Planet Fitness said it was off to a strong start for 2016, as it reported its second quarter financials Tuesday. The company said it outperformed guidance for the quarter and was raising its full-year revenue outlook.
Planet Fitness opened 36 clubs in the second quarter to give the company 1,206 total locations as of June 30. (Photo courtesy Planet Fitness.)
Revenue for Planet Fitness, Newington, New Hampshire, grew to $91.5 million in the second quarter, marking a 15.9 percent increase over the second quarter of 2015, according to financials released by the company on Thursday.
Growth in the second quarter "accelerated" following a "strong start to the year" and was highlighted by system-wide same store sales growth of 7.6 percent, Planet Fitness CEO Chris Rondeau said in a statement. Franchisee-owned same store sales increased 7.8 percent and corporate-owned same store sales increased 4.7 percent.
"We continue to successfully attract new members to our affordable, non-intimidating fitness offering, including a large percentage of first-time gym users," Rondeau said in the statement. "Membership growth at our legacy stores as well as our newly opened locations is fueling strong gains in our high-margin franchise segment. We believe this trend will continue as our group of well-capitalized franchisees is on schedule to open a record number of new stores this year and we continue to leverage the power of our national advertising fund to drive brand awareness."
Planet Fitness raised its 2016 revenue forecast to between $366 million and $372 million, up from the previous estimate of between $360 million and $370 million. The company, which has raised its 2016 revenue outlook twice this year, reported $330.5 million in 2015 revenue in March and first quarter 2016 revenue of $83.3 million in May.
Planet Fitness' previous forecast of 210 and 220 new franchised locations in 2016 remained unchanged in the second quarter disclosure. Planet Fitness chief financial officer Dorvin Lively told analysts during a conference call on Thursday that the company has a higher degree of confidence in the lower to midpoint of the 210-220 range.
Rondeau further elaborated on Planet Fitness' overall U.S. growth plans during the call, citing a trend related to a new member survey that reaffirmed the company's confidence to have 4,000 total U.S. locations "over time." The survey of nearly 1 million new Planet Fitness members showed 40 percent of respondents had never attended a gym before joining Planet Fitness.
"This powerful statistic demonstrates that our affordable non-intimidating fitness offering and brand positioning are resonating with the broad consumer audience," Rondeau told analysts. "Our mission is to make fitness more accessible, and bringing health and wellness to the majority of our population. It’s extremely rewarding to learn we’re attracting new consumers to the fitness industry and growing the overall market size."
Planet Fitness had 1,206 opened stores as of June 30 after opening 36 new franchise clubs in the second quarter. The company opened 48 new clubs in the first quarter and had 1,171 total locations as of March 31. Internationally, Rondeau said there are 100 Canadian locations in development and further international expansion may be possible beyond current locations in Canada and the Dominican Republic.
"We will probably end up partnering with a couple of franchisees that expressed interest to open a store or two in a couple of countries and experiment much like we did in the Dominican," Rondeau told analysts. Last year, Rondeau hinted that Mexico may be a possible country for further international expansion.
Planet Fitness' three operating segments all saw year-over-year second quarter growth. Franchise segment revenue, which includes commission income, increased 34.7 percent to $29.5 million; corporate-owned stores segment revenue increased 5.6 percent to $26.4 million; and equipment segment revenue increased 10.9 percent to $35.6 million. The increase in equipment segment revenue was driven by an increase in replacement equipment sales to existing franchisee-owned stores and was partially offset by a decrease in equipment sales to new franchisee-owned stores related to fewer stores opened compared to the prior year period, Planet Fitness said in the earnings release.
Planet Fitness' corporate-owned clubs, which comprise 5 percent of the company's locations, saw operating expenses increase from $14.7 million in the second quarter 2015 to $15.8 million in second quarter 2016. The $1.1 million increase was driven by a combination of incremental store labor costs at several corporate stores related to increasing staffing levels and marketing initiatives to drive membership growth.
The staffing levels were increased to provide a "better member experience," Lively told analysts. Manager salaries are expected to go up "a bit" starting the fourth quarter related to the new Fair Labor Standards Act (FLSA) rule finalized by the U.S. Department of Labor earlier in May, which will result in a $1,000-$2,000 impact per month per store, Lively said.
Planet Fitness (NYSE:PLNT) shares were trading nearly 10 percent at $22.27 per share in midday trading Friday.
Planet Fitness completed a secondary offering of 11.5 million shares of its Class A common stock in June at a price of $16.50 per share. All shares sold in the offering by existing holders of limited liability company units of Pla-Fit Holdings LLC and certain holders of Class A common stock. The company did not receive any proceeds from the sale of those shares of Class A common stock.
Rathke Appointed to Board
Frances Rathkey was appointed to the Planet Fitness Board of Directors' Audit Committee on August 4.
Rathke most recently served as chief financial officer and treasurer of Keurig Green Mountain Inc. for 12 years. She was responsible for leading the company's finance organization, overseeing $1.5 billion of acquisitions and playing a leading role in capital raises and strategic investments.
"I am excited to join the Planet Fitness Board of Directors," Rathke said in a statement. "I look forward to working with the management team and my fellow board members to build on the company's success and drive long-term value for all stakeholders."
Rathke is a current member of the board of directors of Green Mountain Power Corp. and the Flynn Center for Performing Arts.
"I am excited to welcome Fran, a seasoned financial executive, to our board of directors," Rondeau said in a statement. "She brings with her a wealth of business and finance expertise leading entrepreneurial growth companies, which will be highly beneficial to Planet Fitness and our shareholders as we continue to build on brand momentum and execute our growth strategy."