EX-99.1 2 plntq12018pressreleaseex991.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1
Planet Fitness, Inc. Announces First Quarter 2018 Results
Total Revenue Increased 33.2% to $121.3 Million
System-Wide Same Stores Sales Increased 11.1%
47 New Planet Fitness Stores Opened

Hampton, NH, May 8, 2018 - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its first quarter ended March 31, 2018.
First Quarter Fiscal 2018 Highlights
•
Total revenue increased from the prior year period by 33.2% to $121.3 million.
•
System-wide same stores sales increased 11.1%.
•
Net income attributable to Planet Fitness, Inc. was $19.9 million, or $0.23 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $8.8 million, or $0.14 per diluted share in the prior year period.
•
Net income was $23.5 million, compared to net income of $17.9 million in the prior year period.
•
Adjusted net income(1) increased 42.3% to $26.2 million, or $0.27 per diluted share, compared to $18.4 million, or $0.19 per diluted share in the prior year period.
•
Adjusted EBITDA(1) increased 15.4% to $48.8 million from $42.3 million in the prior year period.
•
47 new Planet Fitness franchise stores were opened during the period, bringing system-wide total stores to 1,565 as of March 31, 2018.
(1) Adjusted net income and adjusted EBITDA are non-GAAP measures. For reconciliations of Adjusted EBITDA and Adjusted net income to U.S. GAAP (“GAAP”) net income see “Non-GAAP Financial Measures” accompanying this press release.

“We delivered another strong financial performance as first quarter system-wide same store sales increased 11% for the second consecutive year and all three operating segments posted double-digit revenue gains on a percentage basis,” commented Chris Rondeau.  “Our success is being fueled by the expansion of our high value, low cost non-intimidating fitness concept in existing and new markets combined with growing brand awareness from increased investments in national and local advertising. At the same time, we continue to explore ways to strengthen our offering, including utilizing technology to provide more immersive workout experiences and personalized workout recommendations. By targeting casual and first-time gym users, we believe Planet Fitness has a long runway for growth based on the fact that the vast majority of the U.S. population does not own a gym membership.”
Operating Results for the First Quarter Ended March 31, 2018
For the first quarter 2018, total revenue increased $30.2 million or 33.2% to $121.3 million from $91.1 million in the prior year period. $10.5 million, or 11.5% of the increase, is national advertising fund revenue and is included in our franchise segment. We began reporting national advertising fund contributions as revenue in 2018 in connection with the adoption of the new U.S. GAAP revenue recognition standard. By segment:
•
Franchise segment revenue increased $17.8 million or 48.4% to $54.6 million from $36.8 million in the prior year period, which includes commission income and the above-mentioned $10.5 million of national advertising fund revenue;
•
Corporate-owned stores segment revenue increased $5.7 million or 21.0% to $32.7 million from $27.0 million in the prior year period, $2.4 million of which is from six franchisee-owned stores acquired on January 1, 2018; and
•
Equipment segment revenue increased $6.7 million or 24.8% to $34.0 million from $27.3 million in the prior year period.
System-wide same store sales increased 11.1%. By segment, franchisee-owned same store sales increased 11.4% and corporate-owned same store sales increased 5.0%.



For the first quarter of 2018, net income was $23.5 million, or $0.23 per diluted share, compared to net income of $17.9 million, or $0.14 per diluted share, in the prior year period. Adjusted net income increased 42.3% to $26.2 million, or $0.27 per diluted share, from $18.4 million, or $0.19 per diluted share, in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.3% for the current year period and 39.5% for the comparable 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 15.4% to $48.8 million from $42.3 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 $4.6 million or 14.5% to $36.7 million driven by royalties from new franchised stores opened since March 31, 2017, a higher average royalty rate and higher same store sales of 11.4%;
•
Corporate-owned stores segment EBITDA increased $1.5 million or 13.8% to $12.2 million driven primarily by an increase in same store sales, higher annual fees and the addition of six franchise owned stores acquired January 1, 2018; and
•
Equipment segment EBITDA increased by $1.4 million or 22.6% to $7.5 million driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.
2018 Outlook
For the year ending December 31, 2018, the Company expects:
•
Total revenue increase of approximately 20% as compared to the year ended December 31, 2017;
•
System-wide same store sales growth in the high single digit range; and
•
Adjusted net income and adjusted net income per diluted share to increase approximately 40% as compared to the year ended December 31, 2017.
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, 2018. 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, 2018.
Investor Conference Call
The Company will hold a conference call at 4:30 pm (ET) on May 8, 2018 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 March 31, 2018, Planet Fitness had approximately 11.8 million members and 1,565 stores in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic and Panama. 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
brendon.frey@icrinc.com
203-682-8200
Media Contacts:
McCall Gosselin, Planet Fitness
mccall.gosselin@pfhq.com
603-957-4650

