Planet Fitness, Inc. Announces First Quarter 2017 Results

05/02/2017

First Quarter System-Wide Same Store Sales Increased 11.1%
54 New Planet Fitness Stores Opened System-Wide in First Quarter
Dorvin Lively Promoted from Chief Financial Officer to President and Chief Financial Officer of Planet Fitness, Inc.
Company Raises Full Year 2017 Outlook

NEWINGTON, N.H., May 2, 2017 /PRNewswire/ -- Planet Fitness, Inc. (NYSE: PLNT) today reported financial results for its first quarter ended March 31, 2017.

First Quarter Fiscal 2017 Highlights

  • Total revenue increased from the prior year period by 9.3% to $91.1 million.
  • System-wide same store sales increased 11.1%.
  • Net income increased 9.3% to $17.9 million, or $0.14 per diluted share, compared to net income of $16.3 million, or $0.09 per diluted share in the prior year period.
  • Adjusted net income(1)  increased 21.2% to $18.4 million, or $0.19 per diluted share, compared to $15.2 million, or $0.15 per diluted share in the prior year period.
  • Adjusted EBITDA(1)  increased 23.3% to $42.3 million from $34.3 million in the prior year period.
  • 54 new Planet Fitness stores were opened system-wide compared to 48 in the year ago period, bringing system-wide total stores to 1,367 at March 31, 2017.

(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.

Christopher Rondeau, Chief Executive Officer, commented, "There were several highlights from the first quarter that continue to underscore the growing popularity of our fitness offering and reinforce the strength of our business model. We added over 1.2 million net new members during the first three months of 2017 to surpass 10 million members system-wide. This increase was driven by the expansion efforts of our franchisees over the past year, including 54 new store openings and double digit same store sales growth during the quarter. Strong revenue and net income growth was fueled primarily by our high margin Franchise segment and contributed significantly to the Company's robust cash flow generation. With approximately 1,000 new stores scheduled to open in the next 5 years, combined with our growing national and local advertising spend, we are confident that we'll continue to be successful in attracting more and more first time and casual gym users to Planet Fitness."

Operating Results for the First Quarter Ended March 31, 2017

For the first quarter of 2017, total revenue increased $7.8 million or 9.3% to $91.1 million from $83.3 million in the prior year period. By segment:

  • Franchise segment revenue, which includes commission income, increased $9.1 million or 33.0% to $36.8 million from $27.7 million in the prior year period;
  • Corporate-owned stores segment revenue increased $1.3 million or 5.2% to $27.0 million from $25.7 million in the prior year period; and
  • Equipment segment revenue decreased $2.7 million or 9.0% to $27.3 million from $30.0 million. This decrease was driven by fewer equipment placements in connection with new franchisee-owned store openings versus the prior year period, partially offset by an increase in replacement equipment sales to existing franchisee-owned stores.

System-wide same store sales increased 11.1%. By segment, franchisee-owned same store sales increased 11.5% and corporate-owned same store sales increased 4.5%.

For the first quarter of 2017, net income was $17.9 million, or $0.14 per diluted share, compared to net income of $16.3 million, or $0.09 per diluted share in the prior year period. Adjusted net income (see "Non-GAAP Financial Measures") increased 21.2% to $18.4 million, or $0.19 per diluted share, from $15.2 million, or $0.15 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 39.5% for the current year period and 39.4% 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 23.3% to $42.3 million from $34.3 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").

Executive Leadership Promotion

The Company announced that Dorvin Lively, currently Chief Financial Officer of Planet Fitness, has been promoted and will now serve as President and Chief Financial Officer effective immediately. In this newly created position, Lively will oversee the brand's technology and real estate and development functions, as well as its corporate stores, in addition to his ongoing oversight of all finance related functions.

Rondeau, commented, "Dorvin has been instrumental in the successful expansion of our brand since joining Planet Fitness in 2013. During his tenure as Chief Financial Officer, we have more than doubled the number of stores system-wide while achieving strong financial returns for our franchisees, and more recently our shareholders. The Board of Directors and I are confident that Dorvin's experience and deep knowledge of our business will prove invaluable as we execute the Company's growth strategies."

