Document
false0001637207 0001637207 2020-02-25 2020-02-25


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
February 25, 2020
Date of Report (Date of earliest event reported)  
 Planet Fitness, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
001-37534
 
38-3942097
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
4 Liberty Lane West
Hampton, NH 03842
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (603) 750-0001
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Exchange act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A common stock, $0.0001 Par Value
PLNT
New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐





Item 2.02
Results of Operations and Financial Condition.
On February 25, 2020, Planet Fitness, Inc. (the “Company”) issued a press release announcing its financial results for the quarter and year ended December 31, 2019. A copy of this press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 2.02.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.
 
Item 9.01
Financial Statements and Exhibits.
 
(d)
Exhibits
 
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
104
 
The cover page from this Current Report on Form 8-K, formatted in Inline XBRL (included as Exhibit 101)
 
 

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
PLANET FITNESS, INC.
 
 
By:
 
/s/ Dorvin Lively
Name:
Title:
 
Dorvin Lively
President
Dated: February 25, 2020




Exhibit 99.1
Planet Fitness, Inc. Announces Fourth Quarter and Year-End 2019 Results
Fourth Quarter System-Wide Same Store Sales Increased 8.6%
Company record 261 New Planet Fitness Stores Opened System-Wide in 2019
Executed $300 Million Accelerated Share Repurchase in Fourth Quarter

Hampton, NH, February 25, 2020 - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its fourth quarter ended December 31, 2019 and announced its full year 2020 outlook.
Fourth Quarter Fiscal 2019 Highlights
•
Total revenue increased from the prior year period by 9.8% to $191.5 million.
•
System-wide same store sales increased 8.6%.
•
Net income attributable to Planet Fitness, Inc. was $29.7 million, or $0.36 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $24.8 million, or $0.29 per diluted share, in the prior year period.
•
Net income was $34.3 million, compared to net income of $28.8 million in the prior year period.
•
Adjusted net income(1) increased 20.6% to $39.2 million, or $0.44 per diluted share, compared to $32.5 million, or $0.34 per diluted share, in the prior year period.
•
Adjusted EBITDA(1) increased 23.0% to $76.6 million from $62.3 million in the prior year period.
•
102 new Planet Fitness stores were opened system-wide during the period, bringing system-wide total stores to 2,001 as of December 31, 2019.
Fiscal Year 2019 Highlights
•
Total revenue increased from the prior year by 20.2% to $688.8 million.
•
System-wide same store sales increased 8.8%.
•
Net income attributable to Planet Fitness, Inc. was $117.7 million, or $1.41 per diluted share, compared to $88.0 million, or $1.00 per diluted share, in the prior year.
•
Net income was $135.4 million, compared to $103.2 million in the prior year.
•
Adjusted net income(1) increased 22.7% to $146.7 million, or $1.59 per diluted share, compared to $119.5 million, or $1.22 per diluted share, in the prior year.
•
Adjusted EBITDA(1) increased 26.4% to $282.2 million from $223.2 million in the prior year.
•
261 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 2,001 as of December 31, 2019.

“2019 was filled with many important milestones and financial achievements,” said Chris Rondeau, Chief Executive Officer. “We opened a company record 261 new stores system-wide and ended the year with 2,001 Planet Fitness locations and approximately 14.4 million members. Our ability to attract casual, first time gym users to our welcoming, non-intimidating fitness concept, combined with higher black card pricing, fueled an 8.8% improvement in system-wide same store sales on top of a 10.2% increase in 2018. Revenue in all three of our operating segments - Franchise, Corporate-Owned Stores and Equipment - grew double-digits in 2019, with Franchise, our highest margin segment, growing the fastest, which along with the repurchase of 6.1 million shares, helped drive a 30% increase in Adjusted net income per share, diluted(1) year-over-year. We begin 2020 with great momentum in our business, a long runway for growth, and an experienced group of franchisees eager to capitalize on the many opportunities that still lie ahead.”

