10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to ______________

Commission file number: 001-37534

PLANET FITNESS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	38-3942097
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

4 Liberty Lane West, Hampton, NH 03842

(Address of Principal Executive Offices and Zip Code)

(603) 750-0001

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.0001 Par Value	PLNT	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

As of November 1, 2019 there were 81,792,537 shares of the Registrant’s Class A Common Stock, par value $0.0001 per share, outstanding and 8,561,920 shares of the Registrant’s Class B Common Stock, par value $0.0001 per share, outstanding.

PLANET FITNESS, INC.

TABLE OF CONTENTS

		Page
	Cautionary Note Regarding Forward-Looking Statements	3
	PART I – FINANCIAL INFORMATION	4
ITEM 1.	Financial Statements	4
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	43
ITEM 4.	Controls and Procedures	44
	PART II – OTHER INFORMATION	45
ITEM 1.	Legal Proceedings	45
ITEM 1A.	Risk Factors	45
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
ITEM 3.	Defaults Upon Senior Securities	45
ITEM 4.	Mine Safety Disclosures	45
ITEM 5.	Other Information	45
ITEM 6.	Exhibits	46
	Signatures	47

2

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “ongoing,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:

• future financial position;

• business strategy;

• budgets, projected costs and plans;

• future industry growth;

• financing sources;

• potential return of capital initiatives;

• the impact of litigation, government inquiries and investigations; and

• all other statements regarding our intent, plans, beliefs or expectations or those of our directors or officers.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, risks and uncertainties associated with the following:

• our dependence on the operational and financial results of, and our relationships with, our franchisees and the success of their new and existing stores;

• damage to our brand and reputation;

• our ability to successfully implement our growth strategy, including our and our franchisees’ ability to identify and secure suitable sites for new franchise stores;

• technical, operational and regulatory risks related to our third-party providers’ systems and our own information systems, including failures, interruptions or security breaches of such systems;

• our and our franchisees’ ability to attract and retain members;

• the high level of competition in the health club industry generally;

• our reliance on a limited number of vendors, suppliers and other third-party service providers;

• our substantial increased indebtedness as a result of our refinancing and securitization transactions and our ability to incur additional indebtedness or refinance that indebtedness in the future;

• our future financial performance and our ability to pay principal and interest on our indebtedness;

• our corporate structure and tax receivable agreements; and

• the other factors identified under the heading “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2018 filed with the Securities and Exchange Commission on March 1, 2019.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Report. We undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future developments or otherwise.

3

PART I-FINANCIAL INFORMATION

1. Financial Statements

Planet Fitness, Inc. and subsidiaries

Condensed consolidated balance sheets

(Unaudited)

(Amounts in thousands, except per share amounts) 

	September 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	219,752		$	289,431
Restricted cash	30,499			30,708
Accounts receivable, net of allowance for bad debts of $37 and $84 at September 30, 2019 and December 31, 2018, respectively	29,398			38,960
Inventory	2,612			5,122
Restricted assets – national advertising fund	657			—
Prepaid expenses	8,649			4,947
Other receivables	9,232			12,548
Other current assets	5,471			6,824
Total current assets	306,270			388,540
Property and equipment, net of accumulated depreciation of $70,083, as of September 30, 2019 and $53,086 as of December 31, 2018	131,454			114,367
Right-of-use assets, net	127,746			—
Intangible assets, net	227,575			234,330
Goodwill	206,752			199,513
Deferred income taxes	418,745			414,841
Other assets, net	1,690			1,825
Total assets	$	1,420,232		$	1,353,416
Liabilities and stockholders’ deficit
Current liabilities:
Current maturities of long-term debt	$	12,000		$	12,000
Accounts payable	23,037			30,428
Accrued expenses	25,737			32,384
Equipment deposits	8,566			7,908
Restricted liabilities – national advertising fund	657			—
Deferred revenue, current	24,638			23,488
Payable pursuant to tax benefit arrangements, current	25,506			24,765
Other current liabilities	15,780			430
Total current liabilities	135,921			131,403
Long-term debt, net of current maturities	1,155,049			1,160,127
Deferred rent, net of current portion	—			10,083
Lease liabilities, net of current portion	127,646			—
Deferred revenue, net of current portion	31,532			26,374
Deferred tax liabilities	2,067			2,303
Payable pursuant to tax benefit arrangements, net of current portion	407,884			404,468
Other liabilities	2,250			1,447
Total noncurrent liabilities	1,726,428			1,604,802
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
Class A common stock, $.0001 par value - 300,000 authorized, 81,773 and 83,584 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	8			9
Class B common stock, $.0001 par value - 100,000 authorized, 8,562 and 9,448 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	1			1
Accumulated other comprehensive income	189			94
Additional paid in capital	27,240			19,732
Accumulated deficit	(466,032		)	(394,410		)
Total stockholders’ deficit attributable to Planet Fitness Inc.	(438,594		)	(374,574		)
Non-controlling interests	(3,523		)	(8,215		)
Total stockholders’ deficit	(442,117		)	(382,789		)
Total liabilities and stockholders’ deficit	$	1,420,232		$	1,353,416

 See accompanying notes to condensed consolidated financial statements

4

Planet Fitness, Inc. and subsidiaries

Condensed consolidated statements of operations

(Unaudited)

(Amounts in thousands, except per share amounts)

	For the three months ended September 30,						For the nine months ended September 30,
	2019			2018			2019			2018
Revenue:
Franchise	$	53,443		$	41,997		$	164,624		$	129,575
Commission income	614			1,448			2,673			5,012
National advertising fund revenue	12,652			11,377			36,986			32,997
Corporate-owned stores	40,742			35,406			118,481			102,365
Equipment	59,364			46,428			174,528			128,589
Total revenue	166,815			136,656			497,292			398,538
Operating costs and expenses:
Cost of revenue	46,194			36,871			135,071			100,114
Store operations	22,295			18,751			63,363			55,154
Selling, general and administrative	20,928			17,233			57,944			52,066
National advertising fund expense	12,652			11,377			36,986			32,997
Depreciation and amortization	11,832			8,863			32,316			25,947
Other (gain) loss	(147		)	(12		)	99			958
Total operating costs and expenses	113,754			93,083			325,779			267,236
Income from operations	53,061			43,573			171,513			131,302
Other expense, net:
Interest income	1,808			2,025			5,585			2,480
Interest expense	(14,807		)	(17,909		)	(44,192		)	(35,725		)
Other expense	(61		)	(27		)	(4,824		)	(338		)
Total other expense, net	(13,060		)	(15,911		)	(43,431		)	(33,583		)
Income before income taxes	40,001			27,662			128,082			97,719
Provision for income taxes	10,309			7,190			26,924			23,335
Net income	29,692			20,472			101,158			74,384
Less net income attributable to non-controlling interests	3,915			3,001			13,128			11,158
Net income attributable to Planet Fitness, Inc.	$	25,777		$	17,471		88,030			$	63,226
Net income per share of Class A common stock:
Basic	$	0.31		$	0.20		$	1.05		$	0.72
Diluted	$	0.31		$	0.20		$	1.04		$	0.72
Weighted-average shares of Class A common stock outstanding:
Basic	83,157			88,047			83,700			87,727
Diluted	83,807			88,458			84,354			88,064

See accompanying notes to condensed consolidated financial statements.

5

Planet Fitness, Inc. and subsidiaries

Condensed consolidated statements of comprehensive income (loss)

(Unaudited)

(Amounts in thousands)

	For the three months ended September 30,					For the nine months ended September 30,
	2019			2018		2019		2018
Net income including non-controlling interests	$	29,692		$	20,472	$	101,158	$	74,384
Other comprehensive income (loss), net:
Unrealized gain on interest rate caps, net of tax	—			606		—		989
Foreign currency translation adjustments	(62		)	40		95		(23		)
Total other comprehensive income, net	(62		)	646		95		966
Total comprehensive income including non-controlling    interests	29,630			21,118		101,253		75,350
Less: total comprehensive income attributable to non-controlling interests	3,915			3,007		13,128		11,221
Total comprehensive income attributable to Planet    Fitness, Inc.	$	25,715		$	18,111	$	88,125	$	64,129

See accompanying notes to condensed consolidated financial statements.

6

Planet Fitness, Inc. and subsidiaries

Condensed consolidated statements of cash flows

(Unaudited)

(Amounts in thousands)

	For the nine months ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	101,158		$	74,384
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,316			25,947
Amortization of deferred financing costs	4,014			2,041
Amortization of favorable leases	—			280
Amortization of asset retirement obligations	178			—
Amortization of interest rate caps	—			1,170
Deferred tax expense	15,666			19,654
Loss on extinguishment of debt	—			4,570
Loss (gain) on re-measurement of tax benefit arrangement	4,638			(354		)
Provision for bad debts	13			8
Loss on reacquired franchise rights	—			360
(Gain) loss on disposal of property and equipment	(84		)	542
Equity-based compensation	3,565			4,137
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable	12,779			10,922
Due to and due from related parties	(344		)	3,174
Inventory	2,509			(3,450		)
Other assets and other current assets	(4,628		)	4,972
Accounts payable and accrued expenses	(12,939		)	2,426
Other liabilities and other current liabilities	1,510			(2,869		)
Income taxes	3,047			1,028
Payable pursuant to tax benefit arrangements	(17,476		)	(21,706		)
Equipment deposits	658			4,950
Deferred revenue	6,103			7,544
Leases and deferred rent	54			4,156
Net cash provided by operating activities	152,737			143,886
Cash flows from investing activities:
Additions to property and equipment	(37,138		)	(18,601		)
Acquisition of franchises	(14,801		)	(45,752		)
Proceeds from sale of property and equipment	84			196
Purchase of intellectual property	(300		)	—
Net cash used in investing activities	(52,155		)	(64,157		)
Cash flows from financing activities:
Principal payments on capital lease obligations	(59		)	(35		)
Proceeds from issuance of long-term debt	—			1,200,000
Repayment of long-term debt	(9,000		)	(709,469		)
Payment of deferred financing and other debt-related costs	—			(27,191		)
Exercise of stock options and ESPP proceeds	1,892			1,106
Repurchase and retirement of Class A common stock	(157,945		)	(42,090		)
Dividend equivalent payments	(229		)	(881		)
Distributions to Continuing LLC Members	(5,499		)	(5,369		)
Net cash (used in) provided by financing activities	(170,840		)	416,071
Effects of exchange rate changes on cash and cash equivalents	370			(234		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(69,888		)	495,566
Cash, cash equivalents and restricted cash, beginning of period	320,139			113,080
Cash, cash equivalents and restricted cash, end of period	$	250,251		$	608,646
Supplemental cash flow information:
Net cash paid for income taxes	$	9,061		$	3,777
Cash paid for interest	$	40,335		$	20,015
Non-cash investing activities:
Non-cash additions to property and equipment	$	4,837		$	2,217

 See accompanying notes to condensed consolidated financial statements.

7

Planet Fitness, Inc. and subsidiaries

Condensed consolidated statements of changes in equity (deficit)

(Unaudited)

(Amounts in thousands) 

	Class A common stock				Class B common stock				Accumulated other comprehensive (loss) income			Additional paid- in capital		Accumulated deficit			Non-controlling interests			Total (deficit) equity
	Shares		Amount		Shares		Amount
Balance at June 30, 2019	83,995		$	8	8,582		$	1	$	251		$	24,495	$	(333,870	)	$	(5,257	)	$	(314,372	)
Net income	—		—		—		—		—			—		25,777			3,915			29,692
Equity-based compensation expense	—		—		—		—		—			1,286		—			—			1,286
Exchanges of Class B common stock	20		—		(20	)	—		—			—		—			—			—
Exercise of stock options, vesting of restricted share units and ESPP share purchase	30		—		—		—		—			826		—			—			826
Repurchase and retirement of Class A common stock	(2,272	)	—		—		—		—			209		(157,945		)	(209		)	(157,945		)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	—		—		—		—		—			424		—			—			424
Non-cash adjustments to VIEs	—		—		—		—		—			—		—			(215		)	(215		)
Distributions paid to members of Pla-Fit Holdings	—		—		—		—		—			—		—			(1,757		)	(1,757		)
Forfeiture of dividend equivalents	—		—		—		—		—			—		6			—			6
Other comprehensive income	—		—		—		—		(62		)	—		—			—			(62		)
Balance at September 30, 2019	81,773		$	8	8,562		$	1	$	189		$	27,240	$	(466,032	)	$	(3,523	)	$	(442,117	)

	Class A common stock				Class B common stock				Accumulated other comprehensive (loss) income			Additional paid- in capital			Accumulated deficit			Non-controlling interests			Total (deficit) equity
	Shares		Amount		Shares		Amount
Balance at June 30, 2018	87,932		$	9	10,471		$	1	$	(385	)	$	14,744		$	(94,348	)	$	(11,269	)	$	(91,248	)
Net income	—		—		—		—		—			—			17,471			3,001			20,472
Equity-based compensation expense	—		—		—		—		—			1,450			—			—			1,450
Exchanges of Class B common stock	927		—		(927	)	—		1			(1,442		)	—			1,441			—
Retirement of Class B common stock	—		—		—		—		—			—			—			—			—
Exercise of stock options and vesting of restricted share units	50		—		—		—		—			706			—			—			706
Repurchase and retirement of Class A common stock	(824	)	—		—		—		—			—			(42,090		)	—			(42,090		)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	—		—		—		—		—			1,779			—			—			1,779
Forfeiture of dividend equivalents	—		—		—		—		—			—			3			—			3
Distributions paid to members of Pla-Fit Holdings	—		—		—		—		—			—			—			(1,866		)	(1,866		)
Other comprehensive income	—		—		—		—		640			—			—			6			646
Balance at September 30, 2018	88,085		$	9	9,544		$	1	$	256		$	17,237		$	(118,964	)	$	(8,687	)	$	(110,148	)