Rondeau continued, "My passion for the Planet Fitness brand and my commitment to bringing affordable and non-intimidating health and wellness to millions of people has never been stronger.  We have an exciting future ahead, and with Dorvin's well-deserved promotion, I look forward to increasing my focus on brand growth, long-term strategic initiatives, and franchisee and shareholder returns."

2017 Outlook

For the year ending December 31, 2017, the Company now expects:

  • Total revenue between $405 million and $415 million;
  • System-wide same store sales growth in the 7% to 8% range; and
  • Adjusted net income of $73 million to $76 million, or $0.74 to $0.77 per diluted share.

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 ended December 31, 2017. 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 ended December 31, 2017.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on May 2, 2017 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, N.H., 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 March 31, 2017, Planet Fitness had approximately 10.1 million members and 1,367 stores in 48 states, the District of Columbia, Puerto Rico, Canada and the Dominican Republic. 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 certain statements, approximations, estimates and projections with respect to our anticipated future performance, especially those under the heading "2017 Outlook," ("forward-looking statements"). Forward-looking statements are neither historical facts nor 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, 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 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, 2016, and the Company's other filings with the Securities and Exchange Commission. 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 press release, whether as a result of new information, future developments or otherwise.

 

 

Planet Fitness, Inc. and subsidiaries

Condensed consolidated statements of operations

(Unaudited)

(Amounts in thousands, except per share amounts)




For the three months ended

March 31,



2017



2016


Revenue:








Franchise

$

30,281



$

21,491


Commission income


6,516




6,186


Corporate-owned stores


27,041




25,697


Equipment


27,264




29,969


Total revenue


91,102




83,343


Operating costs and expenses:








Cost of revenue


21,124




23,639


Store operations


15,184




14,732


Selling, general and administrative


13,820




11,845


Depreciation and amortization


7,951




7,703


Other gain


(32)




(186)


Total operating costs and expenses


58,047




57,733


Income from operations


33,055




25,610


Other expense, net:








Interest expense, net


(8,763)




(6,367)


Other income


682




393


Total other expense, net


(8,081)




(5,974)


Income before income taxes


24,974




19,636


Provision for income taxes


7,108




3,291


Net income


17,866




16,345


Less net income attributable to non-controlling interests


9,024




12,977


Net income attributable to Planet Fitness, Inc.

$

8,842



$

3,368










Net income per share of Class A common stock:








Basic & diluted

$

0.14



$

0.09


Weighted-average shares of Class A common stock outstanding:








Basic


64,121




36,598


Diluted


64,150




36,598


 

 

Planet Fitness, Inc. and subsidiaries

Condensed consolidated balance sheets

(Unaudited)

(Amounts in thousands, except per share amounts)





March 31,



December 31,




2017



2016


Assets









Current assets:









Cash and cash equivalents


$

60,236



$

40,393


Accounts receivable, net of allowance for bad debts of $118 and $687 at
   March 31, 2017 and December 31, 2016, respectively



14,988




26,873


Due from related parties



2,914




2,864


Inventory



1,331




1,802


Restricted assets – national advertising fund



2,502




3,074


Other receivables



9,715




7,935


Other current assets



7,905




8,284


Total current assets



99,591




91,225


Property and equipment, net of accumulated depreciation of $33,794 as of

   March 31, 2017 and $30,987 as of December 31, 2016



61,104




61,238


Intangible assets, net



249,148




253,862


Goodwill



176,981




176,981


Deferred income taxes



561,342




410,407


Other assets, net



8,186




7,729


Total assets


$

1,156,352



$

1,001,442


Liabilities and stockholders' equity (deficit)









Current liabilities:









Current maturities of long-term debt


$

7,185



$

7,185


Accounts payable



13,278




28,507


Accrued expenses



10,263




19,190


Equipment deposits



10,739




2,170


Deferred revenue, current



18,226




17,780


Payable to related parties pursuant to tax benefit arrangements, current



11,283




8,072


Other current liabilities



536




369


Total current liabilities



71,510




83,273


Long-term debt, net of current maturities



700,672




702,003


Deferred rent, net of current portion



5,213




5,108


Deferred revenue, net of current portion



8,445




8,351


Deferred tax liabilities



1,052




1,238


Payable to related parties pursuant to tax benefit arrangements, net of current portion



552,213




410,999


Other liabilities



5,271




5,225


Total noncurrent liabilities



1,272,866




1,132,924


Commitments and contingencies (note 11)









Stockholders' equity (deficit):









Class A common stock, $.0001 par value - 300,000 shares authorized, 72,473 and 61,314
   shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively



7




6


Class B common stock, $.0001 par value - 100,000 shares authorized, 26,026 and 37,185
   shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively



3




4


Accumulated other comprehensive loss



(1,274)




(1,174)


Additional paid in capital



23,087




34,467


Accumulated deficit



(155,288)




(164,062)


Total stockholders' deficit attributable to Planet Fitness Inc.



