EX-99.1 2 plntq12019pressreleaseex991.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
Planet Fitness, Inc. Announces First Quarter 2019 Results
System-Wide Same Store Sales Increased 10.2%
65 New Planet Fitness Stores Opened

Hampton, NH, May 2, 2019 - Today, Planet Fitness, Inc. (NYSE:PLNT) reported financial results for its first quarter ended March 31, 2019.
First Quarter Fiscal 2019 Highlights
•
Total revenue increased from the prior year period by 22.7% to $148.8 million.
•
System-wide same store sales increased 10.2%.
•
Net income attributable to Planet Fitness, Inc. was $27.4 million, or $0.32 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $19.9 million, or $0.23 per diluted share in the prior year period.
•
Net income increased 34.7% to $31.6 million, compared to net income of $23.5 million in the prior year period.
•
Adjusted net income(1) increased 24.9% to $32.7 million, or $0.35 per diluted share, compared to $26.2 million, or $0.27 per diluted share in the prior year period.
•
Adjusted EBITDA(1) increased 29.9% to $63.4 million from $48.8 million in the prior year period.
•
65 new Planet Fitness stores were opened during the period, bringing system-wide total stores to 1,806 as of March 31, 2019.
(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.
“Fiscal year 2019 is off to a great start.  Our strong first quarter results, which included 10.2% system-wide same store sales growth and 65 new store openings, show why Planet Fitness is a leader in the fitness industry,” stated Chris Rondeau, Chief Executive Officer. “We once again demonstrated the attractiveness of our high value, low cost welcoming fitness concept and the power of our business model with our diversified revenue streams and strong free cash flow. As we move forward, we believe we can continue to deliver significant growth and increased shareholder value through robust unit expansion, increased national and local advertising spending, and membership enhancement initiatives. The future for Planet Fitness looks extremely bright and I am confident that with our great group of experienced franchisees, the Company is well positioned to capitalize on the many opportunities that lie ahead.”
Operating Results for the First Quarter Ended March 31, 2019
For the first quarter 2019, total revenue increased $27.5 million or 22.7% to $148.8 million from $121.3 million in the prior year period. By segment:
•
Franchise segment revenue increased $11.2 million or 20.4% to $65.8 million from $54.6 million in the prior year period, driven primarily by higher royalty revenue which increased as a result of new stores opened since December 31, 2017, a 10.3% increase in same store sales, and a higher average royalty rate;
•
Corporate-owned stores segment revenue increased $5.3 million or 16.3% to $38.0 million from $32.7 million in the prior year period, $2.4 million of which is from new corporate-owned stores opened or acquired since January 1, 2018, and another $2.0 million of which is from same store sales growth; and
•
Equipment segment revenue increased $11.0 million or 32.3% to $45.0 million from $34.0 million in the prior year period, 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 10.2%. By segment, franchisee-owned same store sales increased 10.3% and corporate-owned same store sales increased 8.0%.



For the first quarter of 2019, net income attributable to Planet Fitness, Inc. was $27.4 million, or $0.32 per diluted share, compared to net income attributable to Planet Fitness, Inc. of $19.9 million, or $0.23 per diluted share in the prior year period. Net income was $31.6 million in the first quarter of 2019 compared to $23.5 million in the prior year period. Adjusted net income increased 24.9% to $32.7 million, or $0.35 per diluted share, from $26.2 million, or $0.27 per diluted share in the prior year period. Adjusted net income has been adjusted to reflect a normalized federal income tax rate of 26.6% for the current year period and 26.3% 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 29.9% to $63.4 million from $48.8 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 $10.7 million or 29.1% to $47.4 million driven by royalties from new franchised stores opened since January 1, 2018, a higher average royalty rate and higher same store sales of 10.3%;
•
Corporate-owned stores segment EBITDA increased $3.4 million or 27.9% to $15.6 million driven primarily by an increase in same store sales, higher annual fees and from additional clubs opened or acquired since January 1, 2018; and
•
Equipment segment EBITDA increased by $2.9 million or 39.3% to $10.4 million driven by an increase in equipment sales to new stores and an increase in replacement equipment sales to existing franchisee-owned stores.
2019 Outlook
For the year ending December 31, 2019, the Company reiterates its expectation of:
•
Total revenue increase of approximately 15% as compared to the year ended December 31, 2018;
•
System-wide same store sales in the high single digits;
•
Adjusted net income to increase approximately 18% as compared to the year ended December 31, 2018; and
•
Adjusted net income per diluted share to increase approximately 25% as compared to the year ended December 31, 2018.