(1) Adjusted net income, Adjusted EBITDA and Adjusted net income per share, diluted are non-GAAP measures. For reconciliations of Adjusted EBITDA and Adjusted net income to U.S. GAAP (“GAAP”) net income and a computation of Adjusted net income per share, diluted, see “Non-GAAP Financial Measures” accompanying this press release.
Operating Results for the Fourth Quarter Ended December 31, 2019
For the fourth quarter of 2019, total revenue increased $17.2 million or 9.8% to $191.5 million from $174.4 million in the prior year period. By segment:
•
Franchise segment revenue increased $16.7 million or 29.6% to $73.3 million from $56.6 million in the prior year period;



•
Corporate-owned stores segment revenue increased $5.0 million or 13.7% to $41.2 million from $36.2 million in the prior year period, $3.1 million of which is from new corporate-owned stores opened or acquired since September 30, 2018; and
•
Equipment segment revenue decreased $4.6 million or 5.6% to $77.0 million from $81.6 million in the prior year period, driven by a decrease in replacement equipment sales to existing franchisee-owned stores, partially offset by higher equipment sales to new franchisee-owned stores.
System-wide same store sales increased 8.6%. By segment, franchisee-owned same store sales increased 8.8% and corporate-owned same store sales increased 5.8%.
For the fourth quarter of 2019, net income attributable to Planet Fitness, Inc. was $29.7 million, or $0.36 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $24.8 million, or $0.29 per diluted share, in the prior year period. Net income was $34.3 million in the fourth quarter of 2019 compared to $28.8 million in the prior year period. Adjusted net income increased 20.6% to $39.2 million, or $0.44 per diluted share, from $32.5 million, or $0.34 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.8% for the fourth quarter of 2019 and 26.3% for the 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 23.0% to $76.6 million from $62.3 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 $12.0 million or 30.8% to $50.7 million, driven by royalties from new franchisee-owned stores opened since September 30, 2018, a higher average royalty rate by 46 basis points and higher same store sales of 8.8%;
•
Corporate-owned stores segment EBITDA increased $0.5 million or 3.6% to $15.1 million; and
•
Equipment segment EBITDA decreased by $0.3 million or 1.7% to $18.7 million.
Operating Results for the Fiscal Year Ended December 31, 2019
For the fiscal year ended December 31, 2019, total revenue increased $115.9 million or 20.2% to $688.8 million from $572.9 million in the prior year. By segment:  
•
Franchise segment revenue increased $53.4 million or 23.8% to $277.6 million from $224.1 million in the prior year;
•
Corporate-owned stores segment revenue increased $21.1 million or 15.2% to $159.7 million from $138.6 million in the prior year, $10.7 million of which is from new corporate-owned stores opened or acquired since January 1, 2018; and
•
Equipment segment revenue increased $41.4 million or 19.7% to $251.5 million from $210.2 million in the prior year, driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.
System-wide same store sales increased 8.8%. By segment, franchisee-owned same store sales increased 9.0% and corporate-owned same store sales increased 6.1%.
For the year ended December 31, 2019, net income attributable to Planet Fitness, Inc. was $117.7 million, or $1.41 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $88.0 million, or $1.00 per diluted share, in the prior year. Net income was $135.4 million in 2019 compared to $103.2 million in the prior year. Adjusted net income increased 22.7% to $146.7 million, or $1.59 per diluted share, from $119.5 million, or $1.22 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.8% for the year ended December 31, 2019 and 26.3% for the 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 26.4% to $282.2 million from $223.2 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 $39.7 million or 26.0% to $192.3 million driven by royalties from new franchisee-owned stores opened since January 1, 2018, a higher average royalty rate and higher same store sales of 9.0%;
•
Corporate-owned stores segment EBITDA increased $8.9 million or 15.7% to $65.6 million, driven primarily by additional stores opened and acquired since January 1, 2018, an increase in same store sales of 6.1% and higher annual fees; and
•
Equipment segment EBITDA increased by $12.0 million or 25.2% to $59.6 million driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.
Share Repurchase Program
On December 4, 2019, we entered into a $300 million accelerated share repurchase agreement (the “2019 ASR Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”). We acquired shares under the 2019 ASR Agreement as part of our 2019 $500 million share repurchase authorization (the “2019 Share Repurchase Authorization”). On December 5, 2019, we paid JPMC $300 million in cash and received approximately 3.3 million shares of our Class A common stock. At final settlement, JPMC may be required to deliver additional shares to us, or, under certain circumstances, we may be required to deliver shares of our Class A common stock or may elect to make a cash payment to JPMC, based generally on the average of the daily volume-weighted average prices of our Class A common stock during the term of the 2019 ASR Agreement. The 2019 ASR Agreement contains provisions customary for agreements of this type, including provisions for adjustments to the transaction terms, the circumstances generally under which the 2019 ASR Agreement may be accelerated, extended or terminated early by JPMC and various acknowledgments, representations and warranties made by the parties to one another. Final settlement of the 2019 ASR Agreement is expected to be completed during the second quarter of 2020, although the settlement may be accelerated at JPMC’s option. Following this accelerated share repurchase there will is approximately $200 million remaining on the 2019 Share Repurchase Authorization.
2020 Outlook
For the year ending December 31, 2020, the Company expects:
•
Total revenue increase of approximately 12% as compared to the year ended December 31, 2019;
•
System-wide same store sales of approximately 8%;
•
Adjusted net income to increase approximately 10% as compared to the year ended December 31, 2019; and
•
Adjusted net income per diluted share to increase approximately 16% as compared to the year ended December 31, 2019.
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.
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 year ending December 31, 2020. 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, 2020.
Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores. 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.
Investor Conference Call
The Company will hold a conference call at 4:30 pm (ET) on February 25, 2020 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 December 31, 2019, Planet Fitness had approximately 14.4 million members and 2,001 stores in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, 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 95% of Planet Fitness stores are owned and operated by independent business men and women.
Investor Contact:

Brendon Frey, ICR
[email protected]
203-682-8200
Media Contacts:
McCall Gosselin, Planet Fitness
[email protected]
603-957-4650

Julia Young, ICR
[email protected]
646-277-1280
Forward-Looking Statements
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 “2020 Outlook,” those attributed to the Company’s Chief Executive Officer in this press release, the Company's statements about its share repurchase program 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 competition in the fitness industry, the Company’s and franchisees’ ability to attract and retain new 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, general economic conditions and the other factors described in the Company’s annual report on Form 10-K for the year ended December 31, 2018 and, once available, the Company's annual report on Form 10-K for the year ended December 31, 2019, as well as 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.


Planet Fitness, Inc. and subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands, except per share amounts)

 
 
For the three months ended December 31,
 
For the year ended December 31,
 
 
2019
 
2018
 
2019
 
2018
Revenue:
 
 

 
 

 
 

 
 

Franchise
 
$
58,515

 
$
45,739

 
$
223,139

 
$
175,314

Commission income
 
1,615

 
1,620

 
4,288

 
6,632

National advertising fund revenue
 
13,169

 
9,197

 
50,155

 
42,194

Corporate-owned stores
 
41,216

 
36,234

 
159,697

 
138,599

Equipment
 
76,996

 
81,570

 
251,524

 
210,159

Total revenue
 
191,511

 
174,360

 
688,803

 
572,898

Operating costs and expenses:
 
 
 
 
 
 
 
 
Cost of revenue
 
59,378

 
62,532

 
194,449

 
162,646

Store operations
 
22,745

 
19,851

 
86,108

 
75,005

Selling, general and administrative
 
20,874

 
20,380

 
78,818

 
72,446

National advertising fund expense
 
13,167

 
9,622

 
50,153

 
42,619

Depreciation and amortization
 
12,030

 
9,313

 
44,346

 
35,260

Other loss (gain)
 
1,747

 
(80
)
 
1,846

 
878

Total operating costs and expenses
 
129,941

 
121,618

 
455,720

 
388,854

Income from operations
 
61,570

 
52,742

 
233,083

 
184,044

Other expense, net:
 
 
 
 
 
 
 
 
Interest income
 
1,468

 
2,201

 
7,053

 
4,681

Interest expense
 
(16,660
)
 
(15,021
)
 
(60,852
)
 
(50,746
)
Other expense
 
(1,283
)
 
(5,837
)
 
(6,107
)
 
(6,175
)
Total other expense, net
 
(16,475
)
 
(18,657
)
 
(59,906
)
 
(52,240
)
Income before income taxes
 
45,095

 
34,085

 
173,177

 
131,804

Provision for income taxes
 
10,840

 
5,307

 
37,764

 
28,642

Net income
 
34,255

 
28,778

 
135,413

 
103,162

Less net income attributable to non-controlling interests
 
4,590

 
3,983

 
17,718

 
15,141

Net income attributable to Planet Fitness, Inc.
 
