Planet Fitness, Inc. Announces Fourth Quarter and Year-End 2021 Results
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Planet Fitness, Inc. Announces Fourth Quarter and Year-End 2021 Results

  • Fourth quarter 2021 system-wide same store sales increased 12.3%
  • Ended 2021 with 15.2 million members, a 1.7 million member increase since the end of 2020
  • Opened 132 new stores in 2021
  • Acquired Sunshine Fitness in Q1 2022; refinanced and upsized securitized debt

HAMPTON, N.H., Feb. 24, 2022 // PRNewswire // - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its fourth quarter ended December 31, 2021.

"We exceeded our expectations for both members and new store growth in 2021, which we believe demonstrates that our message of fitness being essential to both physical and mental health is resonating with consumers," said Chris Rondeau, Chief Executive Officer. "To date in the first quarter of 2022, we ended January with 15.6 million members surpassing our pre-pandemic first quarter 2020 membership peak. We also recently acquired Sunshine Fitness, a high-performing operator of more than 100 Planet Fitness locations, and we completed a successful debt refinancing."

Fourth Quarter Fiscal 2021 Highlights

  • Total revenue increased from the prior year period by 37.3% to $183.6 million.
  • System-wide same store sales increased 12.3%.
  • Net income attributable to Planet Fitness, Inc. was $5.7 million, or $0.07 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $8.7 million, or $0.11 per diluted share, in the prior year period.
  • Net income was $6.3 million, compared to $9.7 million in the prior year period.
  • Adjusted net income(1)  increased 49.6% to $22.5 million, or $0.26 per diluted share, compared to $15.1 million, or $0.17 per diluted share, in the prior year period.
  • Adjusted EBITDA(1)  increased 23.3% to $63.0 million from $51.1 million in the prior year period.
  • 62 new Planet Fitness stores were opened system-wide during the period, bringing system-wide total stores to 2,254 as of December 31, 2021.

Fiscal Year 2021 Highlights

  • Total revenue increased from the prior year by 44.4% to $587.0 million.
  • Net income (loss) attributable to Planet Fitness, Inc. was income of $42.8 million, or $0.51 per diluted share, compared to a loss of $15.0 million, or $(0.19) per diluted share, in the prior year.
  • Net income (loss) was income of $46.1 million, compared to a loss of $15.2 million in the prior year.
  • Adjusted net income(1)  increased to $71.5 million, or $0.82 per diluted share, compared to $3.1 million, or $0.04 per diluted share, in the prior year.
  • Adjusted EBITDA(1) increased 86.5% to $224.4 million from $120.4 million in the prior year.
  • 132 new Planet Fitness stores were opened system-wide during the year, bringing system-wide total stores to 2,254 as of December 31, 2021.

(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, 2021

For the fourth quarter of 2021, total revenue increased $49.9 million or 37.3% to $183.6 million from $133.8 million in the prior year period, including system-wide same store sales growth of 12.3%. By segment:

  • Franchise segment revenue increased $11.5 million or 17.3% to $78.4 million from $66.9 million in the prior year period. Of the increase, $6.2 million is from new stores and stores that were open in the current year period but temporarily closed in the prior year period due to COVID-19, $5.5 million is attributable to the franchise same store sales increase of 12.4%, $2.3 million is from higher equipment placement revenue, and $2.2 million is from higher franchise and other fees.  These amounts were partially offset by lower National Advertising Fund ("NAF") revenue of $2.9 million and lower annual fee revenue of $1.8 million as a result of catch up billings in the fourth quarter of 2020 as stores reopened from temporary COVID-19 closures;
  • Corporate-owned stores segment revenue increased $5.9 million or 15.3% to $44.9 million from $38.9 million in the prior year period. The $5.9 million increase was primarily a result of new stores and stores that were open in the current year period but temporarily closed in the prior year period due to COVID-19 and a same store sales increase of 10.1%, partially offset by lower annual fee revenue as a result of catch up billings in the fourth quarter of 2020 as stores reopened from temporary COVID-19 closures; and
  • Equipment segment revenue increased $32.4 million or 115.7% to $60.4 million from $28.0 million in the prior year period, due to higher equipment sales to new and existing franchisee-owned stores. Also contributing to the increase was the 15% discount provided to franchisees on equipment  sales  in  the  prior  year  as  a  result  of  the  COVID-19  pandemic.

