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Planet Fitness, Inc. Announces Second Quarter 2022 Results
System-wide same store sales increased 13.6%
Ends second quarter with total membership of more than 16.5 million
More than 3.3 million High School Summer Pass participants through end of July
Hampton, NH, August 9, 2022 - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its second quarter ended June
30, 2022.
“Our high-quality, affordable fitness experience resonates now more than ever as Americans are seeking value and feeling the rising costs of everyday items such as food and gas. We believe that people will continue to prioritize their health and wellness while being more cost-conscious, and we offer a welcoming environment for people of all fitness levels. During the second quarter, our join trend returned to pre-pandemic seasonality with the addition of approximately 300,000 net new members, ending the quarter with more than 16.5 million,” said Chris Rondeau, Chief Executive Officer. “We now have more than 3.3 million teens enrolled in our High School Summer Pass, a program that offers teens a chance to work out for free at our gyms over the summer – an extremely important initiative given the ongoing and alarming teen mental health crisis. This is more than three times the number of participants than
when we last ran the program in 2019. Nearly 15 percent of all high school-aged teens in the U.S. are either enrolled in the program or are a paying member at Planet Fitness. We’re proud to be helping them establish healthy habits that they can build upon into the future.”
Second Quarter Fiscal 2022 results
•Total revenue increased from the prior year period by 63.5% to $224.4 million.
•System-wide same store sales increased 13.6%.
•System-wide sales increased $151 million to $1,019 million, from $868 million in the prior year period.
•Net income attributable to Planet Fitness, Inc. was $22.3 million, or $0.26 per diluted share, compared to $14.0 million, or $0.17
per diluted share, in the prior year period.
•Net income increased $10.1 million to $25.1 million, compared to $15.0 million in the prior year period.
•Adjusted net income(1) increased $16.3 million to $34.5 million, or $0.38 per diluted share, compared to $18.2 million, or $0.21 per diluted share, in the prior year period.
•Adjusted EBITDA(1) increased $34.3 million to $89.9 million from $55.6 million in the prior year period.
•34 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 2,324 as of June 30, 2022.
•Repurchased
and retired approximately 697,000 shares of Class A common stock using $44.3 million of cash on hand.
•Repaid in full its $75 million of borrowings under our Variable Funding Notes using cash on hand.
•Cash of $446.3 million, which includes cash and cash equivalents of $383.5 million and restricted cash of $62.8 million.
(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.
Operating Results for the Second Quarter Ended June
30, 2022
For the second quarter 2022, total revenue increased $87.2 million or 63.5% to $224.4 million from $137.3 million in the prior year period, which included system-wide same store sales growth of 13.6%. By segment:
•Franchise segment revenue increased $9.7 million or 13.3% to $82.5 million from $72.8 million in the prior year period. The increase in franchise segment revenue for the second quarter of 2022 was primarily due to a $6.2 million increase in franchise royalty revenue, a $1.6 million increase in National Advertising Fund (“NAF”) revenue, and a $1.7 million increase in placement revenue. Of the $6.2 million increase in royalty revenue, $5.9 million was attributable to a same store sales increase of 13.4% in franchisee-owned stores, $1.9 million was attributable to new stores opened since April
1, 2021 or stores that were not open for all of the prior year period due to COVID-related temporary closures, and $0.8 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $3.1 million as a result of the stores acquired in the acquisition of Sunshine
Fitness Growth Holdings, LLC in the first quarter of 2022 (the “Sunshine Acquisition”) moving from the franchise segment to the corporate-owned segment;
•Corporate-owned stores segment revenue increased $60.9 million or 150.0% to $101.5 million from $40.6 million in the prior year period. Of the increase, $49.5 million was attributable to the acquisition of 114 stores in the Sunshine Acquisition,
$5.3 million was from the corporate-owned store same store sales increase of 15.7%, $4.0 million was from new stores opened since April 1, 2021 and stores that were not open for all of the prior year period due to COVID-related temporary closures, and the remainder due to higher annual fee revenue; and
•Equipment segment revenue increased $16.6 million or 69.8% to $40.4 million from $23.8 million in the prior year period, driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June 30, 2022 compared to the three months ended June 30, 2021. In the three months ended June 30, 2022, the
Company had equipment sales to 26 new franchisee-owned stores compared to 19 in the prior year period.