8

Planet Fitness, Inc. and subsidiaries

Condensed consolidated statements of changes in equity (deficit)

(Unaudited)

(Amounts in thousands) 

	Class A common stock					Class B common stock				Accumulated other comprehensive (loss) income		Additional paid- in capital			Accumulated deficit			Non-controlling interests			Total (deficit) equity
	Shares		Amount			Shares		Amount
Balance at December 31, 2018	83,584		$	9		9,448		$	1	$	94	$	19,732		$	(394,410	)	$	(8,215	)	$	(382,789	)
Net income	—		—			—		—		—		—			88,030			13,128			101,158
Equity-based compensation expense	—		—			—		—		—		3,565			—			—			3,565
Exchanges of Class B common stock	886		—			(886	)	—		—		(1,172		)	—			1,172			—
Retirement of Class B common stock	—		—			—		—		—		—			—			—			—
Exercise of stock options, vesting of restricted share units and ESPP share purchase	99		—			—		—		—		2,035			—			—			2,035
Repurchase and retirement of Class A common stock	(2,796	)	(1		)	—		—		—		273			(157,945		)	(273		)	(157,946		)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	—		—			—		—		—		2,807			—			—			2,807
Non-cash adjustments to VIEs	—		—			—		—		—		—			—			(3,836		)	(3,836		)
Distributions paid to members of Pla-Fit Holdings	—		—			—		—		—		—			—			(5,499		)	(5,499		)
Cumulative effect adjustment, net of tax (Note 16)	—		—			—		—		—		—			(1,713		)	—			(1,713		)
Forfeiture of dividend equivalents	—		—			—		—		—		—			6			—			6
Other comprehensive income	—		—			—		—		95		—			—			—			95
Balance at September 30, 2019	81,773		$	8		8,562		$	1	$	189	$	27,240		$	(466,032	)	$	(3,523	)	$	(442,117	)

	Class A common stock				Class B common stock				Accumulated other comprehensive (loss) income			Additional paid- in capital			Accumulated deficit			Non-controlling interests			Total (deficit) equity
	Shares		Amount		Shares		Amount
Balance at December 31, 2017	87,188		$	9	11,193		$	1	$	(648	)	$	12,118		$	(130,966	)	$	(17,451	)	$	(136,937	)
Net income	—		—		—		—		—			—			63,226			11,158			74,384
Equity-based compensation expense	—		—		—		—		—			4,140			(3		)	—			4,137
Exchanges of Class B common stock	1,640		—		(1,640	)	—		1			(2,913		)	—			2,912			—
Retirement of Class B common stock	—		—		(9	)	—		—			—			—			—			—
Exercise of stock options and vesting of restricted share units	81		—		—		—		—			1,106			—			—			1,106
Repurchase and retirement of Class A common stock	(824	)	—		—		—		—			—			(42,090		)	—			(42,090		)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	—		—		—		—		—			2,786			—			—			2,786
Forfeiture of dividend equivalents	—		—		—		—		—						61						61
Distributions paid to members of Pla-Fit Holdings	—		—		—		—		—			—			—			(5,369		)	(5,369		)
Cumulative effect adjustment - ASC 606	—		—		—		—		—			—			(9,192		)	—			(9,192		)
Other comprehensive income	—		—		—		—		903			—			—			63			966
Balance at September 30, 2018	88,085		$	9	9,544		$	1	$	256		$	17,237		$	(118,964	)	$	(8,687	)	$	(110,148	)

See accompanying notes to condensed consolidated financial statements.

9

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

(1) Business Organization

Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with more than 14.1 million members and 1,899 owned and franchised locations (referred to as stores) in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico as of September 30, 2019.

The Company serves as the reporting entity for its various subsidiaries that operate three distinct lines of business:

• Licensing and selling franchises under the Planet Fitness trade name.

• Owning and operating fitness centers under the Planet Fitness trade name.

• Selling fitness-related equipment to franchisee-owned stores.

The Company was formed as a Delaware corporation on March 16, 2015 for the purpose of facilitating an initial public offering (the “IPO”), which was completed on August 11, 2015 and related transactions in order to carry on the business of Pla-Fit Holdings, LLC and its subsidiaries (“Pla-Fit Holdings”). As of August 5, 2015, in connection with the recapitalization transactions that occurred prior to the IPO, the Company became the sole managing member and holder of 100% of the voting power of Pla-Fit Holdings. Pla-Fit Holdings owns 100% of Planet Intermediate, LLC, which has no operations but is the 100% owner of Planet Fitness Holdings, LLC, a franchisor and operator of fitness centers through its subsidiaries. With respect to the Company, Pla-Fit Holdings and Planet Intermediate, LLC, each entity owns nothing other than the respective entity below it in the corporate structure and each entity has no other material operations.

The Company is a holding company whose principal asset is a controlling equity interest in Pla-Fit Holdings. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of limited liability company units of Pla-Fit Holdings (“Holdings Units”) not owned by the Company. Unless otherwise specified, “the Company” refers to both Planet Fitness, Inc. and Pla-Fit Holdings throughout the remainder of these notes.

As of September 30, 2019, Planet Fitness, Inc. held 100.0% of the voting interest and 90.5% of the economic interest of Pla-Fit Holdings and the holders of Holdings Units of Pla-Fit Holdings (the “Continuing LLC Owners”) held the remaining 9.5% economic interest in Pla-Fit Holdings.

(2) Summary of Significant Accounting Policies

(a) Basis of presentation and consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three and nine months ended September 30, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “Annual Report”) filed with the SEC on March 1, 2019. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

As discussed in Note 1, Planet Fitness, Inc. consolidates Pla-Fit Holdings. The Company also consolidates entities in which it has a controlling financial interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly

10

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it. The principal entities in which the Company possesses a variable interest include franchise entities and certain other entities. The Company is not deemed to be the primary beneficiary for Planet Fitness franchise entities. Therefore, these entities are not consolidated.

The results of the Company have been consolidated with Matthew Michael Realty LLC (“MMR”), PF Melville LLC (“PF Melville”), and Planet Fitness NAF, LLC (the “NAF”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. MMR and PF Melville are real estate holding companies that derive a majority of their financial support from the Company through lease agreements for corporate stores. See Note 3 for further information related to the Company’s VIEs. The NAF is an advertising fund on behalf of which the Company collects 2% of gross monthly membership dues from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to support our national marketing campaigns, our social media platforms and the development of local advertising materials.

(b) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, the liability for the Company’s tax benefit arrangements, and the value of the lease liability and related right-of-use asset recorded in accordance with ASC 842 (see Note 2(d) and 16).

(c) Fair Value

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The carrying value and estimated fair value of long-term debt as of September 30, 2019 and December 31, 2018 were as follows:

	September 30, 2019				December 31, 2018
	Carrying value		Estimated fair value(1)		Carrying value		Estimated fair value(1)
Long-term debt	$	1,188,000	$	1,230,305	$	1,197,000	$	1,188,985

(1) The estimated fair value of our long-term debt is estimated primarily based on current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.

(d) Recent accounting pronouncements

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases, in February 2016. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance requires lessees to recognize the assets and liabilities on the balance sheet for the rights and obligations created by leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Leases will be

11

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

classified as finance or operating, with the classification affecting the pattern and classification of expense recognition within the income statement.

The Company adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The new guidance also provides several practical expedients and policies that companies may elect upon transition. The Company has elected the package of practical expedients under which it did not reassess the classification of its existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. The Company did not elect the practical expedient pertaining to land easements, as it is not applicable to its leases. Additionally, the Company elected to use the practical expedient that permits a reassessment of lease terms for existing leases using hindsight.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption. This means, for those leases that qualify, the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components.

Upon transition to the new guidance on January 1, 2019, the Company recognized approximately $130,000 of operating lease liabilities. Additionally, the Company recorded ROU assets in a corresponding amount, net of amounts reclassified from other assets and liabilities, including deferred rent, tenant improvement allowances, and favorable lease assets, as specified by the new lease guidance. In connection with the election of the hindsight practical expedient related to reassessing lease terms for existing leases as of January 1, 2019, the Company recorded a cumulative transition adjustment of $1,713 through retained earnings, net of tax.

The FASB issued ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018. The guidance helps align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year, but allows for early adoption. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

(3) Variable Interest Entities

The carrying values of VIEs included in the consolidated financial statements as of September 30, 2019 and December 31, 2018 are as follows: 

	September 30, 2019				December 31, 2018
	Assets		Liabilities		Assets		Liabilities
PF Melville	$	2,722	$	—	$	4,787	$	—
MMR	2,233		—		3,563		—
Total	$	4,955	$	—	$	8,350	$	—

The Company also has variable interests in certain franchisees mainly through the guarantee of lease agreements. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $10,376 and $732 as of September 30, 2019 and December 31, 2018, respectively. In 2019, in connection with a real estate partnership, the Company began guaranteeing certain leases of its franchisees up to a maximum period of ten years with earlier expiration dates possible if certain conditions are met.

12

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

The amount of the Company’s maximum obligation represents a loss that the Company could incur from the variability in credit exposure without consideration of possible recoveries through insurance or other means. In addition, the amount bears no relation to the ultimate settlement estimated to be incurred from the Company’s involvement with these entities, which is not material.

(4) Acquisitions

Maine Acquisition

On May 30, 2019, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Maine for a cash payment of $14,801. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	999
Reacquired franchise rights	6,740
Customer relationships	30
Unfavorable leases, net	(140		)
Other assets	78
Goodwill	7,239
Liabilities assumed, including deferred revenues	(145		)
	$	14,801

The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.

The acquisition was not material to the results of operations of the Company.

Colorado Acquisition

On August 10, 2018, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Colorado for a cash payment of $17,249. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $10, which has been reflected in other operating costs in the statement of operations. The loss incurred reduced the net purchase price to $17,239. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	3,873
Reacquired franchise rights	4,610
Customer relationships	140
Favorable leases, net	80
Other assets	143
Goodwill	8,476
Liabilities assumed, including deferred revenues	(83		)
	$	17,239

The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.

The acquisition was not material to the results of operations of the Company.

13

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Long Island Acquisition

On January 1, 2018, the Company purchased from one of its franchisees certain assets associated with six franchisee-owned stores in New York for a cash payment of $28,503. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $350, which has been reflected in other operating costs in the statement of operations. The loss incurred reduced the net purchase price to $28,153. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	4,672
Reacquired franchise rights	7,640
Customer relationships	1,150
Favorable leases, net	520
Reacquired area development rights	150
Other assets	275
Goodwill	14,056
Liabilities assumed, including deferred revenues	(310		)
	$	28,153

The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.

The acquisition was not material to the results of operations of the Company.

(5) Goodwill and Intangible Assets

A summary of goodwill and intangible assets at September 30, 2019 and December 31, 2018 is as follows: 

September 30, 2019	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,093	(108,948		)	$	64,145
Noncompete agreements	5.0	14,500		(14,500		)	—
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.7	28,089		(11,259		)	16,830
		219,082		(138,107		)	80,975
Indefinite-lived intangible:
Trade and brand names	N/A	146,600		—			146,600
Total intangible assets		$	365,682	$	(138,107	)	$	227,575
Goodwill		$	206,752	$	—		$	206,752

14

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

December 31, 2018	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,063	$	(99,439	)	$	73,624
Noncompete agreements	5.0	14,500		(14,500		)	—
Favorable leases	8.0	4,017		(2,345		)	1,672
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.0	21,349		(8,615		)	12,734
		216,329		(128,299		)	88,030
Indefinite-lived intangible:
Trade and brand names	N/A	146,300		—			146,300
Total intangible assets		$	362,629	$	(128,299	)	$	234,330
Goodwill		$	199,513	$	—		$	199,513

In connection with the adoption of ASC 842, as of January 1, 2019, the Company has derecognized the favorable leases intangible asset, and the favorable leases balance is now included in the ROU asset, net balance (Note 16). The Company determined that no impairment charges were required during any periods presented and the increase to goodwill was due to the acquisition of four franchisee-owned stores on May 30, 2019 (Note 4).

Amortization expense related to the intangible assets totaled $4,160 and $4,027 for the three months ended September 30, 2019 and 2018, respectively and $12,186 and $12,052 for the nine months ended September 30, 2019 and 2018, respectively. The anticipated annual amortization expense related to intangible assets to be recognized in future years as of September 30, 2019 is as follows:

	Amount
Remainder of 2019	$	4,146
2020	14,968
2021	15,053
2022	15,280
2023	15,185
Thereafter	16,343
Total	$	80,975

(6) Long-Term Debt

Long-term debt as of September 30, 2019 and December 31, 2018 consists of the following: 

	September 30, 2019			December 31, 2018
Class A-2-I notes	$	569,250		$	573,563
Class A-2-II notes	618,750			623,437
Total debt, excluding deferred financing costs	1,188,000			1,197,000
Deferred financing costs, net of accumulated amortization	(20,951		)	(24,873		)
Total debt	1,167,049			1,172,127
Current portion of long-term debt and line of credit	12,000			12,000
Long-term debt, net of current portion	$	1,155,049		$	1,160,127

15

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Future annual principal payments of long-term debt as of September 30, 2019 are as follows: 

	Amount
Remainder of 2019	$	3,000
2020	12,000
2021	12,000
2022	562,563
2023	6,250
Thereafter	592,187
Total	$	1,188,000

On August 1, 2018, Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, entered into a base indenture and a related supplemental indenture (collectively, the “Indenture”) under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued Series 2018-1 4.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) with an initial principal amount of $575,000 and Series 2018-1 4.666% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “Class A-2 Notes”) with an initial principal amount of $625,000. In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility that allows for the issuance of up to $75,000 in Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes” and together with the Class A-2 Notes, the “Series 2018-1 Senior Notes”), and certain letters of credit, all of which was undrawn as of both September 30, 2019 and December 31, 2018. The Series 2018-1 Senior Notes were issued in a securitization transaction pursuant to which most of the Company’s domestic revenue-generating assets, consisting principally of franchise-related agreements, certain corporate-owned store assets, equipment supply agreements and intellectual property and license agreements for the use of intellectual property, were assigned to the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the Series 2018-1 Senior Notes and that have pledged substantially all of their assets to secure the Series 2018-1 Senior Notes.

Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Class A-2 Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the Class A-2 Notes is in September 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the Class A-2-I Notes will be repaid in September 2022 and the Class A-2-II Notes will be repaid in September 2025 (together, the “Anticipated Repayment Dates”). If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture.

The Variable Funding Notes will accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars, or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin and as specified in the Variable Funding Note agreement. There is a commitment fee on the unused portion of the Variable Funding Notes of 0.5% based on utilization. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to September 2023, subject to two additional one-year extensions. Following the anticipated repayment date (and any extensions thereof) additional interest will accrue on the Variable Funding Notes equal to 5.0% per year.

In connection with the issuance of the Series 2018-1 Senior Notes, the Company incurred debt issuance costs of $27,133. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Class A-2 Notes utilizing the effective interest rate method.

The Series 2018-1 Senior Notes are subject to covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Series 2018-1 Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Series 2018-1 Senior Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information and similar matters. The Series 2018-1 Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure

16

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

to maintain stated debt service coverage ratios, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled Anticipated Repayment Dates. The Series 2018-1 Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Series 2018-1 Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.

In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee (the “Trustee”) for the benefit of the trustee and the noteholders, and are restricted in their use. The Company holds restricted cash which primarily represents cash collections held by the Trustee, interest, principal, and commitment fee reserves held by the Trustee related to the Company’s Series 2018-1 Senior Notes. As of September 30, 2019, the Company had restricted cash held by the Trustee of $30,499. Restricted cash has been combined with cash and cash equivalents when reconciling the beginning and end of period balances in the consolidated statements of cash flows.

The proceeds from the issuance of the Class A-2 Notes were used to repay all amounts outstanding on the Term Loan B under the Company’s prior credit facility. As a result, the Company recorded a loss on early extinguishment of debt of $4,570 in August 2018, primarily consisting of the write-off of deferred costs related to the prior credit facility. In connection with the repayment of the Term Loan B, the Company terminated the related interest rate caps with notional amounts totaling $219,837, which had been designated as a cash flow hedge. See Note 7 for more information on the interest rate caps.

(7) Derivative Instruments and Hedging Activities

Prior to the refinancing transactions described in Note 6, the Company used interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments.

In order to manage the market risk arising from the previously outstanding term loans, the Company entered into a series of interest rate caps. As of September 30, 2019 and December 31, 2018, the Company had no interest rate cap agreements outstanding. In connection with the issuance of the Class A-2 Notes, the Company terminated the interest rate caps it had entered into in order to hedge interest expense on its previously outstanding term loans.

(8) Related Party Transactions

Amounts due from related parties of $412 as of September 30, 2019 recorded within other receivables on the condensed consolidated balance sheet relate to a potential indemnification reimbursement for an outstanding legal matter, see Note 12.

Activity with entities considered to be related parties is summarized below: 

	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Franchise revenue	$	505	$	897	$	1,735	$	2,453
Equipment revenue	883		1,472		2,325		1,782
Total revenue from related parties	$	1,388	$	2,369	4,060		$	4,235

Additionally, the Company had deferred area development agreement revenue from related parties of $260 and $779 as of September 30, 2019 and December 31, 2018, respectively.

The Company had payables to related parties pursuant to tax benefit arrangements of $55,478 and $59,458, as of September 30, 2019 and December 31, 2018, respectively (see Note 11).

The Company provides administrative services to the NAF and charges NAF a fee for providing these services. The services provided include accounting services, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted to $402 and $676 for the three months ended September 30, 2019 and 2018, respectively, and $1,771 and $1,872 for the nine months ended September 30, 2019 and 2018, respectively.

17

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

(9) Stockholder’s Equity

Pursuant to the exchange agreement between the Company and the Continuing LLC Owners, the Continuing LLC Owners (or certain permitted transferees thereof) have the right, from time to time and subject to the terms of the exchange agreement, to exchange their Holdings Units, along with a corresponding number of shares of Class B common stock, for shares of Class A common stock (or cash at the option of the Company) on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and similar transactions. In connection with any exchange of Holdings Units for shares of Class A common stock by a Continuing LLC Owner, the number of Holdings Units held by the Company is correspondingly increased as it acquires the exchanged Holdings Units, and a corresponding number of shares of Class B common stock are canceled.

During the nine months ended September 30, 2019, certain existing holders of Holdings Units exercised their exchange rights and exchanged 885,810 Holdings Units for 885,810 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 885,810 shares of Class B common stock were surrendered by the holders of Holdings Units that exercised their exchange rights and canceled. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 885,810 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

As a result of the above transactions, as of September 30, 2019:

• Holders of our Class A common stock owned 81,773,267 shares of our Class A common stock, representing 90.5% of the voting power in the Company and, through the Company, 81,773,267 Holdings Units representing 90.5% of the economic interest in Pla-Fit Holdings; and

• the Continuing LLC Owners collectively owned 8,561,920 Holdings Units, representing 9.5% of the economic interest in Pla-Fit Holdings, and 8,561,920 shares of our Class B common stock, representing 9.5% of the voting power in the Company.

Share repurchase program

On August 3, 2018, our board of directors approved an increase to the total amount of the previously approved share repurchase program to $500,000.

On November 13, 2018, the Company entered into a $300,000 accelerated share repurchase agreement (the “ASR Agreement”) with Citibank, N.A. (“the Bank”). Pursuant to the terms of the ASR Agreement, on November 14, 2018, the Company paid the Bank $300,000 upfront in cash and received 4,607,410 shares of the Company’s Class A common stock, which were retired, and the Company elected to record as a reduction to retained earnings of $240,000. Final settlement of the ASR Agreement occurred on April 30, 2019. At final settlement, the Bank delivered 524,124 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $58.46 over the term of the ASR agreement, which were retired. This had been evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings at the original date of payment.

During the three months ended September 30, 2019, the Company purchased 2,272,001 shares of its Class A common stock for an average purchase price of $69.51 per share, completing its previously approved $500,000 share repurchase program.

(10) Earnings Per Share

Basic earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Planet Fitness, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Holdings Units, are exchangeable into shares of Class A common stock on a one-for-one basis.

18

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:  

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Numerator
Net income	$	29,692	$	20,472	$	101,158	$	74,384
Less: net income attributable to non-controlling interests	3,915		3,001		13,128		11,158
Net income attributable to Planet Fitness, Inc.	$	25,777	$	17,471	$	88,030	$	63,226
Denominator
Weighted-average shares of Class A common stock outstanding - basic	83,157,430		88,047,401		83,699,609		87,727,300
Effect of dilutive securities:
Stock options	606,888		382,499		609,788		319,610
Restricted stock units	42,588		27,904		44,775		17,141
Weighted-average shares of Class A common stock outstanding - diluted	83,806,906		88,457,804		84,354,172		88,064,051
Earnings per share of Class A common stock - basic	$	0.31	$	0.20	$	1.05	$	0.72
Earnings per share of Class A common stock - diluted	$	0.31	$	0.20	$	1.04	$	0.72

Weighted average shares of Class B common stock of 8,579,094 and 10,004,682 for the three months ended September 30, 2019 and 2018, respectively, and 8,798,695 and 10,550,857 for the nine months ended September 30, 2019 and 2018, respectively, were evaluated under the if-converted method for potential dilutive effects and were determined to be anti-dilutive. Weighted average stock options outstanding of 76,455 and 36,342 for the three months ended September 30, 2019 and 2018, respectively, and 50,063 and 114,628 for the nine months ended September 30, 2019 and 2018, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive. Weighted average restricted stock units outstanding of 713 and 0 for the three months ended September 30, 2019 and 2018, respectively, and 1,688 and 11,245 for the nine months ended September 30, 2019 and 2018, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.

(11) Income Taxes

The Company is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and certain state and local income taxes. As a partnership, Pla-Fit Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pla-Fit Holdings is passed through to and included in the taxable income or loss of its members, including the Company, on a pro-rata basis.

Planet Fitness, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of Pla-Fit Holdings. The Company’s effective tax rate was 25.8% and 26.0% for the three months ended September 30, 2019 and 2018, respectively and 21.0% and 23.9% for the nine months ended September 30, 2019 and 2018, respectively. The effective tax rate for the three months ended September 30, 2019 differed from the U.S. federal statutory rate of 21% primarily due to state and local taxes, partially offset by income attributable to non-controlling interest. The effective tax rate for the nine months ended September 30, 2019 of 21% included the impact of state and local taxes, offset by income attributable to non-controlling interest. The Company was also subject to taxes in foreign jurisdictions. Undistributed earnings of foreign operations were not material for the three and nine months ended September 30, 2019 and 2018.

Net deferred tax assets of $416,678 and $412,538 as of September 30, 2019 and December 31, 2018, respectively, relate primarily to the tax effects of temporary differences in the book basis as compared to the tax basis of our investment in Pla-Fit Holdings as a result of the secondary offerings, other exchanges, recapitalization transactions and the IPO. As of September 30, 2019, the Company does not have any net operating loss carryforwards.

As of September 30, 2019 and December 31, 2018, the total liability related to uncertain tax positions was $260 and $300, respectively. The Company recognizes interest accrued and penalties, if applicable, related to unrecognized tax benefits in income tax expense. Interest and penalties for the three and nine months ended September 30, 2019 and 2018 were not material.

19

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Tax benefit arrangements

The Company’s acquisition of Holdings Units in connection with the IPO and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to certain existing and previous equity owners of Pla-Fit Holdings (the “TRA Holders”) 85% of the applicable tax savings, if any, in U.S. federal and state income tax that the Company is deemed to realize as a result of certain tax attributes of their Holdings Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the exchanges of their Holdings Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the tax receivable agreement (including imputed interest). Under the second tax receivable agreement, the Company generally is required to pay to TSG AIV II-A L.P and TSG PF Co-Investors A L.P. (the “Direct TSG Investors”) 85% of the amount of tax savings, if any, that the Company is deemed to realize as a result of the tax attributes of the Holdings Units held in respect of the Direct TSG Investors’ interest in the Company, which resulted from the Direct TSG Investors’ purchase of interests in Pla-Fit Holdings in 2012, and certain other tax benefits. Under both agreements, the Company generally retains the benefit of the remaining 15% of the applicable tax savings.

During the nine months ended September 30, 2019, 885,810 Holdings Units were exchanged by the TRA Holders for newly issued shares of Class A common stock, resulting in an increase in the tax basis of the net assets of Pla-Fit Holdings subject to the provisions of the tax receivable agreements. As a result of the change in Planet Fitness, Inc.’s ownership percentage of Pla-Fit Holdings, we recorded a decrease to our net deferred tax assets of $517 during the nine months ended September 30, 2019. As a result of these exchanges, during the nine months ended September 30, 2019, we also recognized deferred tax assets in the amount of $20,340, and corresponding tax benefit arrangement liabilities of $17,016, representing approximately 85% of the tax benefits due to the TRA Holders. The offset to the entries recorded in connection with exchanges was to equity.

As of September 30, 2019 and December 31, 2018, the Company had a liability of $433,390 and $429,233, respectively, related to its projected obligations under the tax benefit arrangements. Projected future payments under the tax benefit arrangements are as follows:

	Amount
Remainder of 2019	$	7,307
2020	25,965
2021	26,584
2022	27,141
2023	27,679
Thereafter	318,714
Total	$	433,390

(12) Commitments and contingencies

From time to time, and in the ordinary course of business, the Company is subject to various claims, charges, and litigation, such as employment-related claims and slip and fall cases.

On May 3, 2019, the Company and other defendants received a joint and several judgment against them in the amount of $6,185, inclusive of accrued interest, in a civil action brought by a former employee. As of September 30, 2019, the Company has estimated its obligation related to this matter to be approximately $1,237, which is included in other current liabilities on the condensed consolidated balance sheet. In connection with 2012 acquisition of Pla-Fit Holdings on November 8, 2012, the sellers are obligated to indemnify the Company related to this specific matter. The Company has therefore recorded an offsetting indemnification receivable of $1,237 in other receivables on the Company’s condensed consolidated balance sheet, of which $412 is due from a related party. As of September 30, there is an additional $4,272 of potential incremental interest being sought by the plaintiff; however, the Company does not currently believe that payment of the incremental interest is probable and therefore has not recorded such amount as of September 30, 2019.

The Company is not currently aware of any other legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or result of operations.

(13) Segments

The Company has three reportable segments: (i) Franchise; (ii) Corporate-owned stores; and (iii) Equipment.  

20

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

The Company’s operations are organized and managed by type of products and services and segment information is reported accordingly. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. The CODM reviews financial performance and allocates resources by reportable segment. There have been no operating segments aggregated to arrive at the Company’s reportable segments.

The Franchise segment includes operations related to the Company’s franchising business in the United States, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico, including revenues and expenses from the NAF beginning on January 1, 2018 (see Note 15). The Corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the United States and Canada. The Equipment segment includes the sale of equipment to our United States franchisee-owned stores.

The accounting policies of the reportable segments are the same as those described in Note 2. The Company evaluates the performance of its segments and allocates resources to them based on revenue and earnings before interest, taxes, depreciation, and amortization, referred to as Segment EBITDA. Revenues for all operating segments include only transactions with unaffiliated customers and include no intersegment revenues.

The tables below summarize the financial information for the Company’s reportable segments for the three and nine months ended September 30, 2019 and 2018. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.