For the fourth quarter of 2021, net income attributable to Planet Fitness, Inc. was $5.7 million, or $0.07 per diluted share, compared to $8.7 million, or $0.11 per diluted share, in the prior year period. Net income was $6.3 million in the fourth quarter of 2021 compared to $9.7 million in the prior year period. Both of the above amounts in 2021 include $17.5 million of credit loss expense related to the establishment of an allowance for credit losses on a held-to-maturity investment based upon facts and circumstances that existed as of December 31, 2021 related to the investee's performance and overall financial condition. Adjusted net income increased 49.6% to $22.5 million, or $0.26 per diluted share, from $15.1 million, or $0.17 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 27.0% for the fourth quarter of 2021 and 26.6% 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 23.3% to $63.0 million from $51.1 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 $5.7 million or 13.2% to $49.3 million. The increase is primarily a result of higher revenue of $11.5 million as described above, partially offset by higher franchise-related payroll and operational expenses and higher NAF expenses in the current year period;
  • Corporate-owned stores segment EBITDA increased $1.7 million or 14.1% to $14.0 million. The increase is primarily due to higher corporate-owned store revenue as described above, partially offset by higher operating expenses as a result of COVID-19 related closures in the prior year period and the opening of nine new corporate-owned stores since October 1, 2020; and
  • Equipment segment EBITDA increased by $11.2 million or 354.9% to $14.3 million, due to higher equipment sales to new and existing franchisee-owned stores. Also contributing to the increase was the 15% discount provided to franchisees on equipment  sales  in  the  prior  year  as  a  result  of  the  COVID-19  pandemic.

Operating Results for the Fiscal Year Ended December 31, 2021

For the fiscal year ended December 31, 2021, total revenue increased $180.4 million or 44.4% to $587.0 million from $406.6 million in the prior year. By segment:

  • Franchise segment revenue increased $84.6 million or 41.0% to $290.7 million from $206.2 million in the prior year primarily from higher royalty revenue and NAF revenue as a result of temporary store closures related to COVID-19 beginning in March 2020, as well as higher equipment placement revenue;
  • Corporate-owned stores segment revenue increased $50.1 million or 42.7% to $167.2 million from $117.1 million in the prior year, primarily as a result of temporary store closures related to COVID-19 beginning in March 2020, as well as the opening of 12 new corporate-owned stores since January 1, 2020; and
  • Equipment segment revenue increased $45.8 million or 54.9% to $129.1 million from $83.3 million in the prior year, driven by higher equipment sales to new and existing franchisee-owned stores. Also contributing to the increase was the 15% discount provided to franchisees on equipment  sales  in  the  prior  year  as  a  result  of  the  COVID-19 pandemic. 

For the year ended December 31, 2021, net income (loss) attributable to Planet Fitness, Inc. was income of $42.8 million, or $0.51 per diluted share, compared to a loss of $15.0 million, or $(0.19) per diluted share, in the prior year. Net income (loss) was income of $46.1 million in 2021 compared to a loss of $15.2 million in the prior year. Both of the above amounts in 2021 include $17.5 million of credit loss expense related to the establishment of an allowance for credit losses on a held-to-maturity investment based upon facts and circumstances that existed as of December 31, 2021 related to the investee's performance and overall financial condition. Adjusted net income increased to $71.5 million, or $0.82 per diluted share, from $3.1 million, or $0.04 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized income tax rate of 27.0% for the year ended December 31, 2021 and 26.6% 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 86.5% to $224.4 million from $120.4 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 $79.3 million or 69.0% to $194.3 million primarily due to temporary store closures related to COVID-19 beginning in March 2020, higher NAF revenue and lower NAF expense, partially offset by higher franchise-related payroll and operational expenses;
  • Corporate-owned stores segment EBITDA increased $25.5 million or 107.8% to $49.2 million, primarily due to temporary store closures related to COVID-19 beginning in March 2020, as well as the opening of 12 new corporate-owned stores since January 1, 2020; and
  • Equipment segment EBITDA increased by $16.6 million or 126.6% to $29.7 million driven by higher equipment sales to new and existing franchisee-owned stores and the 15% discount offered to franchisees on equipment sales in the prior year as a result of the COVID-19 pandemic.