Julia Young, ICR
julia.young@icrinc.com
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 “2018 Outlook,” those attributed to the Company’s Chief Executive Officer in this press release and other statements, estimates and projections that do not relate solely to historical facts. Forward-looking statements can be identified by words such as “expect,” “goal,” plan,” “will,” “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, 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 indebtedness, our corporate structure and tax receivable agreements, general economic conditions and the other factors described in the Company’s annual report on Form 10-K for the year ended December 31, 2017, and the Company’s other filings with the Securities and Exchange Commission. In light of the significant risks and uncertainties inherent in forward-looking statements, investors should not place undue reliance on forward-looking statements, which reflect the Company’s views only as of the date of this press release. Except as required by law, neither the Company nor any of its affiliates or representatives undertake any obligation to provide additional information or to correct or update any information set forth in this release, whether as a result of new information, future developments or otherwise.


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

 
 
For the three months ended
March 31,
 
 
2018
 
2017
Revenue:
 
 

 
 

Franchise
 
$
42,162

 
$
30,281

Commission income
 
1,989

 
6,516

National advertising fund revenue
 
10,461

 
—

Corporate-owned stores
 
32,708

 
27,041

Equipment
 
34,013

 
27,264

Total revenue
 
121,333

 
91,102

Operating costs and expenses:
 
 
 
 
Cost of revenue
 
26,500

 
21,124

Store operations
 
18,356

 
15,184

Selling, general and administrative
 
17,623

 
13,820

National advertising fund expense
 
10,461

 
—

Depreciation and amortization
 
8,465

 
7,951

Other loss (gain)
 
1,010

 
(32
)
Total operating costs and expenses
 
82,415

 
58,047

Income from operations
 
38,918

 
33,055

Other expense, net:
 
 
 
 
Interest expense, net
 
(8,734
)
 
(8,763
)
Other income
 
192

 
682

Total other expense, net
 
(8,542
)
 
(8,081
)
Income before income taxes
 
30,376

 
24,974

Provision for income taxes
 
6,883

 
7,108

Net income
 
23,493

 
17,866

Less net income attributable to non-controlling interests
 
3,613

 
9,024

Net income attributable to Planet Fitness, Inc.
 
$
19,880

 
$
8,842

Net income per share of Class A common stock:
 
 
 
 
Basic
 
$
0.23

 
$
0.14

Diluted
 
$
0.23

 
$
0.14

Weighted-average shares of Class A common stock outstanding:
 
 
 
 
Basic
 
87,434

 
64,121

Diluted
 
87,698

 
64,150




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

 
 
March 31,
 
December 31,
 
 
2018
 
2017
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
127,146

 
$
113,080

Accounts receivable, net of allowance for bad debts of $18 and $32 at March 31, 2018 and December 31, 2017, respectively
 
18,620

 
37,272

Due from related parties
 
3,060

 
3,020

Inventory
 
4,056

 
2,692

Restricted assets – national advertising fund
 
78

 
499

Deferred expenses – national advertising fund
 
4,596

 
—

Prepaid expenses
 
4,051

 
3,929

Other receivables
 
14,550

 
9,562

Other current assets
 
5,355

 
6,947

Total current assets
 
181,512

 
177,001

Property and equipment, net of accumulated depreciation of $40,493, as of March 31, 2018 and $36,228 as of December 31, 2017
 