 

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue
Franchise segment revenue - U.S.	$	65,494	$	53,528	$	200,111	$	164,225
Franchise segment revenue - International	1,215		1,294		4,172		3,359
Franchise segment total	66,709		54,822		204,283		167,584
Corporate-owned stores - U.S.	39,637		34,323		115,178		99,020
Corporate-owned stores - International	1,105		1,083		3,303		3,345
Corporate-owned stores total	40,742		35,406		118,481		102,365
Equipment segment - U.S.	59,364		46,428		174,528		128,589
Equipment segment total	59,364		46,428		174,528		128,589
Total revenue	$	166,815	$	136,656	$	497,292	$	398,538

Franchise segment revenue includes franchise revenue, NAF revenue, and commission income.

Franchise revenue includes revenue generated from placement services of $4,277 and $2,518 for the three months ended September 30, 2019 and 2018, respectively, and $12,112 and $7,694 for the nine months September 30, 2019 and 2018, respectively. 

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Segment EBITDA
Franchise	$	44,328		$	37,075		$	141,548		$	113,793
Corporate-owned stores	16,799			15,279			50,505			42,115
Equipment	13,741			9,654			40,920			28,579
Corporate and other	(10,036		)	(9,599		)	(33,968		)	(27,576		)
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911

21

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

The following table reconciles total Segment EBITDA to income before taxes:

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911
Less:
Depreciation and amortization	11,832			8,863			32,316			25,947
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income from operations	53,061			43,573			171,513			131,302
Interest income	1,808			2,025			5,585			2,480
Interest expense	(14,807		)	(17,909		)	(44,192		)	(35,725		)
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income before income taxes	$	40,001		$	27,662		$	128,082		$	97,719

The following table summarizes the Company’s assets by reportable segment: 

	September 30, 2019		December 31, 2018
Franchise	$	189,192	$	185,899
Corporate-owned stores	390,101		243,221
Equipment	195,022		210,462
Unallocated	645,917		713,834
Total consolidated assets	$	1,420,232	$	1,353,416

The table above includes $1,204 and $1,892 of long-lived assets located in the Company’s corporate-owned stores in Canada as of September 30, 2019 and December 31, 2018, respectively. All other assets are located in the U.S.

For the segment footnote disclosure as of December 31, 2018, an immaterial error of $133,523 has been corrected to appropriately classify assets from the franchise segment to the unallocated segment at December 31, 2018. This correction does not impact the Company’s previously reported consolidated balance sheets, consolidated statements of cash flow or statements of operations.

The following table summarizes the Company’s goodwill by reportable segment: 

	September 30, 2019		December 31, 2018
Franchise	$	16,938	$	16,938
Corporate-owned stores	97,148		89,909
Equipment	92,666		92,666
Consolidated goodwill	$	206,752	$	199,513

22

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

(14) Corporate-Owned and Franchisee-Owned Stores

The following table shows changes in our corporate-owned and franchisee-owned stores for the three and nine months ended September 30, 2019 and 2018:

	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Franchisee-owned stores:
Stores operated at beginning of period	1,779		1,540		1,666		1,456
New stores opened	39		40		157		131
Stores debranded, sold or consolidated(1)	(1	)	(7	)	(6	)	(14	)
Stores operated at end of period	1,817		1,573		1,817		1,573
Corporate-owned stores:
Stores operated at beginning of period	80		68		76		62
New stores opened	2		1		2		1
Stores acquired from franchisees	—		4		4		10
Stores operated at end of period	82		73		82		73
Total stores:
Stores operated at beginning of period	1,859		1,608		1,742		1,518
New stores opened	41		41		159		132
Stores acquired, debranded, sold or consolidated(1)	(1	)	(3	)	(2	)	(4	)
Stores operated at end of period	1,899		1,646		1,899		1,646

 (1) The term “debrand” refers to a franchisee-owned store whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. We retain the right to prevent debranded stores from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s store with another store located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining store.

23

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

(15) Revenue recognition

Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees and area development agreement (“ADA”) fees paid by franchisees, as well as transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Also included are corporate-owned store enrollment fees, annual fees and monthly fees as well as deferred equipment rebates relating to our equipment business. We classify these contract liabilities as deferred revenue in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between December 31, 2018 and September 30, 2019.

	Contract liabilities
Balance at December 31, 2018	$	49,862
Revenue recognized that was included in the contract liability at the beginning of the year	(23,082		)
Increase, excluding amounts recognized as revenue during the period	29,390
Balance at September 30, 2019	$	56,170

The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2019. The Company has elected to exclude short term contracts, sales and usage based royalties and any other variable consideration recognized on an “as invoiced” basis.

Contract liabilities to be recognized in:	Amount
Remainder of 2019	$	12,422
2020	13,129
2021	3,279
2022	3,061
2023	2,818
Thereafter	21,461
Total	$	56,170

(16) Leases

The Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.

Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes.

The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.

24

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

For periods prior to January 1, 2019, the Company recognized rent expense related to leases on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, was recorded as deferred rent in the Company’s consolidated balance sheets.

Leases	Classification	September 30, 2019
Assets
Operating lease assets	Right of use asset, net	$	127,746
Finance lease assets	Property and equipment, net of accumulated depreciation	252
Total lease assets		$	127,998
Liabilities
Current:
Operating	Other current liabilities	$	14,543
Noncurrent:
Operating	Lease liabilities, net of current portion	127,646
Financing	Other liabilities	284
Total lease liabilities		$	142,473
Weighted-average remaining lease term (years) - operating leases		8.9
Weighted-average discount rate - operating leases		5.1		%

During the three and nine months ended September 30, 2019, the components of lease cost were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	5,317	$	15,117
Variable lease cost	2,118		6,091
Total lease cost	$	7,435	$	21,208

The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Cash paid for lease liabilities	$	4,958	$	14,323
Operating assets obtained in exchange for operating lease liabilities	$	16,173	$	19,154

25

Planet Fitness, Inc. and subsidiaries

Notes to Condensed Consolidated financial statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

As of September 30, 2019, maturities of lease liabilities were as follows:

	Amount
Remainder of 2019	$	5,019
2020	21,491
2021	22,055
2022	21,751
2023	20,594
Thereafter	89,594
Total lease payments	$	180,504
Less: imputed interest	38,031
Present value of lease liabilities	$	142,473

As of September 30, 2019, operating lease payments exclude approximately $34,456 of legally binding minimum lease payments for leases signed but not yet commenced.

As of December 31, 2018, under the previous accounting guidance for leases, approximate annual future commitments under noncancelable operating leases were as follows:

	Amount
2019	15,911
2020	15,219
2021	13,454
2022	12,561
2023	11,133
Thereafter	45,324
Total	113,602

26

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, references in this report to the “Company,” “we,” “us” and “our” refer to Planet Fitness, Inc. and its consolidated subsidiaries.

Overview

We are 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. Our mission is to enhance people’s lives by providing a high-quality fitness experience in a welcoming, non-intimidating environment, which we call the Judgement Free Zone, where anyone—and we mean anyone—can feel they belong. Our 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 our members in small groups through our PE@PF program. We offer this differentiated fitness experience at only $10 per month for our 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. We and our 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 our staff and fellow members.

As of September 30, 2019, we had more than 14.1 million members and 1,899 stores in all 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama, and Mexico. Of our 1,899 stores, 1,817 are franchised and 82 are corporate-owned. As of September 30, 2019, we had commitments to open more than 1,000 new stores under existing ADAs.

Our segments

We operate and manage our business in three business segments: Franchise, Corporate-owned stores and Equipment. Our Franchise segment includes operations related to our franchising business in the United States, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico, including revenues and expenses from the NAF. Our Corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the United States and Canada. The Equipment segment includes the sale of equipment to our United States franchisee-owned stores. We evaluate the performance of our segments and allocate resources to them based on revenue and earnings before interest, taxes, depreciation and amortization, referred to as Segment EBITDA. Revenue and Segment EBITDA for all operating segments include only transactions with unaffiliated customers and do not include intersegment transactions. The tables below summarize the financial information for our segments for the three and nine months ended September 30, 2019 and 2018. “Corporate and other,” as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services that are not directly attributable to any individual segment.

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2019			2018			2019			2018
Revenue
Franchise segment	$	66,709		$	54,822		$	204,283		$	167,584
Corporate-owned stores segment	40,742			35,406			118,481			102,365
Equipment segment	59,364			46,428			174,528			128,589
Total revenue	$	166,815		$	136,656		$	497,292		$	398,538
Segment EBITDA
Franchise	$	44,328		$	37,075		$	141,548		$	113,793
Corporate-owned stores	16,799			15,279			50,505			42,115
Equipment	13,741			9,654			40,920			28,579
Corporate and other	(10,036		)	(9,599		)	(33,968		)	(27,576		)
Total Segment EBITDA(1)	$	64,832		$	52,409		$	199,005		$	156,911

(1) Total Segment EBITDA is equal to EBITDA, which is a metric that is not presented in accordance with U.S. GAAP. Refer to “—Non-GAAP financial measures” for a definition of EBITDA and a reconciliation to net income, the most directly comparable U.S. GAAP measure.

27

A reconciliation of income from operations to Segment EBITDA is set forth below: 

(in thousands)	Franchise			Corporate-owned stores			Equipment		Corporate and other			Total
Three months ended September 30, 2019
Income (loss) from operations	$	42,356		$	9,987		$	12,479	$	(11,761	)	$	53,061
Depreciation and amortization	1,980			6,937			1,262		1,653			11,832
Other income (expense)	(8		)	(125		)	—		72			(61		)
Segment EBITDA(1)	$	44,328		$	16,799		$	13,741	$	(10,036	)	$	64,832
Three months ended September 30, 2018
Income (loss) from operations	$	35,120		$	9,872		$	8,398	$	(9,817	)	$	43,573
Depreciation and amortization	1,955			5,277			1,256		375			8,863
Other income (expense)	—			130			—		(157		)	(27		)
Segment EBITDA(1)	$	37,075		$	15,279		$	9,654	$	(9,599	)	$	52,409
Nine months ended September 30, 2019
Income (loss) from operations	$	135,606		$	31,558		$	37,135	$	(32,786	)	$	171,513
Depreciation and amortization	5,952			18,673			3,782		3,909			32,316
Other income (expense)	(10		)	274			3		(5,091		)	(4,824		)
Segment EBITDA(1)	$	141,548		$	50,505		$	40,920	$	(33,968	)	$	199,005
Nine months ended September 30, 2018
Income (loss) from operations	$	107,910		$	27,327		$	24,810	$	(28,745	)	$	131,302
Depreciation and amortization	5,895			15,006			3,769		1,277			25,947
Other income (expense)	(12		)	(218		)	—		(108		)	(338		)
Segment EBITDA(1)	$	113,793		$	42,115		$	28,579	$	(27,576	)	$	156,911

(1) Total Segment EBITDA is equal to EBITDA, which is a metric that is not presented in accordance with U.S. GAAP. Refer to “—Non-GAAP Financial Measures” for a definition of EBITDA and a reconciliation to net income, the most directly comparable U.S. GAAP measure.

How we assess the performance of our business

In assessing the performance of our business, we consider a variety of performance and financial measures. The key measures for determining how our business is performing include the number of new store openings, same store sales for both corporate-owned and franchisee-owned stores, EBITDA, Adjusted EBITDA, Segment EBITDA, Adjusted net income, and Adjusted net income per share, diluted. See “—Non-GAAP financial measures” below for our definition of EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted net income per share, diluted and why we present EBITDA, Adjusted EBITDA, Adjusted net income, and Adjusted net income per share, diluted, and for a reconciliation of our EBITDA, Adjusted EBITDA, and Adjusted net income to net income, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, and a reconciliation of Adjusted net income per share, diluted to net income per share, diluted, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Number of new store openings

The number of new store openings reflects stores opened during a particular reporting period for both corporate-owned and franchisee-owned stores. Opening new stores is an important part of our growth strategy and we expect the majority of our future new stores will be franchisee-owned. Before we obtain the certificate of occupancy or report any revenue for new corporate-owned stores, we incur pre-opening costs, such as rent expense, labor expense and other operating expenses. Some of our stores open with an initial start-up period of higher than normal marketing and operating expenses, particularly as a percentage of monthly revenue. New stores may not be profitable and their revenue may not follow historical patterns.

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The following table shows the change in our corporate-owned and franchisee-owned store base for the three and nine months ended September 30, 2019 and 2018: 

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Franchisee-owned stores:
Stores operated at beginning of period	1,779		1,540		1,666		1,456
New stores opened	39		40		157		131
Stores debranded, sold or consolidated(1)	(1	)	(7	)	(6	)	(14	)
Stores operated at end of period	1,817		1,573		1,817		1,573
Corporate-owned stores:
Stores operated at beginning of period	80		68		76		62
New stores opened	2		1		2		1
Stores acquired from franchisees	—		4		4		10
Stores operated at end of period	82		73		82		73
Total stores:
Stores operated at beginning of period	1,859		1,608		1,742		1,518
New stores opened	41		41		159		132
Stores acquired, debranded, sold or consolidated(1)	(1	)	(3	)	(2	)	(4	)
Stores operated at end of period	1,899		1,646		1,899		1,646

(1) The term “debrand” refers to a franchisee-owned store whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. We retain the right to prevent debranded stores from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s store with another store located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining store.

Same store sales

Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores. We define the same store sales base to include those stores that have been open and for which monthly membership dues have been billed for longer than 12 months. We measure same store sales based solely upon monthly dues billed to members of our corporate-owned and franchisee-owned stores.

Several factors affect our same store sales in any given period, including the following:

• the number of stores that have been in operation for more than 12 months;

• the percentage mix of PF Black Card and standard memberships in any period;

• growth in total net memberships per store;

• increases in membership pricing;

• consumer recognition of our brand and our ability to respond to changing consumer preferences;

• overall economic trends, particularly those related to consumer spending;

• our and our franchisees’ ability to operate stores effectively and efficiently to meet consumer expectations;

• marketing and promotional efforts;

• local competition;

• trade area dynamics; and

• opening of new stores in the vicinity of existing locations.