(133,465)




(130,759)


Non-controlling interests



(54,559)




(83,996)


Total stockholders' deficit



(188,024)




(214,755)


Total liabilities and stockholders' deficit


$

1,156,352



$

1,001,442


 

 

Planet Fitness, Inc. and subsidiaries


Condensed consolidated statements of cash flows


(Unaudited)


(Amounts in thousands)







For the three months ended

March 31,




2017



2016


Cash flows from operating activities:









Net income


$

17,866



$

16,345


Adjustments to reconcile net income to net cash provided by operating activities:









Depreciation and amortization



7,951




7,703


Amortization of deferred financing costs



465




371


Amortization of favorable leases and asset retirement obligations



94




99


Amortization of interest rate caps



432




75


Deferred tax expense



5,298




1,354


Gain on re-measurement of tax benefit arrangement



(541)





Provision for bad debts



27




7


Gain on disposal of property and equipment






(186)


Equity-based compensation



380




576


Changes in operating assets and liabilities, excluding effects of acquisitions:









Accounts receivable



11,859




8,864


Notes receivable and due from related parties



(99)




3,544


Inventory



471




3,081


Other assets and other current assets



(2,187)




(4,632)


Accounts payable and accrued expenses



(21,244)




(16,202)


Other liabilities and other current liabilities



188




30


Income taxes



310




(2,314)


Payable to related parties pursuant to tax benefit arrangements






(2,113)


Equipment deposits



8,569




(334)


Deferred revenue



527




(1,091)


Deferred rent



106




85


Net cash provided by operating activities



30,472




15,262


Cash flows from investing activities:









Additions to property and equipment



(5,336)




(865)


Proceeds from sale of property and equipment






20


Net cash used in investing activities



(5,336)




(845)


Cash flows from financing activities:









Principal payments on capital lease obligations






(12)


Repayment of long-term debt



(1,796)




(1,275)


Premiums paid for interest rate caps



(366)





Dividend equivalent payments



(20)





Distributions to Continuing LLC Members



(3,142)




(6,411)


Net cash used in financing activities



(5,324)




(7,698)


Effects of exchange rate changes on cash and cash equivalents



31




119


Net increase in cash and cash equivalents



19,843




6,838


Cash and cash equivalents, beginning of period



40,393




31,430


Cash and cash equivalents, end of period


$

60,236



$

38,268











Supplemental cash flow information:









Net cash paid for income taxes


$

1,595



$

4,336


Cash paid for interest


$

7,857



$

5,815


Non-cash investing activities:









Non-cash additions to property and equipment


$

38



$

170


 

 

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 U.S. GAAP measure, is set forth below.



Three Months Ended March 31,




2017



2016











Net income attributable to Planet Fitness, Inc.


$

8,842



$

3,368


Net income attributable to non-controlling interests



9,024




12,977


Net income


$

17,866



$

16,345


Interest expense, net



8,763




6,367


Provision for income taxes



7,108




3,291


Depreciation and amortization



7,951




7,703


EBITDA



41,688




33,706


Purchase accounting adjustments-revenue(1)



336




-


Purchase accounting adjustments-rent(2)



196




182


Stock offering-related costs(3)



608




-


Severance costs(4)



-




380


Other(5)



(573)




-


Adjusted EBITDA


$

42,255



$

34,268


 

(1)

Represents the impact of revenue-related purchase accounting adjustments associated with the 2012 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 $103 and $85 in the three months ended March 31, 2017 and 2016, respectively, reflect the difference between the higher rent expense recorded in accordance with GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $93 and $97 for the three months ended March 31, 2017 and 2016, respectively, are due to the amortization of favorable and unfavorable lease intangible assets which were recorded in connection with the 2012 Acquisition and the acquisition of eight franchisee-owned stores on March 31, 2014. 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 legal, accounting and other costs incurred in connection with offerings of the Company's Class A common stock.

