has cash of $446.3 million, which includes cash and cash equivalents of $383.5 million and restricted cash of $62.8 million.
The company now expects 2022 net interest expense to be approximately $86 million as a result of its recent debt refinancing and upsizing.
Additional Second Quarter Numbers
Second quarter net income attributable to Planet Fitness was $22.3 million, or $0.26 per diluted share, compared to $14 million, or $0.17 per diluted share, in the prior year period.
Net income increased $10.1 million to $25.1 million, compared to $15.0 million in the prior year period.
Adjusted net income increased $16.3 million to $34.5 million, or $0.38 per diluted share, compared to $18.2 million, or $0.21 per diluted share, in the prior year period.
Adjusted EBITDA increased $34.3 million to $89.9 million from $55.6 million in the prior year period.
The company also shared that Planet Fitness President Dorvin Lively will retire during the next few months after a transition as the company looks for a new president. Lively started with Planet Fitness in 2013 as CFO and helped the company with its initial public offering in 2015.
“We are grateful to Dorvin's leadership, friendship passion for our members and franchisees and significant contributions to the brand over the past 9 years,” Rondeau said. “Personally, I'd like to thank Dorvin for helping me lead the company. And I'm forever grateful for his guidance and support.”
In addition, Jamie Medeiros, vice president of national marketing, has been promoted to chief brand officer. A 22-year company veteran, Medeiros will lead the brand strategy and work collaboratively with agencies and across the organization to ensure the brand vision comes to life through national and local marketing strategy, creative, brand marketing sponsorships and activations, and social media. She will report directly to Rondeau.