Consistent with common industry practice, we present same store sales as compared to the same period in the prior year. Same store sales of our international stores are calculated on a constant currency basis, meaning that we translate the current year’s same store sales of our international stores at the same exchange rates used in the prior year. Since opening new stores will be a significant component of our revenue growth, same store sales is only one measure of how we evaluate our performance.

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Stores acquired from or sold to franchisees are removed from the franchisee-owned or corporate-owned same store sales base, as applicable, upon the ownership change and for the 12 months following the date of the ownership change. These stores are included in the corporate-owned or franchisee-owned same store sales base, as applicable, following the 12th month after the acquisition or sale. These stores remain in the system-wide same store sales base in all periods.

The following table shows our same store sales for the three and nine months ended September 30, 2019 and 2018:

 

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Same store sales data
Same store sales growth:
Franchisee-owned stores	8.1	%	9.9	%	9.1	%	10.5	%
Corporate-owned stores	4.9	%	6.1	%	6.2	%	5.6	%
Total stores	7.9	%	9.7	%	8.9	%	10.3	%
Number of stores in same store sales base:
Franchisee-owned stores	1,562		1,355		1,562		1,355
Corporate-owned stores	73		58		73		58
Total stores	1,639		1,423		1,639		1,423

Total monthly dues and annual fees from members (system-wide sales)

We define system-wide sales as total monthly dues and annual fees billed by us and our franchisees. System-wide sales is an operating measure that includes sales by franchisees that are not revenue realized by the Company in accordance with GAAP, as well as sales by our corporate-owned stores. While we do not record sales by franchisees as revenue, and such sales are not included in our consolidated financial statements, we believe that this operating measure aids in understanding how we derive royalty revenue and is important in evaluating our performance. We review the total amount of dues we collect from our members on a monthly basis, which allows us to assess changes in the performance of our corporate-owned and franchisee-owned stores from period to period, any competitive pressures, local or regional membership traffic patterns and general market conditions that might impact our store performance. We collect monthly dues on or around the 17^th of every month. We collect annual fees once per year from each member based upon when the member signed his or her membership agreement. System-wide sales were $781 million and $659 million, during the three months ended September 30, 2019 and 2018, respectively, and $2,430 million and $2,061 million during the nine months ended September 30, 2019 and 2018, respectively.

Non-GAAP financial measures

We refer to EBITDA and Adjusted EBITDA as we use these measures to evaluate our operating performance and we believe these measures provide useful information to investors in evaluating our performance. EBITDA and Adjusted EBITDA as presented in this Quarterly Report on Form 10-Q are supplemental measures of our performance that are neither required by, nor presented in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA should not be considered as substitutes for U.S. GAAP metrics such as net income or any other performance measures derived in accordance with U.S. GAAP. Also, in the future we may incur expenses or charges such as those used to calculate Adjusted EBITDA. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. We have also disclosed Segment EBITDA as an important financial metric utilized by the Company to evaluate performance and allocate resources to segments in accordance with ASC 280, Segment Reporting. As part of such disclosure in “Our Segments” within Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company has provided a reconciliation from income from operations to Total Segment EBITDA, which is equal to the Non-GAAP financial metric EBITDA.

We define EBITDA as net income before interest, taxes, depreciation and amortization. We believe that EBITDA, which eliminates the impact of certain expenses that we do not believe reflect our underlying business performance, provides useful information to investors to assess the performance of our segments as well as the business as a whole. Our board of directors also uses EBITDA as a key metric to assess the performance of management. We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, adjusted for the impact of certain additional non-cash and other items that we do not consider in our evaluation of ongoing performance of the Company’s core operations. These items include certain purchase accounting adjustments, stock offering-related costs, and certain other charges and gains. We believe that Adjusted EBITDA is an appropriate measure of operating performance in addition to EBITDA because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.

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A reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below for the three and nine months ended September 30, 2019 and 2018:

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
(in thousands)
Net income	$	29,692		$	20,472		$	101,158		$	74,384
Interest income	(1,808		)	(2,025		)	(5,585		)	(2,480		)
Interest expense	14,807			17,909			44,192			35,725
Provision for income taxes	10,309			7,190			26,924			23,335
Depreciation and amortization	11,832			8,863			32,316			25,947
EBITDA	$	64,832		$	52,409		$	199,005		$	156,911
Purchase accounting adjustments-revenue(1)	275			527			524			941
Purchase accounting adjustments-rent(2)	108			198			348			548
Loss on reacquired franchise rights(3)	—			10			—			360
Transaction fees(4)	—			254			—			290
Severance costs(5)	—			—			—			352
Pre-opening costs(6)	826			370			1,021			853
Tax benefit arrangement remeasurement(7)	(214		)	—			4,638			(354		)
Other(8)	(104		)	19			55			1,039
Adjusted EBITDA	$	65,723		$	53,787		$	205,591		$	160,940

(1) Represents the impact of revenue-related purchase accounting adjustments associated with the 2012 Acquisition. At the time of the 2012 Acquisition, the Company maintained a deferred revenue account, which consisted of deferred ADA fees, deferred franchise fees, and deferred enrollment fees that the Company billed and collected up front but recognizes for U.S. GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these periods if the write-down to deferred revenue had not occurred in connection with the application of acquisition pushdown accounting.

(2) Represents the impact of rent-related purchase accounting adjustments. In accordance with guidance in ASC 805 – Business Combinations, in connection with the 2012 Acquisition, the Company’s deferred rent liability was required to be written off as of the acquisition date and rent was recorded on a straight-line basis from the acquisition date through the end of the lease term. This resulted in higher overall recorded rent expense each period than would have otherwise been recorded had the deferred rent liability not been written off as a result of the acquisition push down accounting applied in accordance with ASC 805. Adjustments of $44, $105, $173 and $272 in the three and nine months ended September 30, 2019 and 2018, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $64, $93, $216 and $276 in the three and nine months ended September 30, 2019 and 2018, respectively, are due to the amortization of favorable and unfavorable leases. All of the rent related purchase accounting adjustments are adjustments to rent expense which is included in store operations on our consolidated statements of operations.

(3) Represents the impact of a non-cash loss recorded in accordance with ASC 805 - Business Combinations related to our acquisition of six franchisee-owned stores on January 1, 2018. The loss recorded under GAAP represents the difference between the fair value of the reacquired franchise rights and the contractual terms of the reacquired franchise rights and is included in other (gain) loss on our consolidated statements of operations.

(4) Represents transaction fees and expenses that could not be capitalized related to the issuance of our Series 2018-1 Senior Notes in the three and nine months ended September 30, 2018.

(5) Represents severance expense recorded in connection with an equity award modification.

(6) Represents costs associated with new corporate-owned stores incurred prior to the store opening, including payroll-related costs, rent and occupancy expenses, marketing and other store operating supply expenses.

(7) Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

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(8) Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the nine months ended September 30, 2018, this amount includes expense of $590 related to the write off of certain assets that were being tested for potential use across the system.

Our presentation of Adjusted net income and Adjusted net income per share, diluted, assumes that all net income is attributable to Planet Fitness, Inc., which assumes the full exchange of all outstanding Holdings Units for shares of Class A common stock of Planet Fitness, Inc., adjusted for certain non-recurring items that we do not believe directly reflect our core operations. Adjusted net income per share, diluted, is calculated by dividing Adjusted net income by the total shares of Class A common stock outstanding plus any dilutive options and restricted stock units as calculated in accordance with U.S. GAAP and assuming the full exchange of all outstanding Holdings Units and corresponding Class B common stock as of the beginning of each period presented. Adjusted net income and Adjusted net income per share, diluted, are supplemental measures of operating performance that do not represent, and should not be considered, alternatives to net income and earnings per share, as calculated in accordance with U.S. GAAP. We believe Adjusted net income and Adjusted net income per share, diluted, supplement U.S. GAAP measures and enable us to more effectively evaluate our performance period-over-period. A reconciliation of Adjusted net income to net income, the most directly comparable U.S. GAAP measure, and the computation of Adjusted net income per share, diluted, are set forth below.

	Three months ended September 30,					Nine months ended September 30,
(in thousands, except per share amounts)	2019			2018		2019		2018
Net income	$	29,692		$	20,472	$	101,158	$	74,384
Provision for income taxes, as reported	10,309			7,190		26,924		23,335
Purchase accounting adjustments-revenue(1)	275			527		524		941
Purchase accounting adjustments-rent(2)	108			198		348		548
Loss on reacquired franchise rights(3)	—			10		—		360
Transaction fees(4)	—			254		—		290
Loss on extinguishment of debt(5)	—			4,570		—		4,570
Severance costs(6)	—			—		—		352
Pre-opening costs(7)	826			370		1,021		853
Tax benefit arrangement remeasurement(8)	(214		)	—		4,638		(354		)
Other(9)	(104		)	19		55		1,039
Purchase accounting amortization(10)	4,146			3,934		12,429		11,776
Adjusted income before income taxes	$	45,038		$	37,544	$	147,097	$	118,094
Adjusted income taxes(11)	11,980			9,874		39,128		31,059
Adjusted net income	$	33,058		$	27,670	$	107,969	$	87,035
Adjusted net income per share, diluted	$	0.36		$	0.28	$	1.16	$	0.88
Adjusted weighted-average shares outstanding(12)	92,386			98,462		93,153		98,615

(1) Represents the impact of revenue-related purchase accounting adjustments associated with the 2012 Acquisition. At the time of the 2012 Acquisition, the Company maintained a deferred revenue account, which consisted of deferred ADA fees, deferred franchise fees, and deferred enrollment fees that the Company billed and collected up front but recognizes for U.S. GAAP purposes at a later date. In connection with the 2012 Acquisition, it was determined that the carrying amount of deferred revenue was greater than the fair value assessed in accordance with ASC 805—Business Combinations, which resulted in a write-down of the carrying value of the deferred revenue balance upon application of acquisition push-down accounting under ASC 805. These amounts represent the additional revenue that would have been recognized in these periods if the write-down to deferred revenue had not occurred in connection with the application of acquisition pushdown accounting.

(2) Represents the impact of rent-related purchase accounting adjustments. In accordance with guidance in ASC 805 – Business Combinations, in connection with the 2012 Acquisition, the Company’s deferred rent liability was required to be written off as of the acquisition date and rent was recorded on a straight-line basis from the acquisition date through the end of the lease term. This resulted in higher overall recorded rent expense each period than would have otherwise been recorded had the deferred rent liability not been written off as a result of the acquisition push down accounting applied in accordance with ASC 805. Adjustments of $44, $105, $173 and $272 in the three and nine months ended September 30, 2019 and 2018, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments

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of $64, $93, $216 and $276 in the three and nine months ended September 30, 2019 and 2018, respectively, are due to the amortization of favorable and unfavorable leases. All of the rent related purchase accounting adjustments are adjustments to rent expense which is included in store operations on our consolidated statements of operations.

(3) Represents the impact of a non-cash loss recorded in accordance with ASC 805 - Business Combinations related to our acquisition of six franchisee-owned stores on January 1, 2018. The loss recorded under GAAP represents the difference between the fair value of the reacquired franchise rights and the contractual terms of the reacquired franchise rights and is included in other (gain) loss on our consolidated statements of operations.

(4) Represents transaction fees and expenses that could not be capitalized related to the issuance of our Series 2018-1 Senior Notes in the three and nine months ended September 30, 2018.

(5) Represents a loss on extinguishment of debt related to the write-off of deferred financing costs associated with the Term Loan B that the Company repaid in August 2018.

(6) Represents severance expense recorded in connection with an equity award modification.

(7) Represents costs associated with new corporate-owned stores incurred prior to the store opening, including payroll-related costs, rent and occupancy expenses, marketing and other store operating supply expenses.

(8) Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.

(9) Represents certain other charges and gains that we do not believe reflect our underlying business performance. In the nine months ended September 30, 2018, this amount includes expense of $590 related to the write off of certain assets that were being tested for potential use across the system.

(10) Includes $3,096, $3,096, $9,288 and $9,288 of amortization of intangible assets, other than favorable leases, for the three and nine months ended September 30, 2019 and 2018, respectively, recorded in connection with the 2012 Acquisition, and $1,052, $838, $2,867 and $2,488 of amortization of intangible assets for the three months ended September 30, 2019 and 2018, respectively, recorded in connection with historical acquisitions of franchisee-owned stores. The adjustment represents the amount of actual non-cash amortization expense recorded, in accordance with U.S. GAAP, in each period.

(11) Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.3% for the three and nine months ended September 30, 2019 and 2018, respectively, applied to adjusted income before income taxes.

(12) Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc.

A reconciliation of net income per share, diluted, to Adjusted net income per share, diluted is set forth below for the three and nine months ended September 30, 2019 and 2018:

	For the three months ended September 30, 2019					For the three months ended September 30, 2018
(in thousands, except per share amounts)	Net income		Weighted Average Shares	Net income per share, diluted		Net income		Weighted Average Shares	Net income per share, diluted
Net income attributable to Planet Fitness, Inc.(1)	$	25,777	83,807	$	0.31	$	17,471	88,458	$	0.20
Assumed exchange of shares(2)	3,915		8,579			3,001		10,004
Net Income	29,692					20,472
Adjustments to arrive at adjusted income    before income taxes(3)	15,346					17,072
Adjusted income before income taxes	45,038					37,544
Adjusted income taxes(4)	11,980					9,874
Adjusted Net Income	$	33,058	92,386	$	0.36	$	27,670	98,462	$	0.28

(1) Represents net income attributable to Planet Fitness, Inc. and the associated weighted average shares, diluted of Class A common stock outstanding.

(2) Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc. Also assumes the addition of net income attributable to non-controlling interests corresponding with the assumed exchange of Holdings Units and Class B common shares for shares of Class A common stock.

