NEWINGTON, N.H., Oct. 26, 2016 /PRNewswire/ -- Planet Fitness, Inc. (NYSE: PLNT) today reported financial results for its third quarter ended September 30, 2016 and announced it is pursuing an increase in the size of its credit facilities and considering paying a one-time dividend.

Third Quarter Fiscal 2016 Highlights

• Total revenue increased from the prior year period by 26.4% to $87.0 million.
• System-wide same store sales increased 10.0% compared to the prior year period
• Net income was $14.9 million, or $0.08 per diluted share, compared to net income of $0.7 million, or $0.04 per diluted share in the prior year period.
• Adjusted net income⁽¹⁾ increased 51.7% to $15.9 million, or $0.16 per diluted share, compared to $10.5 million in the prior year period.
• Adjusted EBITDA⁽¹⁾ increased 33.5% to $35.4 million from $26.5 million in the prior year period.
• 37 new Planet Fitness franchise stores were opened during the period, bringing system-wide total stores to 1,242 at September 30, 2016.

(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 release.

"Our business continues to get stronger," commented Christopher Rondeau, Chief Executive Officer. "Third quarter system-wide same store sales increased 10% as a growing number of casual and first time gym users are joining Planet Fitness. The combination of our affordable, non-intimidating fitness offering and increased national and local advertising spend, which continues to increase with each incremental new join, is fueling greater brand awareness in all markets and membership growth across the store base. Our formula for expanding Planet Fitness' market share, enriching members' lives and delivering strong returns to our franchisees has been working. At the same time, our business model has consistently generated double digit earnings growth and strong free cash flow, providing the company a great foundation for driving significant long-term shareholder value." Mr. Rondeau continued, "based on our performance and more importantly, the long runway for growth ahead of us, we are also announcing that we are seeking to amend our credit facilities to, among other things, increase the size of our term loan.  Proceeds from the incremental borrowings, plus cash on our balance sheet, will enable us to consider a special cash dividend to holders of our Class A common stock and other equivalent payments, including payments to unit holders of Pla-Fit Holdings, LLC, of up to approximately $280 million."

Operating Results for the Third Quarter Ended September 30, 2016

For the third quarter of 2016, total revenue increased $18.2 million or 26.4% to $87.0 million from $68.8 million in the prior year period. By segment:

• Franchise segment revenue, which includes commission income, increased $7.4 million or 37.5% to $27.2 million from $19.8 million in the prior year period;
• Corporate-owned stores segment revenue increased $1.5 million or 6.1% to $26.7 million from $25.2 million in the prior year period; and
• Equipment segment revenue increased $9.2 million or 38.7% to $33.1 million from $23.9 million in the prior year period. This increase was driven by equipment sales to new franchisee-owned stores related to more new equipment sales compared to the prior year period and an increase in replacement equipment sales to existing franchisee-owned stores.

System-wide same store sales increased 10.0% compared to the prior year period. By segment, franchisee-owned same store sales increased 10.3% and corporate-owned same store sales increased 5.4%.

For the third quarter of 2016, net income was $14.9 million, or $0.08 per diluted share, compared to net income of $0.7 million, or $0.04 per diluted share in the prior year period. Adjusted net income increased 51.7% to $15.9 million, or $0.16 per diluted share, from $10.5 million, 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 33.5% to $35.4 million from $26.5 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 income before interest, taxes, depreciation and amortization (see "Non-GAAP Financial Measures").

• Franchise segment EBITDA increased $7.3 million or 47.2% to $22.8 million compared to the prior year period, driven by royalties from new franchised stores opened since September 30, 2015 as well as higher same store sales;
• Corporate-owned stores segment EBITDA increased $1.3 million or 14.0% to $10.6 million compared to the prior year period, driven primarily by higher revenue related to the increase in same store sales; and
• Equipment segment EBITDA increased by $2.2 million or 45.7% to $7.2 million compared to the prior year period, driven by higher equipment sales to new franchisee-owned stores related to more new equipment sales compared to the prior year period and an increase in replacement equipment sales to existing franchisee-owned stores.

Amendment to existing credit facilities

The Company is seeking to amend its senior secured credit facilities to allow for, among other things, incremental term loan borrowings of approximately $230 million. In connection with this potential amendment, the Company is considering paying a special cash dividend to holders of our Class A common stock and other equivalent payments, including payments to unit holders of Pla-Fit Holdings, LLC, of up to approximately $280 million in the aggregate with the proceeds from the additional borrowings and available cash. The specific timing and amount of any such amendment or dividend and equivalent payments, if any, has not been determined and there can be no assurance that such amendment will be consummated on the terms anticipated or at all or that, even if the amendment is consummated, any dividend or equivalent payments will be declared and paid.  The payment of a dividend and any equivalent payments is subject to consideration of various factors by the Company's board of directors, including, among other things, the Company's financial position, alternative uses of cash, and other business and legal requirements.

2016 Outlook

For the year ending December 31, 2016, the Company now expects:

• Total revenue between $373 million and $378 million;
• System-wide same store sales growth in the high-single digit range;
• Adjusted net income of $65 million to $66 million, or $0.66 to $0.67 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 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 results in periods prior to the IPO and recapitalization transactions are of Pla-Fit Holdings, as the predecessor to the Company for accounting and reporting purposes. Accordingly, these historical results do not purport to reflect what the results of operations of the Company or Pla-Fit Holdings would have been had the IPO and related recapitalization transactions occurred prior to August 2015.

The financial information presented in this release includes non-GAAP financial measures such as EBITDA, Total 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 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 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 remainder of 2016. 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 fiscal 2016.

Investor Conference Call

The Company will hold a conference call at 4:30 pm (ET) on October 26, 2016 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 September 30, 2016, Planet Fitness had more than 8.7 million members and more than 1,200 stores in 47 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 90% 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 "2016 Outlook," and statements relating to the proposed amendment of the Company's senior secured indebtedness and potential use of proceeds to fund a special dividend and other equivalent payments ("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 actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the Company may be unable to negotiate  the terms of the potential amendment with its lenders, including the right to pay a special cash dividend to its stockholders and other equivalent payments on the terms contemplated or at all; the Company may not be able to fund dividends, including a special cash dividend, with cash on hand, borrowings under its credit agreement or at all; the Company's board of directors may not approve and declare any dividend and other equivalent payments, even if funds are available to the Company under its credit agreement or otherwise, or may determine to declare a dividend and other equivalent payments in an amount that differs materially from the amount described in this press release in management's remarks or otherwise. Other important factors 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, 2015, 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 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 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 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, management fees, certain IT system upgrade costs, acquisition transaction fees, public offering-related costs, IPO-related compensation expense, pre-opening 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.

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

Adjusted Net Income and Adjusted Net Income per Diluted Share

As a result of the recapitalization transactions that occurred prior to our IPO, 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.

A reconciliation of net income per share, diluted, to Adjusted net income per share, diluted is set forth below for the three and nine months ended September 30, 2016:

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SOURCE Planet Fitness, Inc.