$
29,665

 
$
24,795

 
$
117,695

 
$
88,021

Net income per share of Class A common stock:
 
 
 
 
 
 
 
 
Basic
 
$
0.37

 
$
0.29

 
$
1.42

 
$
1.01

Diluted
 
$
0.36

 
$
0.29

 
$
1.41

 
$
1.00

Weighted-average shares of Class A common stock outstanding:
 
 
 
 
 
 
 
 
Basic
 
80,831

 
85,774

 
82,977

 
87,235

Diluted
 
81,453

 
86,302

 
83,619

 
87,675




Planet Fitness, Inc. and subsidiaries
Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands, except per share amounts)

 
 
December 31,
 
December 31,
 
 
2019
 
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
436,256

 
$
289,431

Restricted cash
 
42,539

 
30,708

Accounts receivable, net of allowance for bad debts of $111 and $84 at
   December 31, 2019 and 2018, respectively
 
42,268

 
38,960

Inventory
 
877

 
5,122

Prepaid expenses
 
8,025

 
4,947

Other receivables
 
9,226

 
12,548

Income tax receivable
 
947

 
6,824

Total current assets
 
540,138

 
388,540

Property and equipment, net of accumulated depreciation of $73,621, as of December 31,
   2019 and $53,086 as of December 31, 2018
 
145,481

 
114,367

Right-of-use assets, net
 
155,633

 
—

Intangible assets, net
 
233,921

 
234,330

Goodwill
 
227,821

 
199,513

Deferred income taxes
 
412,293

 
414,841

Other assets, net
 
1,903

 
1,825

Total assets
 
$
1,717,190

 
$
1,353,416

Liabilities and stockholders' deficit
 
 
 
 
Current liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
17,500

 
$
12,000

Accounts payable
 
21,267

 
30,428

Accrued expenses
 
31,623

 
32,384

Equipment deposits
 
3,008

 
7,908

Deferred revenue, current
 
27,596

 
23,488

Payable pursuant to tax benefit arrangements, current
 
26,468

 
24,765

Other current liabilities
 
18,016

 
430

Total current liabilities
 
145,478

 
131,403

Long-term debt, net of current maturities
 
1,687,505

 
1,160,127

Deferred rent, net of current portion
 
—

 
10,083

Lease liabilities, net of current portion
 
152,920

 
—

Deferred revenue, net of current portion
 
34,458

 
26,374

Deferred tax liabilities
 
1,116

 
2,303

Payable pursuant to tax benefit arrangements, net of current portion
 
400,748

 
404,468

Other liabilities
 
2,719

 
1,447

Total noncurrent liabilities
 
2,279,466

 
1,604,802

Stockholders' equity (deficit):
 
 
 
 
Class A common stock, $.0001 par value - 300,000 shares authorized, 78,525 and 83,584
   shares issued and outstanding as of December 31, 2019 and 2018, respectively
 
8

 
9

Class B common stock, $.0001 par value - 100,000 shares authorized, 8,562 and 9,448
   shares issued and outstanding as of December 31, 2019 and 2018, respectively
 
1

 
1

Accumulated other comprehensive income
 
303

 
94

Additional paid in capital
 
29,820

 
19,732

Accumulated deficit
 
(736,587
)
 
(394,410
)
Total stockholders' deficit attributable to Planet Fitness Inc.
 
(706,455
)
 
(374,574
)
Non-controlling interests
 
(1,299
)
 
(8,215
)
Total stockholders' deficit
 
(707,754
)
 
(382,789
)
Total liabilities and stockholders' deficit
 
$
1,717,190

 
$
1,353,416




Planet Fitness, Inc. and subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands, except per share amounts)


 
For the Year Ended December 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
135,413

 
$
103,162

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
44,346

 
35,260

Amortization of deferred financing costs
5,454

 
3,400

Amortization of favorable leases and asset retirement obligations
237

 
375

Amortization of interest rate caps
—

 
1,170

Deferred tax expense
21,625

 
23,933

Loss on re-measurement of tax benefit arrangement
5,966

 
4,765

Provision for bad debts
87

 
19

(Gain) Loss on disposal of property and equipment
(159
)
 
462

Loss on extinguishment of debt
—

 
4,570

Loss on reacquired franchise rights
1,810

 
360

Equity-based compensation
4,826

 
5,479

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(895
)
 