(3) Represents the total impact of all adjustments identified in the adjusted net income table above to arrive at adjusted income before income taxes.

(4) Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.3% for the three months ended September 30, 2019 and 2018, respectively, applied to adjusted income before income taxes.

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	For the nine months ended September 30, 2019					For the nine months ended September 30, 2018
(in thousands, except per share amounts)	Net income		Weighted Average Shares	Net income per share, diluted		Net income		Weighted Average Shares	Net income per share, diluted
Net income attributable to Planet Fitness, Inc.(1)	$	88,030	84,354	$	1.04	$	63,226	88,064	$	0.72
Assumed exchange of shares(2)	13,128		8,799			11,158		10,551
Net Income	101,158					74,384
Adjustments to arrive at adjusted income    before income taxes(3)	45,939					43,710
Adjusted income before income taxes	147,097					118,094
Adjusted income taxes(4)	39,128					31,059
Adjusted Net Income	$	107,969	93,153	$	1.16	$	87,035	98,615	$	0.88

(1) Represents net income attributable to Planet Fitness, Inc. and the associated weighted average shares, diluted of Class A common stock outstanding.

(2) Assumes the full exchange of all outstanding Holdings Units and corresponding shares of Class B common stock for shares of Class A common stock of Planet Fitness, Inc. Also assumes the addition of net income attributable to non-controlling interests corresponding with the assumed exchange of Holdings Units and Class B common shares for shares of Class A common stock.

(3) Represents the total impact of all adjustments identified in the adjusted net income table above to arrive at adjusted income before income taxes.

(4) Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.3% for the nine months ended September 30, 2019 and 2018, respectively, applied to adjusted income before income taxes.

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Results of operations

The following table sets forth our condensed consolidated statements of operations as a percentage of total revenue for the three and nine months ended September 30, 2019 and 2018:

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue:
Franchise revenue	32.0	%	30.7	%	33.1	%	32.5	%
Commission income	0.4	%	1.1	%	0.5	%	1.2	%
National advertising fund revenue	7.6	%	8.3	%	7.4	%	8.3	%
Franchise segment	40.0	%	40.1	%	41.0	%	42.0	%
Corporate-owned stores	24.4	%	25.9	%	23.9	%	25.7	%
Equipment	35.6	%	34.0	%	35.1	%	32.3	%
Total revenue	100.0	%	100.0	%	100.0	%	100.0	%
Operating costs and expenses:
Cost of revenue	27.7	%	27.0	%	27.2	%	25.1	%
Store operations	13.4	%	13.7	%	12.7	%	13.8	%
Selling, general and administrative	12.5	%	12.6	%	11.7	%	13.1	%
National advertising fund expense	7.6	%	8.3	%	7.4	%	8.3	%
Depreciation and amortization	7.1	%	6.5	%	6.5	%	6.5	%
Other (gain) loss	(0.1	)%	—	%	—	%	0.2	%
Total operating costs and expenses	68.2	%	68.1	%	65.5	%	67.0	%
Income from operations	31.8	%	31.9	%	34.5	%	33.0	%
Other income (expense), net:
Interest income	1.1	%	1.5	%	1.1	%	0.6	%
Interest expense	(8.9	)%	(13.1	)%	(8.9	)%	(9.0	)%
Other expense	—	%	—	%	(1.0	)%	(0.1	)%
Total other expense, net	(7.8	)%	(11.6	)%	(8.8	)%	(8.5	)%
Income before income taxes	24.0	%	20.3	%	25.7	%	24.5	%
Provision for income taxes	6.2	%	5.3	%	5.4	%	5.9	%
Net income	17.8	%	15.0	%	20.3	%	18.6	%
Less net income attributable to non-controlling interests	2.3	%	2.2	%	2.6	%	2.8	%
Net income attributable to Planet Fitness, Inc.	15.5	%	12.8	%	17.7	%	15.8	%

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The following table sets forth a comparison of our condensed consolidated statements of operations for the three and nine months ended September 30, 2019 and 2018:

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
(in thousands)
Revenue:
Franchise revenue	$	53,443		$	41,997		$	164,624		$	129,575
Commission income	614			1,448			2,673			5,012
National advertising fund revenue	12,652			11,377			36,986			32,997
Franchise segment	66,709			54,822			204,283			167,584
Corporate-owned stores	40,742			35,406			118,481			102,365
Equipment	59,364			46,428			174,528			128,589
Total revenue	166,815			136,656			497,292			398,538
Operating costs and expenses:
Cost of revenue	46,194			36,871			135,071			100,114
Store operations	22,295			18,751			63,363			55,154
Selling, general and administrative	20,928			17,233			57,944			52,066
National advertising fund expense	12,652			11,377			36,986			32,997
Depreciation and amortization	11,832			8,863			32,316			25,947
Other (gain) loss	(147		)	(12		)	99			958
Total operating costs and expenses	113,754			93,083			325,779			267,236
Income from operations	53,061			43,573			171,513			131,302
Other income (expense), net:
Interest income	1,808			2,025			5,585			2,480
Interest expense	(14,807		)	(17,909		)	(44,192		)	(35,725		)
Other expense	(61		)	(27		)	(4,824		)	(338		)
Total other expense, net	(13,060		)	(15,911		)	(43,431		)	(33,583		)
Income before income taxes	40,001			27,662			128,082			97,719
Provision for income taxes	10,309			7,190			26,924			23,335
Net income	29,692			20,472			101,158			74,384
Less net income attributable to non-controlling interests	3,915			3,001			13,128			11,158
Net income attributable to Planet Fitness, Inc.	$	25,777		$	17,471		$	88,030		$	63,226

Comparison of the three months ended September 30, 2019 and three months ended September 30, 2018

Revenue

Total revenues were $166.8 million in the three months ended September 30, 2019, compared to $136.7 million in the three months ended September 30, 2018, an increase of $30.2 million, or 22.1%.

Franchise segment revenue was $66.7 million in the three months ended September 30, 2019, compared to $54.8 million in the three months ended September 30, 2018, an increase of $11.9 million, or 21.7%.

Franchise revenue was $53.4 million in the three months ended September 30, 2019 compared to $42.0 million in the three months ended September 30, 2018, an increase of $11.4 million or 27.3%. Included in franchise revenue is royalty revenue of $46.0 million, franchise and other fees of $3.2 million, and placement revenue of $4.3 million for the three months ended September 30, 2019, compared to royalty revenue of $36.0 million, franchise and other fees of $3.5 million, and placement revenue of $2.5 million for the three months ended September 30, 2018. The $10.0 million increase in royalty revenue was primarily driven by $3.6 million attributable to a same store sales increase of 8.1% in franchisee-owned stores and $3.3 million was attributable to stores opened in 2019, as well as stores opened in 2018 which were not included in the same store sales base. Additionally, $2.3 million was due to higher royalty rates on monthly dues and $0.8 million was due to higher royalty rates on annual fees. The $1.8 million increase in equipment placement revenue was due to higher replacement equipment placements in the three months ended September 30, 2019 as compared to the three months ended September 30, 2018.

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Commission income, which is included in our franchise segment, was $0.6 million in the three months ended September 30, 2019 compared to $1.4 million in the three months ended September 30, 2018. The $0.8 million decrease was primarily attributable to fewer franchisees on our commission structure compared to the prior year period.

National advertising fund revenue was $12.7 million in the three months ended September 30, 2019, compared to $11.4 million in the three months ended September 30, 2018, as a result of the higher store count and same store sales growth. This revenue is offset by national advertising fund expenses below.

Revenue from our corporate-owned stores segment was $40.7 million in the three months ended September 30, 2019, compared to $35.4 million in the three months ended September 30, 2018, an increase of $5.3 million, or 15.1%. The increase was due to higher revenue of $2.7 million from corporate-owned stores opened or acquired since July 1, 2018, higher same store sales from corporate-owned stores which increased 4.9% in the three months ended September 30, 2019 which contributed incremental revenues of $1.4 million, and higher annual fee revenue of $1.1 million.

Equipment segment revenue was $59.4 million in the three months ended September 30, 2019, compared to $46.4 million in the three months ended September 30, 2018, an increase of $12.9 million, or 27.9%. The increase was driven by an increase in replacement equipment sales to existing franchisee-owned stores in the three months ended September 30, 2019 compared to the three months ended September 30, 2018.

Cost of revenue

Cost of revenue was $46.2 million in the three months ended September 30, 2019 compared to $36.9 million in the three months ended September 30, 2018, an increase of $9.3 million, or 25.3%. Cost of revenue, which primarily relates to our equipment segment, increased due to an increase in replacement equipment sales to existing franchisee-owned stores in the three months ended September 30, 2019, as compared to the three months ended September 30, 2018.

Store operations

Store operation expenses, which relate to our corporate-owned stores segment, were $22.3 million in the three months ended September 30, 2019 compared to $18.8 million in the three months ended September 30, 2018, an increase of $3.5 million, or 18.9%. The increase was primarily attributable to the acquisition of four franchisee-owned stores on May 30, 2019, the acquisition of four franchisee-owned stores on August 10, 2018, the opening of six corporate-owned stores since July 1, 2018 and expenses related to future store openings currently under construction.

Selling, general and administrative

Selling, general and administrative expenses were $20.9 million in the three months ended September 30, 2019 compared to $17.2 million in the three months ended September 30, 2018, an increase of $3.7 million, or 21.4%. The $3.7 million increase was primarily due to additional expenses incurred during the three months ended September 30, 2019 to support our growing operations, including additional headcount, higher information technology expense, marketing and professional fees and higher expenses related to our Franchise conference held in the three months ended September 30, 2019, which was not in the prior year quarter. With respect to our growing operations, we anticipate that our selling, general and administrative expenses will continue to increase as our franchisee-owned store count continues to grow.

National advertising fund expense

National advertising fund expense was $12.7 million in the three months ended September 30, 2019 compared to $11.4 million in the three months ended September 30, 2018, as a result of the higher store count and same store sales growth. This expense is offset by national advertising fund revenue as described above.

Depreciation and amortization

Depreciation and amortization expense consists of the depreciation of property and equipment, including leasehold and building improvements and equipment. Amortization expense consists of amortization related to our intangible assets, including customer relationships and non-compete agreements.

Depreciation and amortization expense was $11.8 million in the three months ended September 30, 2019 compared to $8.9 million in the three months ended September 30, 2018, an increase of $3.0 million, or 33.5%. The increase was primarily attributable to franchisee-store acquisitions, the opening of corporate-owned stores since July 1, 2018 and depreciation of new information systems assets.

Other gain

Other gain was $0.1 million in the three months ended September 30, 2019 and zero in the three months ended September 30, 2018.

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Interest income

Interest income was $1.8 million in the three months ended September 30, 2019, compared to $2.0 million in the three months ended September 30, 2018.

Interest expense

Interest expense primarily consists of interest on long-term debt as well as the amortization of deferred financing costs.  

Interest expense was $14.8 million in the three months ended September 30, 2019 compared to $17.9 million in the three months ended September 30, 2018. Included in interest expense in the three months ended September 30, 2018 was $4.6 million of losses on extinguishment of debt recorded in connection with the repayment of our Term Loan B that was repaid in August 2018. Excluding the loss on extinguishment of debt, interest expense increased $1.5 million in the three months ended September 30, 2019 as compared to the three months ended September 30, 2018 due to higher interest expense related to the issuance of $1.2 billion of Class A-2 Notes on August 1, 2018.

Other expense

Other expense was $0.1 million in the three months ended September 30, 2019 compared to zero in the three months ended September 30, 2018.

Provision for income taxes

Income tax expense was $10.3 million in the three months ended September 30, 2019, compared to $7.2 million in the three months ended September 30, 2018, an increase of $3.1 million. The increase in the provision for income taxes was primarily attributable to the Company’s increased income before taxes in the three months ended September 30, 2019 as compared to the three months ended September 30, 2018.

Segment results

Franchise

Segment EBITDA for the franchise segment was $44.3 million in the three months ended September 30, 2019 compared to $37.1 million in the three months ended September 30, 2018, an increase of $7.3 million, or 19.6%. The increase was primarily driven by $3.6 million attributable to a same store sales increase of 8.1% in franchisee-owned stores and $3.3 million attributable to stores opened in 2019, as well as stores opened in 2018 which were not included in the same store sales base. Additionally, $2.3 million was due to higher royalty rates on monthly dues and $0.8 million was due to higher royalty rates on annual fees. Also contributing to the increase in franchise segment EBITDA was $1.8 million of higher equipment placement revenue as a result of the increase in equipment sales. The increase was partially offset by $2.8 million of higher franchise-related selling, general, and administrative expense to support our growing franchise operations as mentioned above, and $0.8 million of lower commission income. Depreciation and amortization was $2.0 million for both the three months ended September 30, 2019 and 2018.

Corporate-owned stores

Segment EBITDA for the corporate-owned stores segment was $16.8 million in the three months ended September 30, 2019 compared to $15.3 million in the three months ended September 30, 2018, an increase of $1.5 million, or 9.9%. Of this increase, $1.7 million of the increase was attributable to the stores acquired or opened since July 1, 2018. An additional $1.0 million was from stores included in our same store sales base in the three months ended September 30, 2019, compared to the three months ended September 30, 2018, partially offset by $1.0 million of expense related to stores that have opened in 2019 or have yet to open. Depreciation and amortization was $6.9 million and $5.3 million for the three months ended September 30, 2019 and 2018, respectively. The increase in depreciation and amortization was primarily attributable to the stores acquired and opened since July 1, 2018.

Equipment

Segment EBITDA for the equipment segment was $13.7 million in the three months ended September 30, 2019 compared to $9.7 million in the three months ended September 30, 2018, an increase of $4.1 million, or 42.3%, driven by an increase in replacement equipment sales to existing franchisee-owned stores in the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Depreciation and amortization was $1.3 million for both the three months ended September 30, 2019 and 2018.