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, 2019. 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, 2019.
Investor Conference Call
The Company will hold a conference call at 4:30 pm (ET) on May 2, 2019 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, 2019, Planet Fitness had more than 13.6 million members and 1,806 stores in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico. 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 “2019 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 "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, 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, 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 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,
 
 
2019
 
2018
Revenue:
 
 

 
 

Franchise
 
$
52,956

 
$
42,162

Commission income
 
994

 
1,989

National advertising fund revenue
 
11,812

 
10,461

Corporate-owned stores
 
38,044

 
32,708

Equipment
 
45,011

 
34,013

Total revenue
 
148,817

 
121,333

Operating costs and expenses:
 
 
 
 
Cost of revenue
 
34,486

 
26,500

Store operations
 
20,905

 
18,356

Selling, general and administrative
 
18,154

 
17,623

National advertising fund expense
 
11,812

 
10,461

Depreciation and amortization
 
9,907

 
8,465

Other loss
 
368

 
1,010

Total operating costs and expenses
 
95,632

 
82,415

Income from operations
 
53,185

 
38,918

Other expense, net:
 
 
 
 
Interest income
 
1,798

 
37

Interest expense
 
(14,749
)
 
(8,771
)
Other income (expense)
 
(3,318
)
 
192

Total other expense, net
 
(16,269
)
 
(8,542
)
Income before income taxes
 
36,916

 
30,376

Provision for income taxes
 
5,277

 
6,883

Net income
 
31,639

 
23,493

Less net income attributable to non-controlling interests
 
4,230

 
3,613

Net income attributable to Planet Fitness, Inc.
 
$
27,409

 
$
19,880

Net income per share of Class A common stock:
 
 
 
 
Basic
 
$
0.33

 
$
0.23

Diluted
 
$
0.32

 
$
0.23

Weighted-average shares of Class A common stock outstanding:
 
 
 
 
Basic
 
83,806

 
87,434

Diluted
 
84,425

 
87,698




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

 
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
335,961

 
$
289,431

Restricted cash
 
30,645

 
30,708

Accounts receivable, net of allowance for bad debts of $86 and $84 at March 31, 2019 and
December 31, 2018, respectively
 
18,919

 
38,960

Due from related parties
 


 
—

Inventory
 
3,445

 
5,122

Deferred expenses – national advertising fund
 
6,530

 
—

Prepaid expenses
 
7,254

 
4,947

Other receivables
 
9,805

 
12,548

Other current assets
 
4,877

 
6,824

Total current assets
 
417,436

 
388,540

Property and equipment, net of accumulated depreciation of $59,029, as of March 31, 2019 and
$53,086 as of December 31, 2018
 
114,676

 
114,367

Right of use assets, net
 
115,745

 
—

Intangible assets, net
 
228,663

 
234,330

Goodwill
 
199,513

 
199,513

Deferred income taxes
 
431,947

 
414,841

Other assets, net
 
1,612

 
1,825

Total assets
 
$
1,509,592

 
$
1,353,416

Liabilities and stockholders' deficit
 
 
 
 
Current liabilities:
 
 
 
 
Current maturities of long-term debt
 
$
12,000

 
$
12,000

Accounts payable
 
23,060

 
30,428

Accrued expenses
 
23,679

 
32,384

Equipment deposits
 
12,502

 
7,908

Restricted liabilities – national advertising fund
 
30

 
—

Deferred revenue, current
 
25,920

 
23,488

Payable pursuant to tax benefit arrangements, current
 
24,765

 
24,765

Other current liabilities
 
12,519

 
430

Total current liabilities
 
134,475

 
131,403

Long-term debt, net of current maturities
 
1,158,483

 
1,160,127

Deferred rent, net of current portion
 
—

 
10,083

Lease liabilities, net of current portion
 
114,470

 
—

Deferred revenue, net of current portion
 
27,652

 
26,374

Deferred tax liabilities
 
1,798

 
2,303

Payable pursuant to tax benefit arrangements, net of current portion
 
424,725

 
404,468

Other liabilities
 
2,031

 
1,447

Total noncurrent liabilities
 
1,729,159

 
1,604,802

Stockholders' equity (deficit):
 
 
 
 
Class A common stock, $.0001 par value - 300,000 authorized, 84,463 and 83,584 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
 
9

 
9

Class B common stock, $.0001 par value - 100,000 authorized, 8,589 and 9,448 shares issued and outstanding as of March 31, 2019 December 31, 2018, respectively
 
1

 
1

Accumulated other comprehensive income
 
148

 
94

Additional paid in capital
 
22,576

 
19,732

Accumulated deficit
 
(368,714
)
 
(394,410
)
Total stockholders' deficit attributable to Planet Fitness Inc.
 