(1,923
)
Due from related parties
(472
)
 
3,598

Inventory
4,244

 
(2,430
)
Other assets and other current assets
(3,198
)
 
5,778

Accounts payable and accrued expenses
(6,268
)
 
14,506

Other liabilities and other current liabilities
1,687

 
(2,835
)
Income taxes
6,231

 
194

Payments pursuant to tax benefit arrangements
(24,998
)
 
(30,493
)
Equipment deposits
(4,900
)
 
1,410

Deferred revenue
11,452

 
9,640

Deferred rent
1,823

 
3,999

Net cash provided by operating activities
204,311

 
184,399

Cash flows from investing activities:
 
 
 
Additions to property and equipment
(57,890
)
 
(40,860
)
Acquisitions of franchises
(52,613
)
 
(45,752
)
Proceeds from sale of property and equipment
109

 
196

Purchase of intellectual property
(300
)
 
—

Net cash used in investing activities
(110,694
)
 
(86,416
)
Cash flows from financing activities:
 
 
 
Proceeds from issuance of long-term debt
550,000

 
1,200,000

Proceeds from issuance of Class A common stock
2,863

 
1,209

Principal payments on capital lease obligations
(93
)
 
(47
)
Repayment of long-term debt
(12,000
)
 
(712,469
)
Payment of deferred financing and other debt-related costs
(10,577
)
 
(27,133
)
Repurchase and retirement of Class A common stock
(458,166
)
 
(342,383
)
Dividend equivalent paid to members of Pla-Fit Holdings
(243
)
 
(957
)
Distributions to members of Pla-Fit Holdings
(7,436
)
 
(8,300
)
Net cash used in financing activities
64,348

 
109,920

Effects of exchange rate changes on cash and cash equivalents
691

 
(844
)
Net increase in cash, cash equivalents and restricted cash
158,656

 
207,059

Cash, cash equivalents and restricted cash, beginning of period
320,139

 
113,080

Cash, cash equivalents and restricted cash, end of period
$
478,795

 
$
320,139

Supplemental cash flow information:
 
 
 
Net cash paid for income taxes
$
10,001

 
$
5,016

Cash paid for interest
$
53,713

 
$
38,624

Non-cash investing activities:
 
 
 
Non-cash additions to property and equipment
$
2,827

 
$
5,451




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 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.



Planet Fitness, Inc. and subsidiaries
Non-GAAP Financial Measures
(Unaudited)
(Amounts in thousands, except per share amounts)


A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, is set forth below.
 
 
Three months ended December 31,
 
Year ended December 31,
 
 
2019
 
2018
 
2019
 
2018
(in thousands)
 
 

 
 

 
 

 
 

Net income
 
$
34,255

 
$
28,778

 
$
135,413

 
$
103,162

Interest income
 
(1,468
)
 
(2,201
)
 
(7,053
)
 
(4,681
)
Interest expense(1)
 
16,660

 
15,021

 
60,852

 
50,746

Provision for income taxes
 
10,840

 
5,307

 
37,764

 
28,642

Depreciation and amortization
 
12,030

 
9,313

 
44,346

 
35,260

EBITDA
 
$
72,317

 
$
56,218

 
$
271,322

 
$
213,129

Purchase accounting adjustments-revenue(2)
 
244

 
78

 
768

 
1,019

Purchase accounting adjustments-rent(3)
 
122

 
184

 
470

 
732

Loss on reacquired franchise rights(4)
 
1,810

 
—

 
1,810

 
360

Transaction fees(5)
 
—

 
17

 
—

 
307

Severance costs(6)
 
—

 
—

 
—

 
352

Pre-opening costs(7)
 
772

 
608

 
1,793

 
1,461

Indemnification receivable(8)
 
—

 
342

 
—

 
342

Tax benefit arrangement remeasurement(9)
 
1,328

 
4,765

 
5,966

 
4,765

Other(14)
 
(7
)
 
48

 
48

 
733

Adjusted EBITDA
 
$
76,586

 
$
62,260

 
$
282,177

 
$
223,200


(1)
Includes $4.6 million of loss on extinguishment of debt in the year ended December 31, 2018.
(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 up front but recognizes for 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 $0.1 million, $0.1 million, $0.2 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, 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 $0.1 million, $0.1 million, $0.3 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, are due to the amortization of favorable and unfavorable lease intangible assets. 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 12 franchisee-owned stores in December 2019. The loss recorded under GAAP represents the difference between the fair value of the reacquired franchise rights and the contractual terms of the reacquired franchise rights and is included in other (gain) loss on our consolidated statements of operations.
(5)
Represents transaction fees and expenses that could not be capitalized related to the securitized debt transaction in 2018.
(6)
Represents severance expense recorded in connection with an equity award modification.