2022 Outlook

For the year ending December 31, 2022, the Company expects the following, which includes the impact from the Sunshine Fitness 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 91.1 million, inclusive of the issuance of equity as part of the Sunshine Fitness acquisition

The Company also expects 2022 net interest expense to be approximately $89 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 (loss) and Adjusted net income (loss) 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 (loss) 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 (loss) and Adjusted net income (loss) per share, diluted. The Company's presentation of Adjusted EBITDA, Adjusted net income (loss) and Adjusted net income (loss) 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 (loss), and Adjusted net income (loss) 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 (loss) and net income (loss) 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 (loss) or net income (loss) per share, diluted, determined in accordance with GAAP or a reconciliation of guidance for Adjusted net income (loss) and Adjusted net income (loss) 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 (loss) and net income (loss) per share, diluted, for the year ending December 31, 2022. These items are uncertain, depend on many factors and could have a material impact on our net income (loss) and net income (loss) per share, diluted, for the year ending December 31, 2022, and therefore cannot be made available without unreasonable effort.

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. Because less than 50% of our stores in the same store sales base had membership billings in all of the months included in the year ended December 31, 2020, we are not providing same store sales comparisons for that period. For the three months ending December 31, 2021, we have provided same store sales comparisons for the stores that had monthly membership billings in all three months of both years.

Investor Conference Call

The Company will hold a conference call at 8:00AM (ET) on February 24, 2022 to discuss the news announced in this press release. The webcast will be archived on the website for one year.

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,

   

2021

 

2020

 

2021

 

2020

Revenue:

               

Franchise

 

$        64,151

 

$        49,863

 

$      237,570

 

$      162,159

Commission income

 

398

 

213

 

779

 

696

National advertising fund revenue

 

13,868

 

16,792

 

52,361

 

43,301

Corporate-owned stores

 

44,864

 

38,918

 

167,219

 

117,142

Equipment

 

60,359

 

27,985

 

129,094

 

83,320

Total revenue

 

183,640

 

133,771

 

587,023

 

406,618

Operating costs and expenses:

               

Cost of revenue

 

47,414

 

25,330

 

100,993

 

70,955

Store operations

 

28,628

 

25,588

 

110,716

 

87,797

Selling, general and administrative

 

27,292

 

17,442

 

94,540

 

68,585

National advertising fund expense

 

17,574

 

15,015

 

59,442

 

61,255

Depreciation and amortization

 

16,042

 

14,396

 

62,800

 

53,832

Other loss

 

17,500

 

3,828

 

15,137

 

4,434

Total operating costs and expenses

 

154,450

 

101,599

 

443,628

 

346,858

Income from operations

 

29,190

 

32,172

 

143,395

 

59,760

Other income (expense), net:

               

Interest income

 

233

 

302

 

878

 

2,937

Interest expense

 

(20,492)

 

(20,723)

 

(81,211)

 

(82,117)

Other income (expense), net

 

(11,797)

 

5,687

 

(11,102)

 

4,903

Total other expense, net

 

(32,056)

 

(14,734)

 

(91,435)

 

(74,277)

Income (loss) before income taxes

 

(2,866)

 

17,438

 

51,960

 

(14,517)

Equity earnings (losses) of unconsolidated entities, net of tax

 

(179)

 

 

(179)

 

(Benefit) provision for income taxes

 

(9,329)

 

7,756

 

5,659

 

687

Net income (loss)

 

6,284

 

9,682

 

46,122

 

(15,204)

Less net income (loss) attributable to non-controlling interests

 

544

 

992

 

3,348

 

(213)

Net income (loss) attributable to Planet Fitness, Inc.