Comparison of the nine months ended September 30, 2019 and nine months ended September 30, 2018

Revenue

Total revenues were $497.3 million in the nine months ended September 30, 2019, compared to $398.5 million in the nine months ended September 30, 2018, an increase of $98.8 million, or 24.8%.

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Franchise segment revenue was $204.3 million in the nine months ended September 30, 2019, compared to $167.6 million in the nine months ended September 30, 2018, an increase of $36.7 million, or 21.9%.

Franchise revenue was $164.6 million in the nine months ended September 30, 2019 compared to $129.6 million in the nine months ended September 30, 2018, an increase of $35.0 million or 27.0%. Included in franchise revenue is royalty revenue of $139.8 million, franchise and other fees of $12.7 million, and placement revenue of $12.1 million for the nine months ended September 30, 2019, compared to royalty revenue of $108.7 million, franchise and other fees of $13.2 million, and placement revenue of $7.7 million for the nine months ended September 30, 2018. Of the $31.1 million increase in royalty revenue, $11.0 million was attributable to a same store sales increase of 9.1% in franchisee-owned stores and $9.6 million was attributable to higher royalties from stores opened in 2019, as well as stores that opened in 2018 that were not included in the same store sales base. Additionally, $7.2 million was due to higher royalty rates on monthly dues and $3.2 million was attributable to higher royalty rates on annual fees. The $4.4 million increase in equipment placement revenue was due to higher new and replacement equipment placements in the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.

Commission income, which is included in our franchise segment, was $2.7 million in the nine months ended September 30, 2019 compared to $5.0 million in the nine months ended September 30, 2018. The $2.3 million decrease was primarily attributable to fewer franchisees on our commission structure compared to the prior year period.

National advertising fund revenue was $37.0 million in the nine months ended September 30, 2019, compared to $33.0 million in the nine months ended September 30, 2018, as a result of the higher store count and same store sales growth. This revenue is offset by national advertising fund expenses mentioned below.

Revenue from our corporate-owned stores segment was $118.5 million in the nine months ended September 30, 2019, compared to $102.4 million in the nine months ended September 30, 2018, an increase of $16.1 million, or 15.7%. The increase was due to higher revenue of $7.6 million from corporate-owned stores opened or acquired since January 1, 2018, higher revenues of $5.1 million from same store sales which increased 6.2% in the nine months ended September 30, 2019, and higher annual fee revenue of $3.4 million.

Equipment segment revenue was $174.5 million in the nine months ended September 30, 2019, compared to $128.6 million in the nine months ended September 30, 2018, an increase of $45.9 million, or 35.7%. The increase was driven by an increase in replacement equipment sales to existing franchisee-owned stores, as well as higher equipment sales to new franchisee-owned stores related to 29 incremental new equipment sales in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.

Cost of revenue

Cost of revenue was $135.1 million in the nine months ended September 30, 2019 compared to $100.1 million in the nine months ended September 30, 2018, an increase of $35.0 million, or 34.9%. Cost of revenue, which primarily relates to our equipment segment, increased due to an increase in replacement equipment sales to existing franchisee-owned stores, in addition to 29 incremental equipment sales to new franchisee-owned stores in the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018.

Store operations

Store operation expenses, which relate to our corporate-owned stores segment, were $63.4 million in the nine months ended September 30, 2019 compared to $55.2 million in the nine months ended September 30, 2018, an increase of $8.2 million, or 14.9%. The increase was primarily attributable to the acquisition of four franchisee-owned stores on May 30, 2019, the acquisition of four franchisee-owned stores on August 10, 2018, the opening of six corporate-owned stores since January 1, 2018 and expenses related to future openings currently under construction.

Selling, general and administrative

Selling, general and administrative expenses were $57.9 million in the nine months ended September 30, 2019 compared to $52.1 million in the nine months ended September 30, 2018, an increase of $5.9 million, or 11.3%. The $5.9 million increase was primarily due to additional expenses incurred to support our growing operations, including additional headcount, higher information technology expense, and higher marketing and professional fees. With respect to our growing operations, we anticipate that our selling, general and administrative expenses will continue to increase as our franchisee-owned store count continues to grow.

National advertising fund expense

National advertising fund expense was $37.0 million in the nine months ended September 30, 2019 compared to $33.0 million in the nine months ended September 30, 2018, as a result of the higher store count and same store sales growth. This expense is offset by national advertising fund revenue as described above.

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Depreciation and amortization

Depreciation and amortization expense consists of the depreciation of property and equipment, including leasehold and building improvements and equipment. Amortization expense consists of amortization related to our intangible assets, including customer relationships and non-compete agreements.

Depreciation and amortization expense was $32.3 million in the nine months ended September 30, 2019 compared to $25.9 million in the nine months ended September 30, 2018, an increase of $6.4 million, or 24.5%. The increase was primarily attributable to the acquisition or opening of corporate-owned stores since January 1, 2018 and depreciation on new information systems assets.

Other loss

Other loss was $0.1 million in the nine months ended September 30, 2019 compared to $1.0 million in the nine months ended September 30, 2018.

Interest income

Interest income was $5.6 million in the nine months ended September 30, 2019 compared to $2.5 million in the nine months ended September 30, 2018. The increase was due to the investment of our higher cash and restricted cash balances on our condensed consolidated balance sheets during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.

Interest expense

Interest expense primarily consists of interest on long-term debt as well as the amortization of deferred financing costs.  

Interest expense was $44.2 million in the nine months ended September 30, 2019 compared to $35.7 million in the nine months ended September 30, 2018. Included in interest expense in the three months ended September 30, 2018 was $4.6 million of losses on extinguishment of debt recorded in connection with the repayment of our Term Loan B that was repaid in August 2018. Excluding the loss on extinguishment of debt, interest expense increased $13.1 million in the nine months ended September 30, 2019 due to higher interest expense related to the issuance of $1.2 billion of Class A-2 Notes on August 1, 2018.

Other expense

Other expense was $4.8 million in the nine months ended September 30, 2019 and $0.3 million in the nine months ended September 30, 2018. Other expense includes expense of $4.6 million and a gain of $0.4 million related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rates in the nine months ended September 30, 2019 and the nine months ended September 30, 2018, respectively.

Provision for income taxes

Income tax expense was $26.9 million in the nine months ended September 30, 2019, compared to $23.3 million in the nine months ended September 30, 2018, an increase of $3.6 million. The increase in the provision for income taxes was primarily attributable to the Company’s increased income before taxes, partially offset by the recognition of a tax benefit from the remeasurement of our net deferred tax assets during the nine months ended September 30, 2019.

Segment results

Franchise

Segment EBITDA for the franchise segment was $141.5 million in the nine months ended September 30, 2019 compared to $113.8 million in the nine months ended September 30, 2018, an increase of $27.8 million, or 24.4%. This increase was primarily driven by $11.0 million attributable to a franchisee-owned same store sales increase of 9.1% and $9.6 million attributable to higher royalties from stores opened in 2019, as well as stores that opened in 2018 that were not included in the same store sales base. Additionally, $7.2 million was due to higher royalty rates on monthly dues and $3.2 million was attributable to higher royalty rates on annual fees. Additionally, $4.4 million of the increase is due to higher equipment placement revenue as a result of the increase in equipment sales. The increase in revenue was partially offset by $2.3 million of lower commission income, and $3.5 million of higher franchise-related selling, general, and administrative expense to support our growing franchise operations as mentioned above. Depreciation and amortization was $6.0 million and $5.9 million for the nine months ended September 30, 2019 and 2018, respectively.

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Corporate-owned stores

Segment EBITDA for the corporate-owned stores segment was $50.5 million in the nine months ended September 30, 2019 compared to $42.1 million in the nine months ended September 30, 2018, an increase of $8.4 million, or 19.9%. Of this increase, $5.4 million was related to stores included in our same store sales base in the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. An additional $3.4 million of the increase was attributable to the stores acquired or opened since January 1, 2018, partially offset by $1.2 million of expense related to stores that have opened in 2019 or have yet to open. Depreciation and amortization was $18.7 million and $15.0 million for the nine months ended September 30, 2019 and 2018, respectively. The increase in depreciation and amortization was primarily attributable the acquisition or opening of corporate-owned stores since January 1, 2018.

Equipment

Segment EBITDA for the equipment segment was $40.9 million in the nine months ended September 30, 2019 compared to $28.6 million in the nine months ended September 30, 2018, an increase of $12.3 million, or 43.2%, primarily driven by an increase in replacement equipment sales to existing franchisee-owned stores, in addition to 29 incremental equipment sales to new franchisee-owned stores in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Depreciation and amortization was $3.8 million for both the nine months ended September 30, 2019 and 2018.

Liquidity and capital resources

As of September 30, 2019, we had $219.8 million of cash and cash equivalents. In addition, as of September 30, 2019, we had borrowing capacity of $75.0 million under our Variable Funding Note.

We require cash principally to fund day-to-day operations, to finance capital investments, to service our outstanding debt and tax benefit arrangements and to address our working capital needs. Based on our current level of operations and anticipated growth, we believe that with the available cash balance, the cash generated from our operations, and amounts available under our Variable Funding Note will be adequate to meet our anticipated debt service requirements and obligations under the tax benefit arrangements, capital expenditures and working capital needs for at least the next 12 months. We believe that we will be able to meet these obligations even if we experience no growth in sales or profits. Our ability to continue to fund these items and continue to reduce debt could be adversely affected by the occurrence of any of the events described under “Risk factors” in the Annual Report. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our Variable Funding Note or otherwise to enable us to service our indebtedness, including our Class A-2 Notes, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance the senior secured credit facility will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control.

The following table presents summary cash flow information for the nine months ended September 30, 2019 and 2018:

	Nine months ended September 30,
(in thousands)	2019			2018
Net cash (used in) provided by:
Operating activities	$	152,737		$	143,886
Investing activities	(52,155		)	(64,157		)
Financing activities	(170,840		)	416,071
Effect of foreign exchange rates on cash	370			(234		)
Net increase in cash	$	(69,888	)	$	495,566

Operating activities

For the nine months ended September 30, 2019, net cash provided by operating activities was $152.7 million compared to $143.9 million in the nine months ended September 30, 2018, an increase of $8.9 million. Of the increase, $28.7 million was due to higher net income after adjustments to reconcile net income to net cash provided by operating activities. This increase was partially offset by $19.9 million of unfavorable changes in working capital primarily in accounts payable and accrued expenses, other assets and other current assets, and equipment deposits, partially offset by favorable changes in working capital primarily from payables pursuant to tax benefit arrangements, inventory and other liabilities and current liabilities in the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.

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Investing activities

Cash flow used in investing activities related to the following capital expenditures for the nine months ended September 30, 2019 and 2018: 

	Nine months ended September 30,
(in thousands)	2019		2018
New corporate-owned stores and corporate-owned stores not yet opened	$	10,570	$	4,567
Existing corporate-owned stores	12,775		8,580
Information systems	12,726		5,362
Corporate and all other	1,067		92
Total capital expenditures	$	37,138	$	18,601

For the nine months ended September 30, 2019, net cash used in investing activities was $52.2 million compared to $64.2 million in the nine months ended September 30, 2018, a decrease of $12.0 million. The primary drivers of investing activities included the acquisition of six franchisee-owned stores on January 1, 2018 for $28.5 million, the acquisition of four franchisee-owned stores on August 10, 2018 for $17.2 million and the acquisition of four franchisee-owned stores on May 30, 2019 for $14.8 million. Additionally, the nine months ended September 30, 2019 included $18.5 million higher cash used for additions to property, plant and equipment as broken out in the table above.

Financing activities

For the nine months ended September 30, 2019, net cash used by financing activities was $170.8 million compared to cash provided of $416.1 million in the nine months ended September 30, 2018, decrease of $586.9 million. The nine months ended September 30, 2018 included $463.3 million of cash provided by financing activities due to the completion of the Company’s securitized financing facility and repayment of its Term Loan B and the nine months ended September 30, 2019 included cash used for principal payments on long term debt of $9.0 million. Repurchases of Class A common stock used cash of $158.0 million in the nine months ended September 30, 2019 compared to $42.1 million in the nine months ended September 30, 2018.

2018 Refinancing

On August 1, 2018, Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, entered into a base indenture and a related supplemental indenture (collectively, the “Indenture”) under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued Series 2018-1 4.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) with an initial principal amount of $575 million and Series 2018-1 4.666% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “Class A-2 Notes”) with an initial principal amount of $625 million. In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility that allows for the issuance of up to $75 million in Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes” and together with the Class A-2 Notes, the “Series 2018-1 Senior Notes”), and certain letters of credit, all of which is currently undrawn. The Series 2018-1 Senior Notes were issued in a securitization transaction pursuant to which most of the Company’s domestic revenue-generating assets, consisting principally of franchise-related agreements, certain corporate-owned store assets, equipment supply agreements and intellectual property and license agreements for the use of intellectual property, were assigned to the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the Series 2018-1 Senior Notes and that have pledged substantially all of their assets to secure the Series 2018-1 Senior Notes.

The legal final maturity date of the Class A-2 Notes is in August 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the Class A-2-I Notes will be repaid in August 2022 and the Class A-2-II Notes will be repaid in August 2025.

A portion of the proceeds of the Class A-2 Notes was used to repay the remaining $705.9 million of principal outstanding on the then-existing senior secured credit facility. The additional proceeds, net of transaction costs, are being used for general corporate purposes, and may include a return of capital to the Company’s shareholders. See Note 6 for further information related to the Company’s refinancing.

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Off-balance sheet arrangements

As of September 30, 2019, our off-balance sheet arrangements consisted of guarantees of lease agreements for certain franchisees. Our maximum total commitment under these lease guarantee agreements is approximately $10.4 million and would only require payment upon default by the primary obligor. The estimated fair value of these guarantees at September 30, 2019 was not material, and no accrual has been recorded for our potential obligation under these arrangements. In 2019, in connection with a real estate partnership, the Company began guaranteeing certain leases of its franchisees up to a maximum period of ten years earlier expiration dates if certain conditions are met.

