Planet Fitness: Visible Catalysts, But I Am Still Waiting For Growth To Accelerate

Core Viewpoint - Planet Fitness (PLNT) has shown improvement in its business performance, with potential catalysts for growth acceleration expected in FY25, particularly under the leadership of the new CEO [2][3][13]. Financial Performance - In Q2 2024, PLNT reported revenue of $301 million, exceeding consensus expectations of $291 million, driven by franchise revenue of approximately $88 million, national advertising fund revenue of $20.1 million, corporate-owned stores revenue of $125.5 million, and equipment revenue of $68 million [3]. - Adjusted EBITDA was $128 million, surpassing street estimates by $4 million, while adjusted EPS was $0.71, beating expectations by $0.05 [3]. - Management reiterated FY24 guidance, projecting revenue growth of 4-6%, adjusted EBITDA growth of 7-9%, and adjusted EPS growth of 7-9% year-over-year [3]. Member Churn and Macro Environment - Member churn rates have improved and are trending towards normalized levels, although still elevated compared to historical data [3][13]. - The macroeconomic environment has stabilized, with inflation falling below 3% and a stable labor market, which is expected to enhance consumer spending and benefit PLNT [3][4]. Growth Catalysts - Management is testing new pricing for the Black Card membership, with potential increases from the current $24.99 to $27.99 or $29.99, representing a potential pricing uplift of approximately 16% [5]. - The new CEO, Colleen Keating, is focused on hiring a Chief Development Officer to drive unit growth, indicating a commitment to expanding the franchise model [8][9]. - PLNT has successfully attracted a growing number of Millennials and Gen Z members, which positions the brand well for future growth [8]. Leadership and Strategy - The new CEO's experience in the hospitality sector and her focus on enhancing the membership experience are seen as positive developments for PLNT [10][12]. - The CEO's strategic initiatives, including potential hiring of a COO and direct engagement with top management, are expected to improve operational effectiveness and credibility [10][12]. Valuation Outlook - PLNT's future valuation re-rating will depend on its ability to reaccelerate growth to historical double-digit levels, with two potential scenarios outlined: one where growth accelerates and another where it disappoints, leading to a significant derating [12].