 

$          5,740

 

$          8,690

 

$        42,774

 

$       (14,991)

Net income (loss)  per share of Class A common stock:

               

Basic

 

$             0.07

 

$             0.11

 

$             0.51

 

$           (0.19)

Diluted

 

$             0.07

 

$             0.11

 

$             0.51

 

$           (0.19)

Weighted-average shares of Class A common stock outstanding:

               

Basic

 

83,596

 

81,912

 

83,296

 

80,303

Diluted

 

84,152

 

82,497

 

83,894

 

80,303

 

Planet Fitness, Inc. and subsidiaries

Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except per share amounts)

 
   

December 31,

 

December 31,

   

2021

 

2020

Assets

       

Current assets:

       

Cash and cash equivalents

 

$            545,909

 

$            439,478

Restricted cash

 

58,032

 

76,322

Accounts receivable, net of allowance for bad debts of $0 and $7 at

   December 31, 2021 and 2020, respectively

 

27,257

 

16,447

Inventory

 

1,155

 

473

Prepaid expenses

 

12,869

 

11,881

Other receivables

 

13,519

 

16,754

Income tax receivable

 

3,673

 

5,461

Total current assets

 

662,414

 

566,816

Property and equipment, net of accumulated depreciation of $152,296,

   as of December 31, 2021  and $107,720 as of December 31, 2020

 

173,687

 

160,677

Investments, net of allowance for expected credit losses of $17,462 and $0

   as of December 31, 2021 and 2020, respectively

 

18,760

 

Right-of-use assets, net

 

190,330

 

164,252

Intangible assets, net

 

200,937

 

217,075

Goodwill

 

228,569

 

227,821

Deferred income taxes

 

539,264

 

511,200

Other assets, net

 

2,022

 

1,896

Total assets

 

$         2,015,983

 

$         1,849,737

Liabilities and stockholders' deficit

       

Current liabilities:

       

Current maturities of long-term debt

 

$              17,500

 

$              17,500

Accounts payable

 

27,892

 

19,388

Accrued expenses

 

51,714

 

22,042

Equipment deposits

 

6,036

 

795

Deferred revenue, current

 

28,351

 

26,691

Payable pursuant to tax benefit arrangements, current

 

20,302

 

Other current liabilities

 

24,815

 

25,479

Total current liabilities

 

176,610

 

111,895

Long-term debt, net of current maturities

 

1,665,273

 

1,676,426

Borrowings under Variable Funding Notes

 

75,000

 

75,000

Lease liabilities, net of current portion

 

197,682

 

167,910

Deferred revenue, net of current portion

 

33,428

 

32,587

Deferred tax liabilities

 

 

881

Payable pursuant to tax benefit arrangements, net of current portion

 

507,805

 

488,200

Other liabilities

 

3,030

 

2,511

Total noncurrent liabilities

 

2,482,218

 

2,443,515

Stockholders' equity (deficit):

       

Class A common stock, $0.0001 par value - 300,000 shares authorized, 83,804 and 82,821 shares

         issued and outstanding as of December 31, 2021 and 2020, respectively

 

8

 

8

Class B common stock, $0.0001 par value - 100,000 shares authorized, 3,056 and 3,722 shares

         issued and outstanding as of December 31, 2021 and 2020, respectively

 

1

 

1

Accumulated other comprehensive income

 

12

 

27

Additional paid in capital

 

63,428

 

45,673

Accumulated deficit

 

(708,804)

 

(751,578)

Total stockholders' deficit attributable to Planet Fitness Inc.

