Planet Fitness said it was off to a strong start for 2016, as it reported its first quarter financials Tuesday. The company said it outperformed guidance for the quarter and was raising its full-year revenue outlook.
Planet Fitness opened 48 clubs in the first quarter to give the company 1,171 total locations as of March 31. (Photo courtesy Planet Fitness.)
Planet Fitness, Newington, New Hampshire, reported first quarter revenue of $83.3 million, marking an 8.3 percent increase over the first quarter of 2015, according to financials released Tuesday.
System-wide same store sales increased 6.8 percent in the first quarter, with franchisee-owned same store sales increasing 7 percent and the 58 corporate-owned stores sales increasing 4.9 percent. Planet Fitness Chief Financial Officer Dorvin Lively attributed the system-wide sales growth to member growth in a conference call Tuesday with analysts, though specific data on member growth was not disclosed. The company reported 7.3 million members at the end of 2015 in March.
"The year is off to a strong start," Chris Rondeau, CEO, Planet Fitness, said in a statement. "We continue to be successful attracting new consumers to Planet Fitness, which, combined with system-wide same store sales growth of 6.8 percent contributed to our outperformance in the first quarter compared with guidance."
Planet Fitness also raised its full-year revenue outlook for 2016 to between $360 million and $370 million, up from March's projection of 2016 revenue between $355 million and $365 million. The previous projection of 210 to 220 new locations in 2016 remained unchanged in Tuesday's disclosure. Planet Fitness opened 48 new clubs in the first quarter to give the company 1,171 total locations as of March 31.
The franchise segment is the primary driver behind the raised full-year guidance, Lively told analysts. Franchise segment revenue, which includes commission income, increased 27.2 percent to $27.7 million in the first quarter compared to the first quarter of 2015. Corporate-owned stores revenue increased 9 percent to $25.7 million in the first quarter compared to the first quarter of 2015.
"We remain confident that we have a significant runway for growth based on how well our concept continues to resonate with the large population of casual and first time gym users," Rondeau said in a statement. "At the same time, our group of well capitalized franchisees is on schedule to open a record number of new stores this year, and the pipeline is robust looking beyond 2016. We believe our differentiated, asset-light business model has our company well positioned to deliver enhanced profitability and greater value to our shareholders over the long term."
The company has 1,000 new locations committed to opening in the next seven years, with more than 500 set to open in the next three years, Rondeau told analysts in March. Of the 210 to 220 new locations expected to open in 2016, 15 are expected in Canada.
Equipment segment revenue decreased 5.2 percent to $30 million compared to the first quarter of 2015. The decrease in equipment segment revenue was related to the anticipated fewer new store openings compared to the first quarter of 2015 and was partially offset by higher re-equipment revenue, according to the earnings release. Equipment sales related to new club openings and the timing of individual new club openings can be affected by many factors, making quarter-to-quarter comparisons less meaningful, the release noted.
A new $20 million share repurchase program was announced in Tuesday's disclosure. Planet Fitness will purchase the common stock as market conditions warrant, and the program may be modified, suspended or discontinued at any time.
"The board's decision to authorize this $20 million share buyback program reflects their confidence in the strength of the Planet Fitness brand and our asset-light business model," Rondeau said in a statement. "We believe that current volatility in our stock price provides us with opportunities to purchase our stock at prices that we believe undervalue our business. This program underscores the company's commitment to creating value for our shareholders by using our strong cash flow in the most efficient manner possible as opportunities present themselves."
Planet Fitness stock (NYSE:PLNT) traded up five percent at $16.40 per share in after hours trading on Tuesday. The stock has traded in a range between $13.23 and $20.68 per share since its initial public offering in August 2015.