(345,980
)
 
(374,574
)
Non-controlling interests
 
(8,062
)
 
(8,215
)
Total stockholders' deficit
 
(354,042
)
 
(382,789
)
Total liabilities and stockholders' deficit
 
$
1,509,592

 
$
1,353,416




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,
 
 
2019
 
2018
Cash flows from operating activities:
 
 

 
 

Net income
 
$
31,639

 
$
23,493

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
9,907

 
8,465

Amortization of deferred financing costs
 
1,356

 
484

Amortization of favorable leases
 
—

 
92

Amortization of asset retirement obligations
 
221

 
1

Amortization of interest rate caps
 
—

 
195

Deferred tax expense
 
2,165

 
4,909

Gain on re-measurement of tax benefit arrangement
 
3,373

 
(396
)
Provision for bad debts
 
2

 
(14
)
Loss on reacquired franchise rights
 
—

 
350

Loss on disposal of property and equipment
 
—

 
650

Equity-based compensation
 
1,315

 
998

Changes in operating assets and liabilities, excluding effects of acquisitions:
 
 
 
 
Accounts receivable
 
20,032

 
18,637

Due to and due from related parties
 
(269
)
 
165

Inventory
 
1,677

 
(1,364
)
Other assets and other current assets
 
(2,648
)
 
(1,341
)
National advertising fund
 
(6,500
)
 
(4,586
)
Accounts payable and accrued expenses
 
(14,640
)
 
(16,758
)
Other liabilities and other current liabilities
 
214

 
83

Income taxes
 
1,768

 
1,898

Equipment deposits
 
4,594

 
7,784

Deferred revenue
 
3,668

 
3,536

Leases and deferred rent
 
60

 
853

Net cash provided by operating activities
 
57,934

 
48,134

Cash flows from investing activities:
 
 
 
 
Additions to property and equipment
 
(7,471
)
 
(2,036
)
Acquisition of franchises
 
—

 
(28,503
)
Proceeds from sale of property and equipment
 
21

 
40

Net cash used in investing activities
 
(7,450
)
 
(30,499
)
Cash flows from financing activities:
 
 
 
 
Principal payments on capital lease obligations
 
(12
)
 
(11
)
Repayment of long-term debt
 
(3,000
)
 
(1,796
)
Proceeds from issuance of Class A common stock
 
607

 
242

Dividend equivalent payments
 
(20
)
 
(20
)
Distributions to Continuing LLC Members
 
(1,842
)
 
(1,734
)
Net cash used in financing activities
 
(4,267
)
 
(3,319
)
Effects of exchange rate changes on cash and cash equivalents
 
250

 
(250
)
Net increase in cash, cash equivalents and restricted cash
 
46,467

 
14,066

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

 
113,080

Cash, cash equivalents and restricted cash, end of period
 
$
366,606

 
$
127,146

Supplemental cash flow information:
 
 
 
 
Net cash paid for income taxes
 
$
1,479

 
$
106

Cash paid for interest
 
$
13,477

 
$
8,146

Non-cash investing activities:
 
 
 
 
Non-cash additions to property and equipment
 
$
4,151

 
$
453



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,
 
 
2019
 
2018
(in thousands)
 
 

 
 

Net income
 
$
31,639

 
$
23,493

Interest income
 
(1,798
)
 
(37
)
Interest expense
 
14,749

 
8,771

Provision for income taxes
 
5,277

 
6,883

Depreciation and amortization
 
9,907

 
8,465

EBITDA
 
$
59,774

 
$
47,575

Purchase accounting adjustments-revenue(1)
 
74

 
443

Purchase accounting adjustments-rent(2)
 
123

 
182

Loss on reacquired franchise rights(3)
 
—

 
350

Pre-opening costs(4)
 
1

 
21

Tax benefit arrangement remeasurement(5)
 
3,373

 
(396
)
Other(6)
 
14

 
597

Adjusted EBITDA
 
$
63,359

 
$
48,772


(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 ADA fees, deferred franchise fees, and deferred enrollment fees that the Company billed and collected upfront but recognizes for U.S. GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these periods if the write-down to deferred revenue had not occurred in connection with the application of acquisition pushdown accounting.
(2)
Represents the impact of rent-related purchase accounting adjustments. In accordance with guidance in ASC 805 – Business Combinations, in connection with the 2012 Acquisition, the Company’s deferred rent liability was required to be written off as of the acquisition date and rent was recorded on a straight-line basis from the acquisition date through the end of the lease term. This resulted in higher overall recorded rent expense each period than would have otherwise been recorded had the deferred rent liability not been written off as a result of the acquisition push down accounting applied in accordance with ASC 805. Adjustments of $44 and $90 in the three months ended March 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 $79 and $92 in the three months ended March 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 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 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 gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(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, this amount includes expense of $590 related to 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,
(in thousands)
 