84,545

 
83,327

Intangible assets, net
 
241,105

 
235,657

Goodwill
 
191,038

 
176,981

Deferred income taxes
 
409,216

 
407,782

Other assets, net
 
8,437

 
11,717

Total assets
 
$
1,115,853

 
$
1,092,465

Liabilities and stockholders' equity (deficit)
 
 
 
 
Current liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
7,185

 
$
7,185

Accounts payable
 
15,664

 
28,648

Accrued expenses
 
14,787

 
18,590

Equipment deposits
 
14,283

 
6,498

Restricted liabilities – national advertising fund
 
78

 
490

Deferred revenue, current
 
20,842

 
19,083

Payable pursuant to tax benefit arrangements, current
 
31,062

 
31,062

Other current liabilities
 
493

 
474

Total current liabilities
 
104,394

 
112,030

Long-term debt, net of current maturities
 
695,264

 
696,576

Deferred rent, net of current portion
 
6,907

 
6,127

Deferred revenue, net of current portion
 
22,942

 
8,440

Deferred tax liabilities
 
1,379

 
1,629

Payable pursuant to tax benefit arrangements, net of current portion
 
403,022

 
400,298

Other liabilities
 
4,379

 
4,302

Total noncurrent liabilities
 
1,133,893

 
1,117,372

Stockholders' equity (deficit):
 
 
 
 
Class A common stock, $.0001 par value - 300,000 authorized, 87,505 and 87,188 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
 
9

 
9

Class B common stock, $.0001 par value - 100,000 authorized, 10,893 and 11,193 shares issued and outstanding as of March 31, 2018 December 31, 2017, respectively
 
1

 
1

Accumulated other comprehensive loss
 
(370
)
 
(648
)
Additional paid in capital
 
13,011

 
12,118

Accumulated deficit
 
(120,245
)
 
(130,966
)
Total stockholders' deficit attributable to Planet Fitness Inc.
 
(107,594
)
 
(119,486
)
Non-controlling interests
 
(14,840
)
 
(17,451
)
Total stockholders' deficit
 
(122,434
)
 
(136,937
)
Total liabilities and stockholders' deficit
 
$
1,115,853

 
$
1,092,465




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


 
 
For the three months ended
March 31,
 
 
2018
 
2017
Cash flows from operating activities:
 
 

 
 

Net income
 
$
23,493

 
$
17,866

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
8,465

 
7,951

Amortization of deferred financing costs
 
484

 
465

Amortization of favorable leases and asset retirement obligations
 
93

 
94

Amortization of interest rate caps
 
195

 
432

Deferred tax expense
 
4,909

 
5,298

Gain on re-measurement of tax benefit arrangement
 
(396
)
 
(541
)
Provision for bad debts
 
(14
)
 
27

Loss on reacquired franchise rights
 
350

 
—

Loss on disposal of property and equipment
 
650

 
—

Equity-based compensation
 
998

 
380

Changes in operating assets and liabilities, excluding effects of acquisitions:
 
 
 
 
Accounts receivable
 
18,637

 
11,859

Due to and due from related parties
 
165

 
(99
)
Inventory
 
(1,364
)
 
471

Other assets and other current assets
 
(1,341
)
 
(2,187
)
National advertising fund
 
(4,586
)
 
—

Accounts payable and accrued expenses
 
(16,758
)
 
(21,244
)
Other liabilities and other current liabilities
 
83

 
188

Income taxes
 
1,898

 
310

Equipment deposits
 
7,784

 
8,569

Deferred revenue
 
3,536

 
527

Deferred rent
 
853

 
106

Net cash provided by operating activities
 
48,134

 
30,472

Cash flows from investing activities:
 
 
 
 
Additions to property and equipment
 
(2,036
)
 
(5,336
)
Acquisition of franchises
 
(28,503
)
 
—

Proceeds from sale of property and equipment
 
40

 
—

Net cash used in investing activities
 
(30,499
)
 
(5,336
)
Cash flows from financing activities:
 
 
 
 
Principal payments on capital lease obligations
 
(11
)
 
—

Repayment of long-term debt
 
(1,796
)
 