For the second quarter of 2022, net income attributable to Planet Fitness, Inc. was $22.3 million, or $0.26 per diluted share, compared to $14.0 million, or $0.17 per diluted share, in the prior year period. Net income was $25.1 million in the second quarter of 2022 compared to $15.0 million in the prior year period. Adjusted net income increased $16.3 million to $34.5 million, or $0.38 per diluted share, from $18.2 million, or $0.21 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.7% and 26.6% for the current and prior year period, respectively, 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 $34.3 million to $89.9 million from $55.6 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 $2.6 million to $54.3 million. The increase in franchise segment EBITDA for the second quarter of 2022 was primarily
due to the revenue increases described above. Partially offsetting these EBITDA increases, NAF expense was $5.4 million higher in the three months ended June 30, 2022 than in the prior year period;
•Corporate-owned stores segment EBITDA increased $29.1 million to $39.5 million. Of the increase, $20.7 million was attributable to corporate-owned stores acquired in the Sunshine Acquisition and $9.8 million due to the same store sales increase of 15.7%, partially offset by higher corporate-owned store selling general and administrative expense primarily as a result of the Sunshine Acquisition; and
•Equipment segment EBITDA increased by $4.6 million to $10.2 million driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended June
30, 2022 compared to the three months ended June 30, 2021, as described above.
Company Updates
This morning the Company announced that Dorvin Lively, President, has decided to retire and will transition through the next couple of months. Dorvin joined Planet Fitness in 2013 as the Company’s Chief Financial Officer and was instrumental in developing its finance organization, preparing the Company to go public and then leading the IPO in 2015, and, more broadly, expanding the brand both domestically and globally. The
Company has begun a search for a new President.
“We are grateful for Dorvin’s leadership, friendship, passion for our member and franchisees, and significant contributions to the brand over the past nine years. Personally, I’d like to thank Dorvin for helping me lead Planet Fitness and I am forever grateful for his guidance and support,” said Chris Rondeau, Chief Executive Officer.
2022 Outlook
For the year ending December 31, 2022, the Company is reiterating the following expectations as compared to the
Company’s 2021 results, which includes the impact from the Sunshine Acquisition and assumes there is no significant worsening of the COVID-19 pandemic that seriously impacts performance, including prolonged store closures or other mandated operational restrictions:
•New equipment placements of approximately 170 in franchisee-owned locations
•System-wide same store sales in the low double-digit percentage range
The following are 2022 growth expectations over the Company’s 2021 results:
•Revenue to increase in the mid-50 percent range
•Adjusted EBITDA to increase in the high-50
percent range
•Adjusted Net Income to increase in the low-90 percent range
•Adjusted earnings per share to increase in the mid-80 percent range, based on Adjusted diluted shares outstanding of approximately 90.7 million, inclusive of the issuance of equity as part of the Sunshine Acquisition and the second quarter share repurchase
The Company now expects 2022 net interest expense to be approximately $86 million as a result of its recent debt refinancing and upsizing.
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.
Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores, which is calculated for a given period by including only sales from stores that had sales in the comparable months of both years. We define the same store sales base to include those stores that have been open and for which monthly membership dues have been billed for longer than 12 months. We measure same store sales based solely upon monthly dues billed to members of our corporate-owned and franchisee-owned stores.
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 EBITDA 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 ending December 31, 2022. Accordingly, a reconciliation of the Company’s guidance for Adjusted EBITDA and Adjusted net income per share, diluted, to the most directly comparable GAAP measure cannot be made available without unreasonable effort. 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 ending
December 31, 2022.
Investor Conference Call
The Company will hold a conference call at 8:00 AM (ET) on August 9, 2022 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, NH, 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 June 30, 2022, Planet Fitness had more than 16.5 million members and 2,324 stores in 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia. 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.
This press release contains “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include the Company’s statements with respect to expected future performance presented under the heading “2022 Outlook,” those attributed to the Company’s Chief Executive Officer in this press
release, including with respect to the Company’s growth opportunities globally and long-term targets for U.S. store locations, and other statements, estimates and projections that do not relate solely to historical facts. Forward-looking statements can be identified by words such as "believe,"“expect,”“goal,” plan,” “will,”“prospects,”“future,”“strategy” and similar references to future periods, although not all forward-looking statements include these identifying words. Forward-looking statements are not 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 the duration and impact of COVID-19, which has resulted and may continue to result in store closures and a decrease in our net membership base and may give rise to or heighten one or more of the other risks and uncertainties described herein, competition in the fitness industry, the Company’s and franchisees’
ability to attract and retain members, the Company's and franchisees' ability to identify and secure suitable sites for new franchise stores, changes in consumer demand, changes in equipment costs, the Company’s ability to expand into new markets domestically and internationally, 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 increased indebtedness as a result of our refinancing and securitization transactions and our ability to incur additional indebtedness or refinance that indebtedness in the future, our future financial performance and our ability to pay principal
and interest on our indebtedness, our corporate structure and tax receivable agreements, failures, interruptions or security breaches of the Company's information systems or technology, our ability to successfully integrate and realize the anticipated benefits from the Sunshine Acquisition, general economic conditions and the other factors described in the Company’s annual report on Form 10-K for the year ended December 31, 2021, and the Company’s other filings with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in forward-looking statements, investors should not place undue reliance on forward-looking statements,
which reflect the Company’s views only as of the date of this press release. 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.