 

(645,355)

 

(705,869)

Non-controlling interests

 

2,510

 

196

Total stockholders' deficit

 

(642,845)

 

(705,673)

Total liabilities and stockholders' deficit

 

$         2,015,983

 

$         1,849,737

 

Planet Fitness, Inc. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands, except per share amounts)

 
 

For the Year Ended December 31,

 

2021

 

2020

Cash flows from operating activities:

     

Net income (loss)

$               46,122

 

$             (15,204)

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

62,800

 

53,832

Amortization of deferred financing costs

6,346

 

6,411

Amortization of favorable leases and asset retirement obligations

71

 

57

Equity (earnings) losses of unconsolidated entities, net of tax

179

 

Dividends accrued on investment

(1,401)

 

Deferred tax expense

1,528

 

7,213

Loss (gain) on re-measurement of tax benefit arrangement

11,737

 

(5,949)

Provision for bad debts

10

 

(74)

Credit loss expense on held-to-maturity investment

17,462

 

Gain on disposal of property and equipment

(46)

 

(107)

Other

(22)

 

(494)

Equity-based compensation

8,805

 

4,777

Changes in operating assets and liabilities:

     

Accounts receivable

(10,804)

 

23,611

Inventory

(681)

 

404

Other assets and other current assets

8,259

 

(2,676)

Accounts payable and accrued expenses

30,928

 

(10,938)

Other liabilities and other current liabilities

(3,063)

 

4,384

Income taxes

2,202

 

(4,461)

Payments pursuant to tax benefit arrangements

(445)

 

(26,621)

Equipment deposits

5,235

 

(2,212)

Deferred revenue

2,349

 

(2,842)

Deferred rent

1,718

 

2,027

Net cash provided by operating activities

189,289

 

31,138

Cash flows from investing activities:

     

Additions to property and equipment

(54,074)

 

(52,560)

Acquisitions of franchises

(1,888)

 

Proceeds from sale of property and equipment

46

 

282

Investments

(35,000)

 

Net cash used in investing activities

(90,916)

 

(52,278)

Cash flows from financing activities:

     

Proceeds from issuance of long-term debt

 

75,000

Proceeds from issuance of Class A common stock

8,186

 

2,571

Principal payments on capital lease obligations

(182)

 

(165)

Repayment of long-term debt

(17,500)

 

(17,500)

Dividend equivalent paid to members of Pla-Fit Holdings

 

(234)

Distributions to members of Pla-Fit Holdings

(750)

 

(1,822)

Net cash (used in) provided by financing activities

(10,246)

 

57,850

Effects of exchange rate changes on cash and cash equivalents

14

 

295

Net increase in cash, cash equivalents and restricted cash

88,141

 

37,005

Cash, cash equivalents and restricted cash, beginning of period

515,800

 

478,795

Cash, cash equivalents and restricted cash, end of period

$             603,941

 

$             515,800

Supplemental cash flow information:

     

Net cash paid (refund received) for income taxes

$                1,848

 

$               (2,157)

Cash paid for interest

$               74,869

 

$               75,629

Non-cash investing activities:

     

Non-cash additions to property and equipment

$                5,659

 

$                1,172

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 (loss) and Adjusted net income (loss) 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 (loss) 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 (loss) and Adjusted net income (loss) per share, diluted. The Company's presentation of Adjusted EBITDA, Adjusted net income (loss), and Adjusted net income (loss) 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 (loss) 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 (loss) 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.

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,

   

2021

 

2020

 

2021

 

2020

(in thousands)

               

Net income (loss)

 

$             6,284

 

$             9,682

 

$           46,122

 

$         (15,204)

Interest income

 

(233)

 

(302)

 

(878)

 

(2,937)

Interest expense

 

20,492

 

20,723

 

81,211

 

82,117

(Benefit) provision for income taxes

 

(9,329)

 

7,756

 

5,659

 

687

Depreciation and amortization

 

16,042

 

14,396

 

62,800

 

53,832

EBITDA

 

$           33,256

 

$           52,255

 

$         194,914

 

$         118,495

Purchase accounting adjustments-revenue(1)

 

110

 

63

 

379

 

279

Purchase accounting adjustments-rent(2)

 

109

 

90

 

433

 

490

Severance costs(3)

 

 

(9)

 

 

981

Pre-opening costs(4)

 

832

 

306

 

2,134

 

1,520

Legal matters(5)

 

 

5,810

 

 

5,810

Insurance recovery(6)

 

 

 

(2,500)

 

Credit loss expense on held-to-maturity investments(7)

 

17,462

 

 

17,462

 

Dividend income on held-to-maturity investments(8)

 

(1,401)

 

 

(1,401)

 

Tax benefit arrangement remeasurement(9)

 

12,085

 

(5,447)

 

11,737

 

(5,949)

Other(10)

 

543

 

(1,956)

 

1,286

 

(1,265)

Adjusted EBITDA

 

$           62,996

 

$           51,112

 

$         224,444

 

$         120,361

(1)

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.

