IPO Report: Planet Fitness (PLNT)

Francis Gaskins |

Planet_Fitness.jpg

Planet Fitness (PLNT) is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations, with a highly recognized national brand. The company is based in Newington, NH.

Six other companies are scheduled for the week of Aug. 3. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: J.P. Morgan Securities, Merrill Lynch, Jefferies, Credit Suisse Securities
Co-managers: Guggenheim Securities, Baird/ William Blair, Piper Jaffray, Cowen and Company

End of lockup (180 days): Tuesday, February 2, 2016
End of 25-day quiet period: Monday, August 31, 2015

PLNT scheduled a $203 million IPO with a market capitalization of $529 million at a price range midpoint of $15 for Thursday, August 6, 2015 on NYSE.

Planet Fitness Summary

PLNT is one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations, with a highly recognized national brand.

Planet Fitness Valuation

Glossary

Per share dilution

.

.

-$20.40

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Planet Fitness (PLNT)

$1,485

4.8

43.2

-33.4

2.8

14%

             

Planet Fitness Conclusion

Buy

System wide sales +11.9% in Q1

976 stores, 94% franchised

Growth plan, over 4000 stores in the US

1000 new locations already signed

Proceeds used primarily to purchase stock from private equity sponsors

P/E of 43

Price to sales of 4.8

Per share dilution -20.40 vs IPO mid-range of $15

Planet Fitness Business

PLNT one of the largest and fastest-growing franchisors and operators of fitness centers in the United States by number of members and locations, with a highly recognized national brand.

PLNT’s mission is to enhance people’s lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which PLNT calls the Judgement Free Zone, where anyone—and PLNT means anyone—can feel they belong. PLNT’s bright, clean stores are typically 20,000 square feet, with a large selection of high-quality, purple and yellow Planet Fitness-branded cardio, circuit- and weight-training equipment and friendly staff trainers who offer unlimited free fitness instruction to all PLNT’s members in small groups through its PE@PF program.

PLNT offers this differentiated fitness experience at only $10 per month for its standard membership. This exceptional value proposition is designed to appeal to a broad population, including occasional gym users and the approximately 80% of the U.S. and Canadian populations over age 14 who are not gym members, particularly those who find the traditional fitness club setting intimidating and expensive.

PLNT and its franchisees fiercely protect Planet Fitness’ community atmosphere—a place where you do not need to be fit before joining and where progress toward achieving your fitness goals (big or small) is supported and applauded by PLNT’s staff and fellow members.

PLNT’s judgement-free approach to fitness and exceptional value proposition have enabled PLNT to grow its revenues to $279.8 million in 2014 and to become an industry leader with $1.2 billion in system-wide sales in 2014, and more than 7.1 million members and 976 stores in 47 states, Puerto Rico and Canada as of March 31, 2015. I

In June 2015, PLNT announced the opening of its 1,000th store. System-wide sales for 2014 include $1.1 billion attributable to franchisee-owned stores, from which PLNT generates royalty revenue, and $82.0 million attributable to its corporate-owned stores.

Of PLNT’s 976 stores, 919 are franchised and 57 are corporate-owned. PLNT’s stores are successful in a wide range of geographies and demographics.

Planet Fitness Growth Plan

According to internal and third-party analysis, PLNT believes it has the opportunity to more than quadruple its store count to over 4,000 stores in the United States alone.

1000 more signed
Under signed ADAs as of March 31, 2015, PLNT’s franchisees have committed to open more than 1,000 additional stores.

In 2014, PLNT’s corporate-owned stores had segment EBITDA margin of 37.3% and had AUVs of approximately $1.6 million with four-wall EBITDA margins of approximately 41%, or approximately 36% after applying the 5% royalty rate under its current franchise agreements.

Based on a survey of franchisees, PLNT believes that its franchise stores achieve four-wall EBITDA margins in line with these corporate-owned store EBITDA margins. PLNT’s strong member value proposition has also driven growth throughout a variety of economic cycles and conditions.

Planet Fitness Intellectual Property

PLNT owns many registered trademarks and service marks in the United States and in other countries. PLNT believes the Planet Fitness name and the many distinctive marks associated with it are of significant value and are very important to its business. Accordingly, as a general policy, PLNT pursues registration of its marks in select international jurisdictions, monitor the use of its marks in the United States and internationally and vigorously oppose any unauthorized use of the marks.

PLNT licenses the use of its marks to franchisees, third-party vendors and others through franchise agreements, vendor agreements and licensing agreements. These agreements restrict third parties’ activities with respect to use of the marks and impose brand standards requirements. PLNT requires licensees to inform PLNT of any potential infringement of the marks.

Planet Fitness Competition

The health club industry is highly competitive and fragmented, and the number, size and strength of competitors vary by region.

Some of PLNT’s competitors have national name recognition or an established presence in local markets, and some are established in markets in which PLNT has existing stores or intend to locate new stores. These risks are more significant in Canada, where PLNT has a limited number of stores and limited brand recognition.

PLNT competes primarily based upon the membership value proposition PLNT is able to offer due to its significant economies of scale, high-quality fitness experience, judgement-free atmosphere and superior customer service, all at an exceptional value, which PLNT believes differentiates PLNT from its competitors.

PLNT’s competition continues to increase as PLNT continues to expand into new markets and add stores in existing markets.

Planet Fitness 5% Shareholders Pre-IPO

TSG Funds       81.6%  

Chris Rondeau 8.7%

Marc Grondahl              5.4%

Planet Fitness Dividends

No dividends are planned.

Planet Fitness Use of Proceeds

PLNT expects to receive $128 million from its IPO and use it for the following, primarily to purchase stock from private equity sponsors.

to purchase 9,122,657 issued and outstanding Holdings Units from certain Continuing LLC Owners consisting of investment funds affiliated with TSG that they will have received in the Reclassification (or 10,491,055 Holdings Units if the underwriters exercise in full their option to purchase additional shares of Class A common stock), at a purchase price per unit equal to the initial public offering price per share of Class A common stock, less underwriting discounts and commissions.

As such, PLNT will acquire a minority equity percentage of the Holdings Units held by the Continuing LLC Owners issued to them in the Reclassification, which is in addition to the Holdings Units that PLNT acquires in the Reclassification on a one-for-one basis in relation to the number of shares of Class A common stock issued to the Direct TSG Investors in the Merger. Pla-Fit Holdings, LLC will not receive any proceeds that PLNT uses to purchase Holdings Units from Continuing LLC Owners.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
PLNT Planet Fitness Inc. 21.01 -0.07 -0.33 573,192

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