Planet Fitness ( PLNT ) Q3 earnings and revenue better, shares up

Planet Fitness, Inc. PLNT reported remarkable results for the third quarter of 2023, with earnings and revenue beating the Zacks Consensus Estimate. Moreover, both indicators increased year-on-year.

The company’s results reflect solid membership growth and global store count growth. During the reporting quarter, the company witnessed more than 18.5 million members accompanied by the number of stores growing to 2,498 locations globally.

Given the current macroeconomic scenario, the company is focusing on adjusting its return model at the store level to improve the opening and performance of its stores. Improvements include reducing some capital investments by extending the time it takes to replace equipment and complete remodeling. This will position the company to deliver long-term sustainable growth.

Following the announcement, the fitness center franchisor and operator’s stock rose 13.4% during the Nov. 7 trading session.

Discussion of earnings and revenue

For the third quarter, Planet Fitness reported adjusted earnings per share (EPS) of 59 cents, beating the Zacks Consensus Estimate of 55 cents per share by 7.3%. In the year-ago quarter, the company reported adjusted earnings per share of 42 cents.

Planet Fitness, Inc. Price, Consensus and EPS surprise

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

Quarterly revenue of $277.6 million beat the consensus estimate of $267.7 million by 3.7%. Additionally, the top line improved 13.6% over the prior-quarter levels, driven by solid results across all segments, as well as system-wide same-store sales growth of 8.4% year-over-year.

Adjusted EBITDA was $111.9 million compared to $93.9 million reported in the year-ago quarter.

Segment presentation

Franchise: In the quarter, this segment’s revenue was $98.2 million, up 21.6% from the prior-year quarter. Our model predicts this segment’s revenue to increase 11.2% to $89.8 million for the year.

The increase was due to increases of $8 million, $3 million, $1.5 million and $3.5 million, respectively, in franchise royalty revenue, National Advertising Fund revenue, equipment placement revenue and franchise and other fees. Additionally, $1.3 million in revenue related to the sale of HVAC units to franchisees added to the upward trend.

Franchise segment EBITDA was $67.6 million compared to $53.5 million reported in the prior-year quarter.

Corporate stores: This segment’s revenue was $113.2 million, an 11.8% increase over the $101.3 million reported in the year-ago quarter. For this segment’s revenue, our estimate was $114.1 million, up 12.6% year over year. Our estimated figure was relatively higher than the reported value.

The uptick can be primarily attributed to a 10.1% increase in corporate same-store sales and an additional $5.1 million from new store openings from July 1, 2022. The acquisition of four stores in Florida also contributed to the segment’s revenue .

EBITDA was $44.3 million compared to $40.4 million reported in the prior-year quarter.

Equipment: In the equipment segment, revenue was $66.1 million, up 6.1% year over year. We expected revenue to be $63.2 million from this segment, which would indicate growth of 1.4% year-over-year.

The segment’s revenue growth was driven by $5.6 million in higher equipment sales to existing franchisee-owned stores during the quarter.

EBITDA was $16.4 million compared to $15.8 million reported in the prior quarter.

Other financial details

As of September 30, 2023, cash and cash equivalents were $309 million, compared to $409.8 million as of December 31, 2022. Long-term debt (net of current maturities) was $1.97 billion, equal to the value reported on December 31, 2022.

Revised outlook for 2023

Planet Fitness now expects revenue to increase approximately 14%, compared to the previous expectation of approximately 12%.

Adjusted EBITDA is now expected to grow by approximately 18% (previously expected to be approximately 17%), and adjusted net income is expected to grow by approximately 33% (previously expected to be close to 30%). Adjusted EPS is now projected to increase approximately 35%, compared to the previous expectation of approximately 34%.

The company still expects adjusted shares outstanding to be approximately 89 million, which includes a repurchase of 1.7 million shares by September 30, 2023.

The company now expects new equipment placements to be between approximately 130 and 140 (previously expected to be approximately 140) at franchisee-owned locations. In addition, new system-wide stores are expected to open in between approximately 150 and 160 locations (previously approximately 160 locations were expected).

Still, system-wide same-store sales are expected to be in the high single-digit percentage range.

The metrics are based on the assumption that there are no significant supply chain disruptions.

Zacks Rank

Planet Fitness currently carries a Zacks Rank #4 (Sell).

You can see the full list of today’s Zacks #1 Rank (Strong Buy) shares here.

Recent user discretionary versions

Choice Hotels International, Inc. CHH delivered mixed results for the third quarter of 2023, with earnings missing the Zacks Consensus Estimate and revenue outperforming. In addition, the top and bottom lines increased year-over-year.

The year-over-year growth was driven by the company’s top driver of business services, synergies through the successful integration of Radisson Americas and organic growth of its portfolio of brands focused on hotels that generate higher unit fees. The company also aims to remain focused on its robust organic earnings growth strategy and pursue inorganic growth to drive long-term shareholder value.

Hyatt Hotels Corporation H reported Q3 2023 results in which earnings beat the Zacks Consensus Estimate, while revenue missed the same. However, both indicators increased year-on-year.

Hyatt’s quarterly results reflect year-over-year growth in system-wide comparable revenue per available room (RevPAR), driven by increases in occupancy and average daily rate (ADR). This upward trend is driven primarily by strong global demand for travel, particularly among leisure guests and group customers. Also, net room growth is fueling solid fee generation, which the company expects to continue in the coming period given the positive trends. However, increased costs and expenses, currency risks and continued macroeconomic uncertainty partially offset the aforementioned headwinds.

Marriott International, Inc. MAR reported impressive Q3 2023 results, with earnings and revenue beating the Zacks Consensus Estimate. The top and bottom lines both increased year-over-year.

The results were primarily driven by strong leisure demand and robust global booking trends. Also, significant growth in revenue per available room (RevPAR) in international markets added to the growth. At the end of the third quarter of 2023, Marriott’s development project totals 3,200 hotels with approximately 557,000 rooms.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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