(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, $0.2 million and $0.1 million in the three months ended December 31, 2020 and the years ended December 31, 2021 and 2020, 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, 2021 and 2020 and the years ended December 31, 2021 and 2020, 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 severance expense recorded in connection with a reduction in force in the year ended December 31, 2020.

(4)

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.

(5)

Represents costs associated with legal matters in which the Company is a defendant. This amount includes expense of $3.8 million related to the settlement of legal claims in the three months and year ended December 31, 2020, and includes a $2.0 million reserve against an indemnification receivable related to a legal matter in the year ended December 31, 2020.

(6)

Represents an insurance recovery of previously recognized expenses related to the settlement of legal claims.

(7)

Represents an credit loss expense on our held-to-maturity investment based upon facts and circumstances that existed as of December 31, 2021 related to the investee's performance and overall financial condition.

(8)

Represents dividend income recognized on a held-to-maturity investment.

(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 quarter and year ended December 31, 2020 this amount included a $1.4 million gain related to an employee retention payroll tax credit received in connection with the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

A reconciliation of Segment EBITDA to Total Segment EBITDA is set forth below.

   

Three months ended December 31,

 

Year ended December 31,

(in thousands)

 

2021

 

2020

 

2021

 

2020

Segment EBITDA

               

Franchise

 

$          49,321

 

$          43,582

 

$        194,303

 

$        114,968

Corporate-owned stores

 

14,033

 

12,296

 

49,196

 

23,672

Equipment

 

14,326

 

3,149

 

29,680

 

13,097

Corporate and other

 

(14,875)

 

(6,772)

 

(78,265)

 

(33,242)

Total Segment EBITDA(1)

 

$          62,805

 

$          52,255

 

$        194,914

 

$        118,495

(1)

Total Segment EBITDA is equal to EBITDA.

Adjusted Net Income (loss) and Adjusted Net Income (loss) per Diluted Share

Our presentation of Adjusted net income (loss) assumes that all net income (loss) 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 (loss) per share, diluted, is calculated by dividing Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) 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 (loss) and Adjusted net income (loss) per share, diluted, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period. A reconciliation of Adjusted net income (loss) to net income (loss), the most directly comparable GAAP measure, and the computation of Adjusted net income (loss) per share, diluted, are set forth below.

   

Three months ended December 31,

 

Year ended December 31,

(in thousands, except per share amounts)

 

2021

 

2020

 

2021

 

2020

Net income (loss)

 

$             6,284

 

$              9,682

 

$           46,122

 

$          (15,204)

Provision for income taxes, as reported

 

(9,329)

 

7,756

 

5,659

 

687

Purchase accounting adjustments-revenue(1)

 

110

 

63

 

379

 

279

Purchase accounting adjustments-rent(2)

 

109

 

90

 

433

 

490

Severance costs(3)

 

 

(9)

 

 

981

Pre-opening costs(4)

 

832

 

306

 

2,134

 

1,520

Legal matters(5)

 

 

5,810

 

 

5,810

Insurance recovery(6)

 

 

 

(2,500)

 

Credit loss expense on held-to-maturity investments(7)

 

17,462

 

 

17,462

 

Dividend income on held-to-maturity investments(8)

 

(1,401)

 

 

(1,401)

 

Tax benefit arrangement remeasurement(9)

 

12,085

 

(5,447)

 

11,737

 

(5,949)

Other(10)

 

543

 

(1,956)

 

1,286

 

(1,265)

Purchase accounting amortization(11)

 

4,159

 

4,211

 

16,636

 

