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Planet Fitness (PLNT) Q3 Earnings & Revenues Beat, Shares Up

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Planet Fitness, Inc. (PLNT - Free Report) reported remarkable third-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Also, both metrics increased on a year-over-year basis.

The company’s results reflect the solid increase in members and global growth in store counts. In the reporting quarter, the company witnessed more than 18.5 million members accompanied by the store count growing to 2,498 locations, globally.

Given the current macroeconomic scenario, the company is focusing on adjusting its store-level return model to enhance the opening and operations of its stores. The improvements include reducing certain capital investments by extending the timing for equipment replacement and remodeling completion. This will position the company to ensure long-term sustainable growth.

Following the announcement, shares of this franchisor and operator of fitness centers notably gained 13.4% during the trading session on Nov 7.

Earnings & Revenue Discussion

For the third quarter, Planet Fitness reported adjusted earnings per share (EPS) of 59 cents, surpassing the Zacks Consensus Estimate of earnings of 55 cents per share by 7.3%. In the prior-year quarter, the company reported an adjusted EPS of 42 cents.

Planet Fitness, Inc. Price, Consensus and EPS Surprise


Planet Fitness, Inc. Price, Consensus and EPS Surprise

Planet Fitness, Inc. price-consensus-eps-surprise-chart | Planet Fitness, Inc. Quote

Quarterly revenues of $277.6 million topped the consensus mark of $267.7 million by 3.7%. Furthermore, the top line improved 13.6% from the year-ago quarter’s levels, driven by solid performances in all segments as well as system-wide same-store sales growth of 8.4% year over year.

Adjusted EBITDA was $111.9 million compared with $93.9 million reported in the year-ago quarter.

Segmental Performance

Franchise: In the quarter, this segment’s revenues were $98.2 million, up 21.6% from the prior-year quarter.  Our model predicted this segment’s revenues to increase 11.2% to $89.8 million year over year.

The upside was driven by rises of $8 million, $3 million, $1.5 million and $3.5 million in franchise royalty revenues, National Advertising Fund revenues, equipment placement revenues and franchise and other fees, respectively. Also, $1.3 million of revenues associated with the sale of HVAC units to franchisees added to the uptrend.

EBITDA in the Franchise segment was $67.6 million compared with $53.5 million reported in the prior-year quarter.

Corporate-owned Stores: Revenues of this segment amounted to $113.2 million, up 11.8% from the reported value of $101.3 million in the year-ago quarter. For this segment’s revenues, our anticipated value was $114.1 million, up 12.6% year over year. Our estimated figure was comparatively higher than the reported value.

The uptick can primarily be attributed to an increase of 10.1% in corporate-owned store same-store sales and an additional $5.1 million from new store openings since Jul 1, 2022. The acquisition of four stores in Florida also contributed to the segment’s revenues.

EBITDA totaled $44.3 million compared with $40.4 million reported in the prior-year quarter.

Equipment: In the Equipment segment, revenues totaled $66.1 million, up 6.1% year over year. We expected revenues to be $63.2 million from this segment, indicating 1.4% year-over-year growth.

The segment’s revenue growth was attributed to $5.6 million of higher equipment sales to existing franchisee-owned stores in the quarter.

EBITDA was $16.4 million compared with $15.8 million reported in the year-ago quarter.

Other Financial Details

As of Sep 30, 2023, cash and cash equivalents totaled $309 million compared with $409.8 million as of Dec 31, 2022. Long-term debt (net of current maturities) amounted to $1.97 billion, on par with the value reported on Dec 31, 2022.

Revised 2023 Outlook

Planet Fitness now expects revenues to increase approximately 14% compared with the previous expectation of approximately 12%.

Adjusted EBITDA is now estimated to increase approximately 18% (previously expected approximately 17%) and adjusted net income is anticipated to increase about 33% (previously expected nearly 30%). Adjusted EPS is now projected to increase approximately 35% compared with the prior-expectation of approximately 34%.

The company still anticipates adjusted shares outstanding to be approximately 89 million, which includes 1.7 million shares repurchases through Sep 30, 2023.

The company now expects new equipment placements to be between approximately 130 and 140 (previously expected approximately 140) in franchisee-owned locations. Also, system-wide new stores are now expected to open in between approximately 150 and 160 locations (previously expected approximately 160 locations).

Yet, system-wide same-store sales are still expected to be in the high single-digit percentage range.

The metrics are based on the assumption of no significant supply-chain disruptions.

Zacks Rank

Planet Fitness currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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