(1,796
)
Premiums paid for interest rate caps
 
—

 
(366
)
Proceeds from issuance of Class A common stock
 
242

 
—

Dividend equivalent payments
 
(20
)
 
(20
)
Distributions to Continuing LLC Members
 
(1,734
)
 
(3,142
)
Net cash used in financing activities
 
(3,319
)
 
(5,324
)
Effects of exchange rate changes on cash and cash equivalents
 
(250
)
 
31

Net increase in cash and cash equivalents
 
14,066

 
19,843

Cash and cash equivalents, beginning of period
 
113,080

 
40,393

Cash and cash equivalents, end of period
 
$
127,146

 
$
60,236

Supplemental cash flow information:
 
 
 
 
Net cash paid for income taxes
 
$
106

 
$
1,595

Cash paid for interest
 
$
8,146

 
$
7,857

Non-cash investing activities:
 
 
 
 
Non-cash additions to property and equipment
 
$
453

 
$
38




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
March 31,
 
 
2018
 
2017
(in thousands)
 
 

 
 

Net income
 
$
23,493

 
$
17,866

Interest expense, net
 
8,734

 
8,763

Provision for income taxes
 
6,883

 
7,108

Depreciation and amortization
 
8,465

 
7,951

EBITDA
 
47,575

 
41,688

Purchase accounting adjustments-revenue(1)
 
443

 
336

Purchase accounting adjustments-rent(2)
 
182

 
196

Loss on reacquired franchise rights(3)
 
350

 
—

Stock offering-related costs(4)
 
—

 
608

Pre-opening costs(5)
 
21

 
—

Other(6)
 
201

 
(573
)
Adjusted EBITDA
 
$
48,772

 
$
42,255


(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 $90 and $103, in the three months ended March 31, 2018 and 2017, respectively, reflect the difference between the higher rent expense recorded in accordance with GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $92 and $93 in the three months ended March 31, 2018 and 2017, 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 one-time, non-cash loss recorded in accordance with ASC 805 - Business Combinations related to our acquisition of six franchisee-owned stores on January 1, 2018. 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 legal, accounting and other costs incurred in connection with offerings of the Company’s Class A common stock.
(5)
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.
(6)
Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the three months ended March 31, 2018 and 2017, this amount includes a gain of $396 and $541, respectively, related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate. Additionally, in the three months ended March 31, 2018, this amount includes the write off of certain assets that were being tested for potential use across the system.


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


A reconciliation of Segment EBITDA to Total Segment EBITDA is set forth below.
 
 
Three months ended
March 31,
 
 
2018
 
2017
Segment EBITDA
 
 
 
 
Franchise
 
$
36,677

 
$
32,032

Corporate-owned stores
 
12,170

 
10,693

Equipment
 
7,469

 
6,094

Corporate and other
 
(8,741
)
 
(7,131
)
Total Segment EBITDA(1)
 
$
47,575

 
$
41,688

(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
As a result of the recapitalization transactions that occurred prior to our IPO, the limited liability company agreement of Pla-Fit Holdings that was amended and restated (the “New LLC Agreement”) designated Planet Fitness, Inc. as the sole managing member of Pla-Fit Holdings. As sole managing member, Planet Fitness, Inc. exclusively operates and controls the business and affairs of Pla-Fit Holdings, LLC. As a result of the recapitalization transactions and the New LLC Agreement, Planet Fitness, Inc. now consolidates Pla-Fit Holdings, and Pla-Fit Holdings is considered the predecessor to Planet Fitness, Inc. for accounting purposes. Our presentation of Adjusted net income and Adjusted net income per share, diluted, gives effect to the consolidation of Pla-Fit Holdings with Planet Fitness, Inc. resulting from the recapitalization transactions and the New LLC Agreement as if they had occurred on January 1, 2017. In addition, 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
March 31,
(in thousands, except per share amounts)
 
2018
 
2017
Net income
 
$
23,493

 
$
17,866

Provision for income taxes, as reported
 
6,883

 
7,108

Purchase accounting adjustments-revenue(1)
 
443

 
336

Purchase accounting adjustments-rent(2)
 
182

 
196

Loss on reacquired franchise rights(3)
 
350

 
—

Stock offering-related costs(4)
 