Payable pursuant to tax benefit arrangements, current
35,894
20,302
Other current liabilities
42,300
24,815
Total
current liabilities
263,556
176,610
Long-term debt, net of current maturities
1,985,730
1,665,273
Borrowings under Variable Funding Notes
—
75,000
Lease
liabilities, net of current portion
351,462
197,682
Deferred revenue, net of current portion
33,032
33,428
Deferred tax liabilities
886
—
Payable
pursuant to tax benefit arrangements, net of current portion
474,130
507,805
Other liabilities
4,298
3,030
Total noncurrent liabilities
2,849,538
2,482,218
Stockholders'
equity (deficit):
Class A common stock, $0.0001 par value - 300,000 authorized, 84,230 and 83,804 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively
8
8
Class B common stock, $0.0001 par value - 100,000 authorized, 6,146 and 3,056 shares issued and outstanding as of June 30, 2022 and
December 31, 2021, respectively
1
1
Accumulated other comprehensive income
(110)
12
Additional paid in capital
529,026
63,428
Accumulated
deficit
(714,297)
(708,804)
Total stockholders' deficit attributable to Planet Fitness, Inc.
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.
Gain on settlement of preexisting contract with acquiree(5)
—
—
(2,059)
—
Transaction
fees and acquisition-related costs(6)
525
—
4,948
—
Loss (gain) on adjustment of allowance for credit losses on held-to-maturity investments(7)
265
—
(1,845)
—
Dividend
income on held-to-maturity investments(8)
(463)
—
(914)
—
Pre-opening costs(9)
783
481
1,439
847
Legal
matters(10)
898
(325)
951
(2,500)
Tax benefit arrangement remeasurement(11)
(83)
—
(3,871)
(348)
Other(12)
500
54
1,600
688
Adjusted
EBITDA
$
89,923
$
55,576
$
167,267
$
99,284
(1)Includes a $1,583 loss on extinguishment of debt in the six months ended June 30, 2022.
(2)Represents the impact of revenue-related purchase accounting adjustments associated with the
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 upfront but recognizes for U.S. 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.
(3)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 $45, $33, $90 and $82 in the three and six months ended June 30, 2022 and 2021, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $64, $64, $129, and $132 in the three and six months ended June 30, 2022 and 2021, respectively, are due to the amortization of favorable and unfavorable leases. 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.
(4)Represents the impact of a non-cash loss
recorded in accordance with ASC 805 – Business Combinations related to our acquisition of franchisee-owned stores. The loss recorded under U.S. GAAP represents the difference between the fair value and the contractual terms of the reacquired franchise rights and is included in other (gains) losses, net on our consolidated statement of operations.
(5)Represents a gain on settlement of
deferred revenue from existing contracts with acquired franchisee-stores recorded in accordance with ASC 805 – Business Combinations, and is included in other (gains) losses, net on our consolidated statement of operations.
(6)Represents transaction fees and acquisition-related costs incurred in connection with our acquisition of franchisee-owned stores.
(7)Represents a loss (gain) on the adjustment of the allowance for credit losses on the Company’s held-to-maturity investments.
(8)Represents dividend income on held-to-maturity investments.
(9)Represents
costs associated with new corporate-owned stores incurred prior to the store opening, including payroll-related costs, rent and occupancy expenses, marketing and other store operating supply expenses.
(10)In the three and six months ended June 30, 2022, the amounts represent a reserve against an indemnification receivable related to a legal matter. In the three and six months ended June 30, 2021, the amounts represent an insurance recovery of previously recognized expenses related to the settlement of legal claims.
(11)Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our deferred state tax rate.
(12)Represents certain
other charges and gains that we do not believe reflect our underlying business performance.
A reconciliation of Segment EBITDA to Total Segment EBITDA is set forth below.