Planet Fitness, Inc. and subsidiaries
Non-GAAP Financial Measures
(Unaudited)
(Amounts in thousands, except per share amounts)


(7)
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.
(8)
Represents a receivable recorded in connection with a contractual obligation of the Company’s co-founders to indemnify the Company with respect to pre-IPO tax liabilities pursuant to the 2012 Acquisition.
(9)
Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(10)
Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the year ended December 31, 2018 this amount included expense of $0.6 million related to the write off of certain assets that were being tested for potential use across the system.
A reconciliation of Segment EBITDA to Total Segment EBITDA is set forth below.
 
 
Three months ended December 31,
 
Year ended December 31,
(in thousands)
 
2019
 
2018
 
2019
 
2018
Segment EBITDA
 
 
 
 
 
 
 
 
Franchise
 
$
50,734

 
$
38,778

 
$
192,281

 
$
152,571

Corporate-owned stores
 
15,108

 
14,589

 
65,613

 
56,704

Equipment
 
18,698

 
19,028

 
59,618

 
47,607

Corporate and other
 
(12,222
)
 
(16,177
)
 
(46,190
)
 
(43,753
)
Total Segment EBITDA(1)
 
$
72,318

 
$
56,218

 
$
271,322

 
$
213,129

(1) Total Segment EBITDA is equal to EBITDA.


Planet Fitness, Inc. and subsidiaries
Non-GAAP Financial Measures
(Unaudited)
(Amounts in thousands, except per share amounts)


Adjusted Net Income and Adjusted Net Income per Diluted Share
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 December 31,
 
Year ended December 31,
(in thousands, except per share amounts)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
34,255

 
$
28,778

 
$
135,413

 
$
103,162

Provision for income taxes, as reported
 
10,840

 
5,307

 
37,764

 
28,642

Purchase accounting adjustments-revenue(1)
 
244

 
78

 
768

 
1,019

Purchase accounting adjustments-rent(2)
 
122

 
184

 
470

 
732

Loss on reacquired franchise rights(3)
 
1,810

 
—

 
1,810

 
360

Transaction fees(4)
 
—

 
17

 
—

 
307

Loss on extinguishment of debt(5)
 
—

 
—

 
—

 
4,570

Severance costs(6)
 
—

 
—

 
—

 
352

Pre-opening costs(7)
 
772

 
608

 
1,793

 
1,461

Indemnification receivable(8)
 
—

 
342

 
—

 
342

Tax benefit arrangement remeasurement(9)
 
1,328

 
4,765

 
5,966

 
4,765

Other(10)
 
(7
)
 
48

 
48

 
733

Purchase accounting amortization(11)
 
4,164

 
3,940

 
16,318

 
15,716

Adjusted income before income taxes
 
$
53,528

 
$
44,067

 
$
200,350

 
$
162,161

Adjusted income taxes(12)
 
14,346

 
11,590

 
53,694

 
42,648

Adjusted net income
 
$
39,182

 
$
32,477

 
$
146,656

 
$
119,513

 
 
 
 
 
 
 
 
 
Adjusted net income per share, diluted
 
$
0.44

 
$
0.34

 
$
1.59

 
$
1.22

 
 
 
 
 
 
 
 
 
Adjusted weighted-average shares outstanding(13)
 
90,015

 
95,758

 
92,358

 
97,950


(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 up front but recognizes for 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 $0.1 million, $0.1 million, $0.2 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, reflect the difference between


Planet Fitness, Inc. and subsidiaries
Non-GAAP Financial Measures
(Unaudited)
(Amounts in thousands, except per share amounts)


