Planet Fitness, Inc. PLNT reported fourth-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. Also, both metrics increased on a year-over-year basis.

Following the results, the company’s shares fell 5.3% during trading hours on Feb 22. Negative investor sentiments were witnessed as the company cited concerns about continued macroeconomic uncertainty and a slowing down of sales (owing to a transition towards more strength equipment over cardio). The company anticipates 2024 sales distribution to resemble that of 2023, showing a return to a standard quarterly rhythm.

Earnings & Revenue Discussion

For the fourth quarter, Planet Fitness reported adjusted net income per share (diluted) of 60 cents, surpassing the Zacks Consensus Estimate of 58 cents by 3.5%. In the prior-year quarter, the company reported net income per share (diluted) of 53 cents.

Planet Fitness, Inc. Price, Consensus and EPS Surprise

 

Planet Fitness, Inc. price-consensus-eps-surprise-chart | Planet Fitness, Inc. Quote

 

Quarterly revenues of $285.1 million surpassed the consensus mark of $282 million. The top line improved 1.4% from the year-ago quarter’s levels, driven by system-wide same-store sales growth of 7.7% year over year.

The company’s results reflect an improved cancel rate with increased visits per member and higher visit frequency across all age groups compared to the previous year. It noted rises in penetration levels among all generational groups.

Adjusted EBITDA was $114.3 million compared with $106.1 million reported in the year-ago quarter.

Segmental Performance

Franchise: In the quarter, this segment’s revenues were $98.2 million, up 13.9% from the prior-year quarter.  Our model predicted this segment’s revenues to increase 12.6% to $97.1 million year over year.

The upside was driven by rises of $7.8 million stemming from an uptick in royalty revenue, a $2.7 million boost from higher revenue generated by the National Advertising Fund (NAF) and $1.4 million of revenues associated with the sale of HVAC units to franchisees. This was partially offset by a $1.0 million decline in revenues from equipment placement.

EBITDA in the Franchise segment was $68.3 million compared with $48.9 million reported in the prior-year quarter.

Corporate-owned Stores: Revenues of this segment amounted to $116.4 million, up 15.9% from the reported value of $100.5 million in the year-ago quarter. For this segment’s revenues, our anticipated value was $105.2 million.

The uptick can primarily be attributed to an increase of 8.7% in corporate-owned store same-store sales and an additional $4.3 million from new store openings since Oct 1, 2022. The acquisition of four stores in Florida also contributed to the segment’s revenues.

EBITDA totaled $45 million compared with $38.8 million reported in the prior-year quarter.

Equipment: In the Equipment segment, revenues totaled $70.4 million, down 25.5% year over year. We expected revenues to be $79.7 million from this segment, indicating a 15.7% fall year-over-year.

The downside was driven by lower equipment sales to existing franchisee-owned stores.

EBITDA was $16.9 million compared with $24.4 million reported in the year-ago quarter.