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New Store Openings and Strong Comps Power Planet Fitness Inc's Earnings Growth

By Joe Tenebruso - Mar 4, 2016 at 5:35PM

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The gym operator's inexpensive membership plans are proving popular among fitness enthusiasts.

Source: Planet Fitness

Planet Fitness (PLNT 6.12%) reported fourth quarter results on March 3. The fitness chain is enjoying strong increases in same-store sales even as it rapidly opens new gyms -- a powerful combination that's fueling healthy growth in revenue and profits.

The raw numbers

 

Q4 2015

Q4 2014

YoY Growth

Revenue

$105.845 million

$96.019 million

10.2%

Net Income

$17.240 million

$13.783 million

25.1%

Adjusted EPS

$0.17

$0.14

21.4%

Source: Planet Fitness Q4 2015 earnings press release

What happened with Planet Fitness this quarter?
Planet Fitness opened 84 new franchise stores in the fourth quarter, bringing its total store count to 1,124 at the end of 2015. The company also experienced an impressive 6.2% increase in system-wide same-store sales. Together, that helped drive a 10.2% year-over-year rise in total revenue to $105.8 million.

Earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted to exclude acquisition and IPO-related costs and other special items, jumped 23.9% year-over-year to $37.5 million.

Franchise-segment EBITDA soared 39.5% to $19.3 million, driven by royalties from new stores, as well as higher same-store sales from existing locations. EBITDA for corporate-owned stores surged 29.6% to $9.7 million and was also driven primarily by new-store openings. And equipment segment EBITDA increased 15.7% to $13 million, due to higher sales of replacement equipment from older franchise stores.

All told, pro forma adjusted net income -- a non-GAAP metric that makes results more comparable by assuming it was a public company in the prior-year period -- rose 24.7% to $17 million. On a per share basis, pro forma adjusted net income grew 21.4% to $0.17.

What did management have to say?
"This past year, we increased system-wide same-store sales 7.7% while adding 209 new stores, including our first international franchised locations," said CEO Christopher Rondeau in the press release. "These achievements are the direct result of our affordable, non-intimidating fitness offering and powerful national advertising strategy -- both significant competitive advantages, combined with our group of well capitalized franchisees, which we are leveraging to rapidly expand our consumer reach."

Looking forward
Planet Fitness expects to open between 210 and 220 new franchised stores in 2016. The company also anticipates system-wide same-store sales growth in the "mid-single digit" range.

In addition, management projects that total revenue will be in the range of $355 million to $365 million, which would represent year-over-year growth of approximately 9% at the midpoint. And pro forma adjusted net income is forecasted to be between $59 million and $62 million, or $0.60 to $0.63 per share, representing growth of about 14% from 2015.

"The current year is off to an exciting start as our lead sponsorship of the Times Square New Year's Eve Celebration has helped fuel great momentum early on," added Rondeau. "We are very confident that our differentiated, asset light business model has our company well-positioned to deliver profitable growth and increased shareholder returns over the long-term."

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