(4)

Represents severance expense recorded in connection with an equity award modification.

(5)

Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the three months ended March 31, 2017, this amount includes a gain of $541 related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

 

 

A reconciliation of Segment EBITDA to Total Segment EBITDA is set forth below.


Three Months Ended March 31,



2017



2016


Segment EBITDA








Franchise

$

32,032



$

23,813


Corporate-owned stores


10,693




10,162


Equipment


6,094




6,318


Corporate and other


(7,131)




(6,587)


Total Segment EBITDA(1)

$

41,688



$

33,706



(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 "New 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 New 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 New LLC Agreement as if they had occurred on January 1, 2015. 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 U.S. 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 March 31,




2017



2016











Net income attributable to Planet Fitness, Inc.


$

8,842



$

3,368


Net income attributable to non-controlling interests



9,024




12,977


Net income


$

17,866



$

16,345


Provision for income taxes, as reported



7,108




3,291


Purchase accounting adjustments-revenue(1)



336




-


Purchase accounting adjustments-rent(2)



196




182


Stock offering-related costs(3)



608




-


Severance costs(4)



-




380


Other(5)



(342)




-


Purchase accounting amortization(6)



4,622




4,843


Adjusted income before income taxes


$

30,394



$

25,041


Adjusted income taxes(7)



12,006




9,866


Adjusted net income


$

18,388



$

15,175











Adjusted net income per share, diluted


$

0.19



$

0.15











Adjusted weighted-average shares outstanding(8)



98,528




98,707


 

(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 $103 and $85 in the three months ended March 31, 2017 and 2016, respectively, reflect the difference between the higher rent expense recorded in accordance with GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $93 and $97 for the three months ended March 31, 2017 and 2016, respectively, are due to the amortization of favorable and unfavorable lease intangible assets which were recorded in connection with the 2012 Acquisition and the acquisition of eight franchisee-owned stores on March 31, 2014. 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 legal, accounting and other costs incurred in connection with offerings of the Company's Class A common stock.

(4)

Represents severance expense recorded in connection with an equity award modification.

(5)

Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the three months ended March 31, 2017, this amount includes a gain of $541 related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate, partially offset by accelerated depreciation expense taken on our headquarters in preparation for moving to a new building.

(6)

Includes $4,086 and $4,219 of amortization of intangible assets, other than favorable leases, for the three months ended March 31, 2017 and 2016, respectively, recorded in connection with the 2012 Acquisition, and $536 and $624 of amortization of intangible assets for the three months ended March 31, 2017 and 2016, respectively, recorded in connection with the acquisition of eight franchisee-owned stores on March 31, 2014. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with U.S. GAAP, in each period.

(7)

Represents corporate income taxes at an assumed effective tax rate of 39.5% for the three months ended March 31, 2017 and 39.4% for the three months ended March 31, 2016 applied to adjusted income before income taxes.

(8)

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 months ended March 31, 2017 and 2016:



For the Three Months Ended
March
 31, 2017



For the Three Months Ended
March
 31, 2016




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)


$

8,842




64,150



$

0.14



$

3,368




36,598



$

0.09


Assumed exchange of shares(2)



9,024




34,378








12,977




62,109






Net Income



17,866












16,345










Adjustments to arrive at adjusted
   income before income taxes(3)



12,528












8,696










Adjusted income before income taxes



30,394












25,041










Adjusted income taxes(4)



12,006












9,866










Adjusted Net Income


$

18,388




98,528



$

0.19



$

15,175




98,707



$

0.15


 

(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 39.5% and 39.4% for the three months ended March 31, 2017 and 2016, respectively, applied to adjusted income before income taxes.

Planet Fitness logo.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/planet-fitness-inc-announces-first-quarter-2017-results-300449935.html

SOURCE Planet Fitness, Inc.

Investor Contact: Brendon Frey, ICR, brendon.frey@icrinc.com, 203-682-8200; Media Contacts: McCall Gosselin, Planet Fitness, mccall.gosselin@pfhq.com, 603-957-4650; Julia Young, ICR, julia.young@icrinc.com, 646-277-1280