2019
 
2018
Segment EBITDA
 
 
 
 
Franchise
 
$
47,360

 
$
36,677

Corporate-owned stores
 
15,569

 
12,170

Equipment
 
10,407

 
7,469

Corporate and other
 
(13,562
)
 
(8,741
)
Total Segment EBITDA(1)
 
$
59,774

 
$
47,575

(1) Total Segment EBITDA is equal to EBITDA.
Adjusted Net Income and Adjusted Net Income per Diluted Share
Our presentation of adjusted net income assumes that all net income is attributable to Planet Fitness, Inc., which assumes the full exchange of all outstanding Holdings Units for shares of Class A common stock of Planet Fitness, Inc., adjusted for certain non-recurring items that we do not believe directly reflect our core operations. Adjusted net income per share, diluted, is calculated by dividing Adjusted net income by the total shares of Class A common stock outstanding plus any dilutive options and restricted stock units as calculated in accordance with GAAP and assuming the full exchange of all outstanding Holdings Units and corresponding Class B common stock as of the beginning of each period presented. Adjusted net income and Adjusted net income per share, diluted, are supplemental measures of operating performance that do not represent, and should not be considered, alternatives to net income and earnings per share, as calculated in accordance with GAAP. We believe Adjusted net income and Adjusted net income per share, diluted, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period. A reconciliation of Adjusted net income to net income, the most directly comparable GAAP measure, and the computation of Adjusted net income per share, diluted, are set forth below.
 
 
Three months ended March 31,
(in thousands, except per share amounts)
 
2019
 
2018
Net income
 
$
31,639

 
$
23,493

Provision for income taxes, as reported
 
5,277

 
6,883

Purchase accounting adjustments-revenue(1)
 
74

 
443

Purchase accounting adjustments-rent(2)
 
123

 
182

Loss on reacquired franchise rights(3)
 
—

 
350

Pre-opening costs(4)
 
1

 
21

Tax benefit arrangement remeasurement(5)
 
3,373

 
(396
)
Other(6)
 
14

 
597

Purchase accounting amortization(7)
 
3,999

 
3,921

Adjusted income before income taxes
 
$
44,500

 
$
35,494

Adjusted income taxes(8)
 
11,837

 
9,335

Adjusted net income
 
$
32,663

 
$
26,159

 
 
 
 
 
Adjusted net income per share, diluted
 
$
0.35

 
$
0.27

 
 
 
 
 
Adjusted weighted-average shares outstanding(9)
 
93,664

 
98,651

(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 ADA fees, deferred franchise fees, and deferred enrollment fees that the Company billed and collected upfront but recognizes for U.S. GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these


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


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 $44 and $90 in the three months ended March 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 $79 and $92 for the three months ended March 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 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 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 gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(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, this amount includes expense of $590 related to the write-off of certain assets that were being tested for potential use across the system.
(7)
Includes $3,096 and $3,096 of amortization of intangible assets, other than favorable leases, for the three months ended March 31, 2019 and 2018, respectively, recorded in connection with the 2012 Acquisition, and $903 and $825 of amortization of intangible assets for the three months ended March 31, 2019 and 2018, respectively, recorded in connection with prior acquisitions of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with U.S. GAAP, in each period.
(8)
Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.3% for the three months ended March 31, 2019 and 2018, 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, 2019 and 2018:
 
 
For the three months ended
March 31, 2019
 
For the three months ended
March 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)
 
$
27,409

 
84,425

 
$
0.32

 
$
19,880

 
87,698

 
$
0.23

Assumed exchange of shares(2)
 
4,230

 
9,239

 
 
 
3,613

 
10,953

 
 
Net Income
 
31,639

 
 
 
 
 
23,493

 
 
 
 
Adjustments to arrive at adjusted income
   before income taxes(3)
 
12,861

 
 
 
 
 
12,001

 
 
 
 
Adjusted income before income taxes
 
44,500

 
 
 
 
 
35,494

 
 
 
 
Adjusted income taxes(4)
 
11,837

 
 
 
 
 
9,335

 
 
 
 
Adjusted Net Income
 
$
32,663

 
93,664

 
$
0.35

 
$
26,159

 
98,651

 
$
0.27

(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 26.6% and 26.3% for the three months ended March 31, 2019 and 2018, respectively, applied to adjusted income before income taxes.