Financial Performance Overview

Planet Fitness is a leading franchisor and operator of fitness centers in the United States. As of March 31, 2024, Planet Fitness had 2,599 stores system-wide.

Strong Revenue Growth

In the first quarter of 2024, total revenue grew by 11.6% to $248.0 million compared to $222.2 million in the first quarter of 2023. This growth was driven by:

• Franchise revenue increased 11.0% to $84.2 million due to higher royalty revenue from same store sales growth of 6.3%, new stores opened since January 1, 2023, and higher royalties on annual fees.
  
• National advertising fund revenue grew 17.7% to $19.8 million due to higher same store sales and new stores.
• Corporate-owned stores revenue increased 15.6% to $122.4 million due to same store sales growth of 6.2%, new stores opened, and the Florida store acquisition in 2023.

Revenue by Segment

Segment	Q1 2024	Q1 2023	% Change
Franchise	$104.0 million	$92.7 million	+12.2%
Corporate-Owned Stores	$122.4 million	$105.9 million	+15.6%
Equipment	$21.6 million	$23.7 million	-8.6%
Total	$248.0 million	$222.2 million	+11.6%

Improving Profitability

• Income from operations grew by 26.4% to $65.8 million in Q1 2024 compared to $52.2 million in Q1 2023.
  
• Net income increased 41.3% to $35.0 million in Q1 2024 versus $24.8 million in Q1 2023.
• EBITDA grew 18.9% to $104.6 million in Q1 2024 compared to $88.0 million in Q1 2023.

These profitability improvements were driven by strong system-wide same store sales growth of 6.2% and operating leverage from new store openings and acquisitions.

New Store Growth

• Opened 25 new stores system-wide in Q1 2024 compared to 36 in Q1 2023
• Ended the quarter with 2,599 stores system-wide, up from 2,410 stores at the beginning of 2023
• New stores are a key driver of revenue and profit growth

Financial Position

• Strong balance sheet with $301.7 million of cash, cash equivalents and short-term investments as of March 31, 2024
• Long-term debt outstanding was $1.88 billion as of March 31, 2024
• Cash flow from operations was $89.7 million in Q1 2024 compared to $97.9 million in Q1 2023

Business Outlook

Planet Fitness is well-positioned for continued growth and profitability in 2024 and beyond.

Favorable Industry Trends

The global health club industry is large and growing, driven by:

• Increasing health consciousness
• Desire for active lifestyles
• Rising rates of obesity and other health issues

As an affordable, non-intimidating fitness brand, Planet Fitness stands to benefit from these trends.

Growth Strategies

Planet Fitness aims to drive growth through:

• Opening new franchise and corporate-owned stores in existing and new markets
• Increasing same store sales at existing locations
• Strategic acquisitions of franchisee groups and stores
• Improving profitability through scale and operating leverage

If executed well, these strategies should lead to steady gains in system-wide stores, revenue, and profitability over time.

Risk Factors

Planet Fitness does face risks that could affect its growth, including:

• Intense competition in the fitness industry
• Potential oversaturation of certain markets
• Rising real estate, labor, and other operating costs
• Changes in consumer preferences and behavior

However, the company has a strong brand, loyal customer base, and asset-light franchise model that help mitigate these risks.

Financial Analysis

Revenue

Q1 2024 total revenue increased 11.6% over Q1 2023 to $248.0 million. Growth was broad-based across the franchise, corporate-owned stores, and equipment segments.

Profitability

Q1 2024 net income rose 41.3% over Q1 2023 to $35.0 million as revenue growth, higher NAF contributions, and operating leverage drove margin expansion.

Cash Flow

Through Q1 2024, Planet Fitness generated $89.7 million of cash flow from operations, which helps fund growth investments and service debt obligations.

Balance Sheet

With no near-term debt maturities and $301.7 million of cash on hand, the company has a healthy financial position to support its growth.

Final Thoughts

Planet Fitness turned in an excellent first quarter of 2024, with strong gains in revenue, profitability, and system-wide stores. The company appears to have good momentum heading into the rest of 2024 based on a leading brand, capital-light franchise model, and large market opportunity. If Planet Fitness can continue executing on its growth strategy, it should be able to deliver steady gains for shareholders over the long run.