16,846

Adjusted income before income taxes

 

$           30,854

 

$           20,506

 

$           97,947

 

$              4,195

Adjusted income taxes(12)

 

8,331

 

5,455

 

26,446

 

1,116

Adjusted net income

 

$           22,523

 

$           15,051

 

$           71,501

 

$              3,079

                 

Adjusted net income per share, diluted

 

$               0.26

 

$                0.17

 

$                0.82

 

$                0.04

                 

Adjusted weighted-average shares outstanding(13)

 

87,290

 

87,117

 

87,218

 

87,166

(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, $0.2 million and $0.1 million in the three months ended December 31, 2020 and the years ended December 31, 2021 and 2020, 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, 2021 and 2020 and the years ended December 31, 2021 and 2020, 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 severance expense recorded in connection with a reduction in force in the year ended December 31, 2020.

(4)

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.

(5)

Represents costs associated with legal matters in which the Company is a defendant. This amount includes expense of $3.8 million related to the settlement of legal claims in the three months and year ended December 31, 2020, and includes a $2.0 million reserve against an indemnification receivable related to a legal matter in the year ended December 31, 2020.

(6)

Represents an insurance recovery of previously recognized expenses related to the settlement of legal claims.

(7)

Represents credit loss expense on our held-to-maturity investment based upon facts and circumstances that existed as of December 31, 2021 related to the investee's performance and overall financial condition.

(8)

Represents dividend income recognized on a held-to-maturity investment.

(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 quarter and year ended December 31, 2020 this amount included a $1.4 million gain related to an employee retention payroll tax credit received in connection with the CARES Act.

(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, 2021 and 2020 and the years ended December 31, 2021 and 2020, respectively recorded in connection with the 2012 Acquisition, and $1.1 million, $1.1 million, $4.3 million and $4.5 million of amortization of intangible assets for the three months ended  December 31, 2021 and 2020 and the years ended December 31, 2021 and 2020, 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 27.0% for the three months and year ended December 31, 2021 and 26.6% for the three months and year ended December 31, 2020, 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.

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, 2021 and 2020:

   

Three months ended December 31,
2021

 

Three months ended December 31,
2020

(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)

 

$     5,740

 

84,152

 

$          0.07

 

$     8,690

 

82,497

 

$          0.11

Assumed exchange of shares(2)

 

544

 

3,138

     

992

 

4,620

   

Net income

 

6,284

         

9,682

       

Adjustments to arrive at adjusted income

   before income taxes(3)

 

24,570

         

10,824

       

Adjusted income before income taxes

 

30,854

         

20,506

       

Adjusted income taxes(4)

 

8,331

         

5,455

       

Adjusted net income

 

$   22,523

 

87,290

 

$          0.26

 

$   15,051

 

87,117

 

$          0.17

(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. as of the beginning of the period presented. 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 27.0% and 26.6% for the three months ended December 31, 2021 and 2020, respectively, applied to adjusted income before income taxes.

   

Year Ended December 31, 2021

 

Year Ended December 31, 2020

(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 (loss) attributable to Planet Fitness, Inc.(1)

 

$   42,774

 

83,894

 

$          0.51

 

$ (14,991)

 

80,303

 

$        (0.19)

Assumed exchange of shares(2)

 

3,348

 

3,324

     

(213)

 

6,293

   

Net income (loss)

 

46,122

         

(15,204)

       

Adjustments to arrive at adjusted income

   before income taxes(3)

 

51,825

         

19,399

 

570

   

Adjusted income before income taxes

 

97,947

         

4,195

       

Adjusted income taxes(4)

 

26,446

         

1,116

       

Adjusted net income

 

$   71,501

 

87,218

 

$          0.82

 

$     3,079

 

87,166

 

$          0.04

(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. as of the beginning of the period presented. 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, and the impact of dilutive stock options and RSUs.

(4)

Represents corporate income taxes at an assumed effective tax rate of 27.0% and 26.6% for the years ended December 31, 2021 and 2020, respectively, applied to adjusted income before income taxes.

SOURCE Planet Fitness

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