—

 
608

Pre-opening costs(5)
 
21

 
—

Other(6)
 
201

 
(342
)
Purchase accounting amortization(7)
 
3,921

 
4,622

Adjusted income before income taxes
 
$
35,494

 
$
30,394

Adjusted income taxes(8)
 
9,335

 
12,006

Adjusted net income
 
$
26,159

 
$
18,388

 
 
 
 
 
Adjusted net income per share, diluted
 
$
0.27

 
$
0.19

 
 
 
 
 
Adjusted weighted-average shares outstanding(9)
 
98,651

 
98,528

(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 U.S. GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these periods if the write-down to deferred revenue had not occurred in connection with the application of acquisition pushdown accounting.
(2)
Represents the impact of rent-related purchase accounting adjustments. In accordance with guidance in ASC 805 – Business Combinations, in connection with the 2012 Acquisition, the Company’s deferred rent liability was required to be written off as of the acquisition date and rent was recorded on a straight-line basis from the acquisition date through the end of the lease term. This resulted in higher overall recorded rent expense each period than would have otherwise been recorded had the deferred rent liability not been written off as a result of the acquisition push down accounting applied in accordance


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


with ASC 805. Adjustments of $90 and $103 in the three months ended March 31, 2018 and 2017, 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 $92 and $93 for the three months ended March 31, 2018 and 2017, 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 one-time, non-cash loss recorded in accordance with ASC 805 - Business Combinations related to our acquisition of six franchisee-owned stores on January 1, 2018. 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 legal, accounting and other costs incurred in connection with offerings of the Company’s Class A common stock.
(5)
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.
(6)
Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the three months ended March 31, 2018 and 2017, this amount includes a gain of $396 and $541, respectively, related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate. Additionally, in the three months ended March 31, 2018, this amount includes the write off of certain assets that were being tested for potential use across the system. In the three months ended March 31, 2017, this amount includes expense of $231 related to accelerated depreciation expense taken on our headquarters in preparation for moving to a new building.
(7)
Includes $3,096 and $4,086 of amortization of intangible assets, other than favorable leases, for the three months ended March 31, 2018 and 2017, respectively, recorded in connection with the 2012 Acquisition, and $825 and $536 of amortization of intangible assets for the three months ended March 31, 2018 and 2017, respectively, recorded in connection with the historical acquisition of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with U.S. GAAP, in each period.
(8)
Represents corporate income taxes at an assumed effective tax rate of 26.3% and 39.5% for the three months ended March 31, 2018 and 2017, respectively, applied to adjusted income before income taxes.
(9)
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 ended March 31, 2018 and 2017:
 
 
For the three months ended
March 31, 2018
 
For the three months ended
March 31, 2017
 
 
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)
 
$
19,880

 
87,698

 
$
0.23

 
$
8,842

 
64,150

 
$
0.14

Assumed exchange of shares(2)
 
3,613

 
10,953

 
 
 
9,024

 
34,378

 
 
Net Income
 
23,493

 
 
 
 
 
17,866

 
 
 
 
Adjustments to arrive at adjusted income
   before income taxes(3)
 
12,001

 
 
 
 
 
12,528

 
 
 
 
Adjusted income before income taxes
 
35,494

 
 

 
 
 
30,394

 
 
 
 
Adjusted income taxes(4)
 
9,335

 
 
 
 
 
12,006

 
 
 
 
Adjusted Net Income
 
$
26,159

 
98,651

 
$
0.27

 
$
18,388

 
98,528

 
$
0.19

(1)
Represents net income attributable to Planet Fitness, Inc. and the associated weighted average shares, diluted of Class A common stock outstanding.
(2)
Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc. Also assumes the addition of net income attributable to non-controlling interests corresponding with the assumed exchange of Holdings Units and Class B common shares for shares of Class A common stock.
(3)
Represents the total impact of all adjustments identified in the adjusted net income table above to arrive at adjusted income before income taxes.
(4)
Represents corporate income taxes at an assumed effective tax rate of 26.3% and 39.5% for the three months ended March 31, 2018 and 2017, respectively, applied to adjusted income before income taxes.