Planet Fitness(PLNT) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Planet Fitness reported total revenue of $181.7 million for Q2 2019, a 29.3% increase from $140.6 million in the prior year period [17] - Adjusted earnings per share (EPS) increased by 32.4% to $0.45 compared to $0.34 in the prior year [7][28] - Net income attributable to Planet Fitness Inc was $34.8 million, or $0.41 per diluted share, compared to $25.9 million, or $0.29 per diluted share in the prior year [27] Business Line Data and Key Metrics Changes - Franchisee same store sales increased by 9%, while corporate store same store sales increased by 5.8% [18] - Franchise segment revenue rose to $71.8 million, a 23.5% increase from $58.2 million in the prior year [19] - Equipment segment revenue increased by 45.7% to $70.2 million, driven by higher replacement equipment sales [23] Market Data and Key Metrics Changes - The company added approximately 400,000 net new members in Q2, ending the period with over 14 million members, a 16% increase year-over-year [8] - The Black Card penetration increased by 100 basis points to 61.5% compared to the previous year [18] Company Strategy and Development Direction - Planet Fitness plans to open 250 to 260 new stores in 2019, up from a previous estimate of approximately 225 [14] - The company is focusing on enhancing its technology initiatives, including the launch of a mobile app to improve member experience [12] - The partnership with Kohl's aims to open five new Planet Fitness stores adjacent to existing Kohl's locations by the end of 2019 [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's growth, citing strong franchisee commitment and market opportunities [39] - The company anticipates a moderate decline in same store sales growth in the second half of the year, projecting approximately 8% for the full year [34][85] - Management noted that attrition rates have slightly improved, indicating stability in membership retention [99] Other Important Information - The company reported a significant increase in cash and cash equivalents, reaching $330.5 million, up 123.7% from the previous year [33] - Adjusted EBITDA increased by 31.1% to $76.5 million from $58.4 million in the prior period [30] Q&A Session Summary Question: Shift in unit growth strategy - Management indicated that the sophistication of franchisees and increased resources have allowed for more openings, suggesting a potential shift in growth strategy [38][40] Question: Balance between franchisee markets and cannibalization - Management acknowledged that more openings could lead to some cannibalization but emphasized that analytics show this can be beneficial for overall membership growth [42][43] Question: Online vs. in-store signups - Currently, about 30% of memberships are signed up online, an increase from 25% in the past year [76][77] Question: Equipment revenue expectations - Management expects equipment revenue to be slightly down in Q4 compared to the previous year, with 60% of equipment revenue coming from replacement sales [70][71] Question: Competitive landscape and churn rates - Management reported no significant changes in churn rates, maintaining that attrition has slightly improved [99] Question: Capital allocation and share repurchase plans - The company has approximately $150 million remaining under its $500 million share repurchase plan and continues to focus on returning cash to shareholders [81]