Adjusted Net Income and Adjusted Net Income per Diluted Share
Our presentation of 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 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 June 30,
Six months ended June 30,
(in thousands, except per share amounts)
2022
2021
2022
2021
Net income
$
25,071
$
15,016
$
43,447
$
21,206
Provision
for income taxes, as reported
8,570
5,159
20,281
8,513
Purchase accounting adjustments-revenue(1)
71
128
129
197
Purchase
accounting adjustments-rent(2)
109
97
219
214
Loss on reacquired franchise rights(3)
—
—
1,160
—
Gain
on settlement of preexisting contract with acquiree(4)
—
—
(2,059)
—
Transaction fees and acquisition-related costs(5)
525
—
4,948
—
Loss
on extinguishment of debt(6)
—
—
1,583
—
Loss (gain) on adjustment of allowance for credit losses on held-to-maturity investments(7)
265
—
(1,845)
—
Dividend
income on held-to-maturity investments(8)
(463)
—
(914)
—
Pre-opening costs(9)
783
481
1,439
847
Legal
matters(10)
898
(325)
951
(2,500)
Tax benefit arrangement remeasurement(11)
(83)
—
(3,871)
(348)
Other(12)
500
54
1,600
688
Purchase
accounting amortization(13)
10,781
4,159
19,299
8,318
Adjusted income before income taxes
$
47,027
$
24,769
$
86,367
$
37,135
Adjusted
income taxes(14)
12,556
6,589
23,060
9,878
Adjusted net income
$
34,471
$
18,180
$
63,307
$
27,257
Adjusted
net income per share, diluted
$
0.38
$
0.21
$
0.70
$
0.31
Adjusted
weighted-average shares outstanding(15)
91,343
87,200
90,503
87,188
(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 upfront but recognizes for U.S. 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 $45, $33, $90 and $82 in the three and six months ended June 30, 2022 and 2021, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $64, $64, $129, and $132 in the three and six months ended June 30, 2022 and 2021, respectively, are due to the amortization of favorable and unfavorable leases. 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 the impact of a non-cash loss
recorded in accordance with ASC 805 – Business Combinations related to our acquisition of franchisee-owned stores. The loss recorded under U.S. GAAP represents the difference between the fair value and the contractual terms of the reacquired franchise rights and is included in other (gains) losses, net on our consolidated statement of operations.
(4)Represents a gain on settlement of deferred revenue from existing contracts with acquired franchisee-stores recorded in accordance with ASC 805 – Business Combinations, and is included in other (gains) losses, net on our consolidated statement of operations.
(5)Represents transaction fees and acquisition-related costs incurred in connection with our acquisition of franchisee-owned stores.
(6)Represents
a loss on extinguishment of debt in the six months ended June 30, 2022.
(7)Represents a loss (gain) on the adjustment of the allowance for credit losses on the Company’s held-to-maturity investments.
(8)Represents dividend income on held-to-maturity investments.
(9)Represents costs associated with new corporate-owned stores incurred prior to the store opening, including payroll-related costs, rent and occupancy expenses, marketing and other store operating supply expenses.
(10)In the three and six months ended June 30, 2022,
the amounts represent a reserve against an indemnification receivable related to a legal matter. In the three and six months ended June 30, 2021, the amounts represent an insurance recovery of previously recognized expenses related to the settlement of legal claims.
(11)Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our deferred state tax rate.
(12)Represents certain other charges and gains that we do not believe reflect our underlying business performance.
(13)Includes $3,096, $3,096, $6,192 and $6,192 of amortization of intangible assets, for the three and six months ended June 30, 2022 and 2021,
recorded in connection with the 2012 Acquisition, and $7,685, $1,063, $13,107, and $2,216 of amortization of intangible assets for the three and six months ended June 30, 2022 and 2021, respectively, recorded in connection with historical acquisitions of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with U.S. GAAP, in each period.
(14)Represents corporate income taxes at an assumed blended tax rate of 26.7% for the three and six months ended June 30, 2022 and 26.6% for the three and six months ended June 30, 2021, applied to adjusted income before income taxes.
(15)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 and six months ended June
30, 2022 and 2021:
Net income attributable to Planet Fitness, Inc.(1)
$
22,342
85,197
$
0.26
$
14,010
83,837
$
0.17
Assumed
exchange of shares(2)
2,729
6,146
1,006
3,363
Net income
25,071
15,016
Adjustments
to arrive at adjusted income
before income taxes(3)
21,956
9,753
Adjusted income before income taxes
47,027
24,769
Adjusted
income tax expense(4)
12,556
6,589
Adjusted net income
$
34,471
91,343
$
0.38
$
18,180
87,200
$
0.21
(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 blended tax rate of 26.7% and 26.6% for the three months
ended June 30, 2022 and 2021, respectively, applied to adjusted income before income taxes.
Net income attributable to Planet Fitness, Inc.(1)
$
38,806
84,919
$
0.46
$
19,591
83,771
$
0.23
Assumed
exchange of shares(2)
4,641
5,584
1,615
3,417
Net income
43,447
21,206
Adjustments
to arrive at adjusted income before income taxes(3)
42,920
15,929
Adjusted income before income taxes
86,367
37,135
Adjusted
income tax expense(4)
23,060
9,878
Adjusted net income
$
63,307
90,503
$
0.70
$
27,257
87,188
$
0.31
(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 blended tax rate of 26.7% and 26.6% for the six
months ended June 30, 2022 and 2021, respectively, applied to adjusted income before income taxes.
Dates Referenced Herein and Documents Incorporated by Reference