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 $0.1 million, $0.1 million, $0.3 million and $0.4 million in the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, are due to the amortization of favorable and unfavorable lease intangible assets. 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 12 franchisee-owned stores in December 2019. The loss recorded under GAAP represents the difference between the fair value of the reacquired franchise rights and the contractual terms of the reacquired franchise rights and is included in other (gain) loss on our consolidated statements of operations.
(4)
Represents transaction fees and expenses that could not be capitalized related to the securitized debt transaction in 2018.
(5)
Represents a loss on extinguishment of debt related to the write-off of deferred financing costs associated with the Term Loan B which the Company repaid in August 2018.
(6)
Represents severance expense recorded in connection with an equity award modification.
(7)
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.
(8)
Represents a receivable recorded in connection with a contractual obligation of the Company’s co-founders to indemnify the Company with respect to pre-IPO tax liabilities pursuant to the 2012 Acquisition.
(9)
Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(10)
Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the year ended December 31, 2018 this amount included expense of $0.6 million related to the write-off of certain assets that were being tested for potential use across the system.
(11)
Includes $3.1 million, $3.1 million, $12.4 million and $12.4 million of amortization of intangible assets, other than favorable leases, for the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively recorded in connection with the 2012 Acquisition, and $1.1 million, $0.8 million, $4.0 million and $3.3 million of amortization of intangible assets for the three months ended December 31, 2019 and 2018 and the years ended December 31, 2019 and 2018, respectively, created in connection with historical acquisitions of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with GAAP, in each period.
(12)
Represents corporate income taxes at an assumed effective tax rate of 26.8% for the three months and year ended December 31, 2019 and 26.3% for the three months and year ended December 31, 2018, applied to adjusted income before income taxes.
(13)
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.


Planet Fitness, Inc. and subsidiaries
Non-GAAP Financial Measures
(Unaudited)
(Amounts in thousands, except per share amounts)



A reconciliation of net income per share, diluted, to Adjusted net income per share, diluted is set forth below for the three months and years ended December 31, 2019 and 2018:
 
 
For the three months ended
December 31, 2019
 
For the three months ended
December 31, 2018
(in thousands, except per share amounts)
 
Net income
 
Weighted Average Shares
 
Net income per share, diluted
 
Net income
 
Weighted Average Shares
 
Net income per share, diluted
Net income attributable to Planet Fitness, Inc.(1)
 
$
29,665

 
81,453

 
$
0.36

 
$
24,795

 
86,302

 
$
0.29

Assumed exchange of shares(2)
 
4,590

 
8,562

 
 
 
3,983

 
9,456

 
 
Net Income
 
34,255

 
 
 
 
 
28,778

 
 
 
 
Adjustments to arrive at adjusted income
   before income taxes(3)
 
19,273

 
 
 
 
 
15,289

 
 
 
 
Adjusted income before income taxes
 
53,528

 
 
 
 
 
44,067

 
 
 
 
Adjusted income taxes(4)
 
14,346

 
 
 
 
 
11,590

 
 
 
 
Adjusted Net Income
 
$
39,182

 
90,015

 
$
0.44

 
$
32,477

 
95,758

 
$
0.34

(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 share of Class B common stock 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 effective tax rate of 26.8% and 26.3% for the three months ended December 31, 2019 and 2018, respectively, applied to adjusted income before income taxes.
 
 
Year Ended December 31, 2019
 
Year Ended December 31, 2018
(in thousands, except per share amounts)
 
Net income
 
Weighted Average Shares
 
Net income per share, diluted
 
Net income
 
Weighted Average Shares
 
Net income per share, diluted
Net income attributable to Planet Fitness, Inc.(1)
 
$
117,695

 
83,619

 
$
1.41

 
$
88,021

 
87,675

 
$
1.00

Assumed exchange of shares(2)
 
17,718

 
8,739

 
 
 
15,141

 
10,275

 
 
Net Income
 
135,413

 
 
 
 
 
103,162

 
 
 
 
Adjustments to arrive at adjusted income
   before income taxes(3)
 
64,937

 
 
 
 
 
58,999

 
 
 
 
Adjusted income before income taxes
 
200,350

 
 
 
 
 
162,161

 
 
 
 
Adjusted income taxes(4)
 
53,694

 
 
 
 
 
42,648

 
 
 
 
Adjusted Net Income
 
$
146,656

 
92,358

 
$
1.59

 
$
119,513

 
97,950

 
$
1.22

(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 shares of Class B common stock 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 effective tax rate of 26.8% and 26.3% for the years ended December 31, 2019 and 2018, respectively, applied to adjusted income before income taxes.