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Planet Fitness, Inc.: Initiation of Research Coverage

Monday, August 31, 2015

William Blair & Company initiated research coverage of Planet Fitness, Inc. (PLNT $16.05) Planet Fitness is a rapidly growing franchisor and operator of fitness clubs in the United States, Puerto Rico, and Canada.

Analyst Sharon Zackfia estimated the company would generate pro forma earnings per share of $0.47 in 2015 and $0.57 in 2016, with healthy club growth of 20%-plus in 2015, high teens in 2016, and midteens thereafter.

"Accessible is the key word for Planet Fitness," Zackfia said. "Clubs are specifically designed to appeal to all fitness levels, and an affordable flat national fee structure with monthly dues of $10 to $20 puts Planet Fitness membership within reach of virtually all income levels. Reflecting its welcoming atmosphere, compelling value proposition, national footprint, and $21 million national advertising fund, Planet Fitness has achieved industry-leading brand awareness as well as broad demographic appeal across age groups, income levels, and gender. As a result, Planet Fitness now has over 7 million members and holds the No. 1 market share in the United States in member count, with 13% of total U.S. fitness club members, having grown its member base at a 27% compound annual rate from 2010 through 2014."

Zackfia added, "With an easy-to-operate model featuring minimal staffing and a recurring revenue stream of monthly dues, Planet Fitness clubs generate cash-on-cash returns of more than 25% on an average investment of about $1.9 million. As a result of its compelling per-club cash flow of roughly $500,000 per year, Planet Fitness has grown its club base at a 24% compound annual rate since 2010, recently reaching 1,000 locations, and management believes room exists for more than 4,000 clubs across the United States."

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