Planet Fitness (PLNT) swung to a net profit for the quarter ended Sep. 30, 2016. The company has made a net profit of $3.42 million, or $ 0.08 a share in the quarter, against a net loss of $3.89 million, or $0.04 a share in the last year period. On an adjusted basis, net profit for the quarter was $15.87 million, when compared with $10.46 million in the last year period.

Revenue during the quarter grew 26.43 percent to $87.01 million from $68.82 million in the previous year period. Gross margin for the quarter contracted 239 basis points over the previous year period to 70.20 percent. Total expenses were 69.94 percent of quarterly revenues, down from 84.98 percent for the same period last year. This has led to an improvement of 1503 basis points in operating margin to 30.06 percent.

Operating income for the quarter was $26.15 million, compared with $10.34 million in the previous year period.

However, the adjusted EBITDA for the quarter stood at $35.42 million compared with $26.53 million in the prior year period. At the same time, adjusted EBITDA margin improved 216 basis points in the quarter to 40.71 percent from 38.56 percent in the last year period.

"Our business continues to get stronger," commented Christopher Rondeau, chief executive officer. "Third quarter system-wide same store sales increased 10% as a growing number of casual and first time gym users are joining Planet Fitness. The combination of our affordable, non-intimidating fitness offering and increased national and local advertising spend, which continues to increase with each incremental new join, is fueling greater brand awareness in all markets and membership growth across the store base. Our formula for expanding Planet Fitness’ market share, enriching members’ lives and delivering strong returns to our franchisees has been working. At the same time, our business model has consistently generated double digit earnings growth and strong free cash flow, providing the company a great foundation for driving significant long-term shareholder value." Mr. Rondeau continued, "based on our performance and more importantly, the long runway for growth ahead of us, we are also announcing that we are seeking to amend our credit facilities to, among other things, increase the size of our term loan. Proceeds from the incremental borrowings, plus cash on our balance sheet, will enable us to consider a special cash dividend to holders of our Class A common stock and other equivalent payments, including payments to unit holders of Pla-Fit Holdings, LLC, of up to approximately $280 million."

For the fiscal year 2016, Planet Fitness projects revenue to be in the range of $373 million to $378 million. Planet Fitness forecasts adjusted net income to be in the range of $65 million to $66 million, the company forecasts diluted earnings per share to be in the range of $0.66 to $0.67 on adjusted basis.

Cash conversion cycle (CCC) has decreased to 31 days for the quarter from 38 days for the last year period. Days sales outstanding went down to 14 days for the quarter compared with 18 days for the same period last year.

Days inventory outstanding has decreased to 1 days for the quarter compared with 9 days for the previous year period. At the same time, days payable outstanding went down to 46 days for the quarter from 65 for the same period last year.