Critical accounting policies and use of estimates

There have been no material changes to our critical accounting policies and use of estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.  

ITEM 3. Quantitative and Qualitative Disclosure about Market Risk

Interest rate risk

The securitized financing facility includes the Series 2018-1 Senior Class A-2 Notes which are comprised of fixed interest rate notes and the Variable Funding Notes which allow for the issuance of up to $75.0 million of Variable Funding Notes. The issuance of the fixed-rate Class A-2 Notes has reduced the Company’s exposure to interest rate increases that could adversely affect its earnings and cash flows. However, the Company is exposed to interest rate increases on future borrowings under the Variable Funding Notes.

Foreign exchange risk

We are exposed to fluctuations in exchange rates between the U.S. dollar and the Canadian dollar, which is the functional currency of our Canadian entities. Our sales, costs and expenses of our Canadian subsidiaries, when translated into U.S. dollars, can fluctuate due to exchange rate movement. As of September 30, 2019, a 10% increase or decrease in the exchange rate of the U.S. and Canadian dollar would increase or decrease net income by a negligible amount.

Inflation risk

Although we do not believe that inflation has had a material effect on our income from continuing operations, we have a substantial number of hourly employees in our corporate-owned stores that are paid wage rates at or based on the applicable federal or state minimum wage. Any increases in these minimum wages will subsequently increase our labor costs. We may or may not be able to offset cost increases in the future.

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ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2019, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II-OTHER INFORMATION

ITEM 1. Legal Proceedings

We are currently involved in various claims and legal actions that arise in the ordinary course of business, most of which are covered by insurance. We do not believe that the ultimate resolution of these actions will have a material adverse effect on our business, financial condition, results of operations, liquidity or capital resources nor do we believe that there is a reasonable possibility that we will incur material loss as a result of such actions. However, a significant increase in the number of these claims or an increase in amounts owing under successful claims could have a material adverse effect on our business, financial condition and results of operations. 

ITEM 1A. Risk Factors.

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in the Annual Report. 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information regarding purchases of shares of our Class A common stock by us and our “affiliated purchasers” (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the three months ended September 30, 2019.

	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(1)
07/01/19 - 07/31/19	—	$	—	—	$157,924,604
08/01/19 - 08/31/19	2,119,887	69.65		2,119,887	10,267,663
09/01/19 - 09/30/19	152,114	67.50		152,114	—
Total	2,272,001	$	69.51	2,272,001

⁽¹⁾On August 3, 2018, our board of directors approved an increase to the total amount of the previously announced share repurchase program from $100,000,000 to $500,000,000. During the three months ended September 30, 2019, the Company completed this share repurchase program.

In connection with our IPO, we and the existing holders of Holdings Units entered into an exchange agreement under which they (or certain permitted transferees) have the right, from time to time and subject to the terms of the exchange agreement, to exchange their Holdings Units, together with a corresponding number of shares of Class B common stock, for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions. As an existing holder of Holdings Units exchanges Holdings Units for shares of Class A common stock, the number of Holdings Units held by Planet Fitness, Inc. is correspondingly increased, and a corresponding number of shares of Class B common stock are canceled.

ITEM 3. Defaults Upon Senior Securities.

None.

ITEM 4. Mine Safety Disclosures.

None.

ITEM 5. Other Information.

None.

45

ITEM 6. Exhibits

		Description of Exhibit Incorporated
		Herein by Reference
Exhibit					Exhibit	Filed
Number	Exhibit Description	Form	File No.	Filing Date	Number	Herewith
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101	Interactive Data Files pursuant to Rule 405 of regulation S-T (XBRL)					X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)					X

46

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Planet Fitness, Inc.
	(Registrant)
Date: November 8, 2019	/s/ Dorvin Lively
	Dorvin Lively
	President and Chief Financial Officer (On behalf of the Registrant and as Principal Financial Officer)

47

EX-31.1

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Chris Rondeau, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Planet Fitness, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2019

/s/ Chris Rondeau

Chris Rondeau

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Dorvin Lively, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Planet Fitness, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2019

/s/ Dorvin Lively

Dorvin Lively

President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Planet Fitness, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2019 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Chris Rondeau, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: November 8, 2019

/s/ Chris Rondeau

Chris Rondeau

Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Planet Fitness, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended September 30, 2019 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dorvin Lively, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: November 8, 2019

/s/ Dorvin Lively

Dorvin Lively

President and Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Leases - Balance Sheet Classification of Lease Assets and Liabilities (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
Operating lease assets	$ 127,746
Finance lease assets	252
Total lease assets	127,998
Current operating lease liabilities	14,543
Noncurrent operating lease liabilities	127,646
Noncurrent finance lease liabilities	284
Total lease liabilities	$ 142,473
Weighted-average remaining lease term (years) - operating leases	8 years 10 months 24 days
Weighted-average discount rate - operating leases	5.10%

XML

Corporate-Owned and Franchisee-Owned Stores - Schedule of Changes in Corporate-owned and Franchisee-owned Stores (Detail) - store	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Number Of Stores [Roll Forward]
Stores operated at beginning of period	1,859	1,608	1,742	1,518
New stores opened	41	41	159	132
Stores acquired, debranded, sold or consolidated	(1)	(3)	(2)	(4)
Stores operated at end of period	1,899	1,646	1,899	1,646
Franchisee-Owned Stores
Number Of Stores [Roll Forward]
Stores operated at beginning of period	1,779	1,540	1,666	1,456
New stores opened	39	40	157	131
Stores acquired, debranded, sold or consolidated	(1)	(7)	(6)	(14)
Stores operated at end of period	1,817	1,573	1,817	1,573
Corporate-Owned Stores
Number Of Stores [Roll Forward]
Stores operated at beginning of period	80	68	76	62
New stores opened	2	1	2	1
Stores acquired from franchisees	0	4	4	10
Stores operated at end of period	82	73	82	73

XML

Long-Term Debt - Schedule of Future Annual Payments of Long-term Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Remainder of 2019	$ 3,000
2020	12,000
2021	12,000
2022	562,563
2023	6,250
Thereafter	592,187
Total	$ 1,188,000	$ 1,197,000

XML

Variable Interest Entities - Carrying Value of Variable Interest Entities of Consolidated Financial Statements (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Variable Interest Entity [Line Items]
Assets	$ 4,955	$ 8,350
Liabilities	0	0
PF Melville
Variable Interest Entity [Line Items]
Assets	2,722	4,787
Liabilities	0	0
MMR
Variable Interest Entity [Line Items]
Assets	2,233	3,563
Liabilities	$ 0	$ 0

XML

Goodwill and Intangible Assets - Summary of Goodwill and Intangible Assets (Detail) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Goodwill And Intangible Assets [Line Items]
Gross carrying amount	$ 219,082	$ 216,329
Accumulated amortization	(138,107)	(128,299)
Net carrying Amount	80,975	88,030
Total intangible assets, Gross carrying amount	365,682	362,629
Total intangible assets, Net carrying Amount	227,575	234,330
Goodwill, gross carrying amount	206,752	199,513
Goodwill, Accumulated amortization	0	0
Goodwill, net carrying amount	206,752	199,513
Trade and brand names
Goodwill And Intangible Assets [Line Items]
Indefinite-lived intangible assets	$ 146,600	$ 146,300
Customer relationships
Goodwill And Intangible Assets [Line Items]
Weighted average amortization period (years)	11 years	11 years
Gross carrying amount	$ 173,093	$ 173,063
Accumulated amortization	(108,948)	(99,439)
Net carrying Amount	$ 64,145	$ 73,624
Noncompete agreements
Goodwill And Intangible Assets [Line Items]
Weighted average amortization period (years)	5 years	5 years
Gross carrying amount	$ 14,500	$ 14,500
Accumulated amortization	(14,500)	(14,500)
Net carrying Amount	$ 0	$ 0
Favorable leases
Goodwill And Intangible Assets [Line Items]
Weighted average amortization period (years)		8 years
Gross carrying amount		$ 4,017
Accumulated amortization		(2,345)
Net carrying Amount		$ 1,672
Order backlog
Goodwill And Intangible Assets [Line Items]
Weighted average amortization period (years)	12 days	12 days
Gross carrying amount	$ 3,400	$ 3,400
Accumulated amortization	(3,400)	(3,400)
Net carrying Amount	$ 0	$ 0
Reacquired franchise rights
Goodwill And Intangible Assets [Line Items]
Weighted average amortization period (years)	7 years 8 months 12 days	7 years
Gross carrying amount	$ 28,089	$ 21,349
Accumulated amortization	(11,259)	(8,615)
Net carrying Amount	$ 16,830	$ 12,734

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(a) Basis of presentation and consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three and nine months ended September 30, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “Annual Report”) filed with the SEC on March 1, 2019. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

As discussed in Note 1, Planet Fitness, Inc. consolidates Pla-Fit Holdings. The Company also consolidates entities in which it has a controlling financial interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly

impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it. The principal entities in which the Company possesses a variable interest include franchise entities and certain other entities. The Company is not deemed to be the primary beneficiary for Planet Fitness franchise entities. Therefore, these entities are not consolidated.

The results of the Company have been consolidated with Matthew Michael Realty LLC (“MMR”), PF Melville LLC (“PF Melville”), and Planet Fitness NAF, LLC (the “NAF”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. MMR and PF Melville are real estate holding companies that derive a majority of their financial support from the Company through lease agreements for corporate stores. See Note 3 for further information related to the Company’s VIEs. The NAF is an advertising fund on behalf of which the Company collects 2% of gross monthly membership dues from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to support our national marketing campaigns, our social media platforms and the development of local advertising materials.

(b) Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, the liability for the Company’s tax benefit arrangements, and the value of the lease liability and related right-of-use asset recorded in accordance with ASC 842 (see Note 2(d) and 16).

(c) Fair Value

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The carrying value and estimated fair value of long-term debt as of September 30, 2019 and December 31, 2018 were as follows:

	September 30, 2019				December 31, 2018
	Carrying value		Estimated fair value(1)		Carrying value		Estimated fair value(1)
Long-term debt	$	1,188,000	$	1,230,305	$	1,197,000	$	1,188,985

(1) The estimated fair value of our long-term debt is estimated primarily based on current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.

(d) Recent accounting pronouncements

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases, in February 2016. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance requires lessees to recognize the assets and liabilities on the balance sheet for the rights and obligations created by leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Leases will be

classified as finance or operating, with the classification affecting the pattern and classification of expense recognition within the income statement.

The Company adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The new guidance also provides several practical expedients and policies that companies may elect upon transition. The Company has elected the package of practical expedients under which it did not reassess the classification of its existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. The Company did not elect the practical expedient pertaining to land easements, as it is not applicable to its leases. Additionally, the Company elected to use the practical expedient that permits a reassessment of lease terms for existing leases using hindsight.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption. This means, for those leases that qualify, the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components.

Upon transition to the new guidance on January 1, 2019, the Company recognized approximately $130,000 of operating lease liabilities. Additionally, the Company recorded ROU assets in a corresponding amount, net of amounts reclassified from other assets and liabilities, including deferred rent, tenant improvement allowances, and favorable lease assets, as specified by the new lease guidance. In connection with the election of the hindsight practical expedient related to reassessing lease terms for existing leases as of January 1, 2019, the Company recorded a cumulative transition adjustment of $1,713 through retained earnings, net of tax.

The FASB issued ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018. The guidance helps align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year, but allows for early adoption. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Company's Liabilities Measured at Fair Value

The carrying value and estimated fair value of long-term debt as of September 30, 2019 and December 31, 2018 were as follows:

	September 30, 2019				December 31, 2018
	Carrying value		Estimated fair value(1)		Carrying value		Estimated fair value(1)
Long-term debt	$	1,188,000	$	1,230,305	$	1,197,000	$	1,188,985

(1) The estimated fair value of our long-term debt is estimated primarily based on current bid prices for our long-term debt. Judgment is required to develop these estimates. As such, the fair value of our long-term debt is classified within Level 2, as defined under U.S. GAAP.

XML

Corporate-Owned and Franchisee-Owned Stores

9 Months Ended

Sep. 30, 2019

Franchisors [Abstract]

Corporate-Owned and Franchisee-Owned Stores

Corporate-Owned and Franchisee-Owned Stores

The following table shows changes in our corporate-owned and franchisee-owned stores for the three and nine months ended September 30, 2019 and 2018:

	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Franchisee-owned stores:
Stores operated at beginning of period	1,779		1,540		1,666		1,456
New stores opened	39		40		157		131
Stores debranded, sold or consolidated(1)	(1	)	(7	)	(6	)	(14	)
Stores operated at end of period	1,817		1,573		1,817		1,573
Corporate-owned stores:
Stores operated at beginning of period	80		68		76		62
New stores opened	2		1		2		1
Stores acquired from franchisees	—		4		4		10
Stores operated at end of period	82		73		82		73
Total stores:
Stores operated at beginning of period	1,859		1,608		1,742		1,518
New stores opened	41		41		159		132
Stores acquired, debranded, sold or consolidated(1)	(1	)	(3	)	(2	)	(4	)
Stores operated at end of period	1,899		1,646		1,899		1,646

 (1)

The term “debrand” refers to a franchisee-owned store whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. We retain the right to prevent debranded stores from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s store with another store located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining store.

XML

Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

Long-term debt as of September 30, 2019 and December 31, 2018 consists of the following: 

	September 30, 2019			December 31, 2018
Class A-2-I notes	$	569,250		$	573,563
Class A-2-II notes	618,750			623,437
Total debt, excluding deferred financing costs	1,188,000			1,197,000
Deferred financing costs, net of accumulated amortization	(20,951		)	(24,873		)
Total debt	1,167,049			1,172,127
Current portion of long-term debt and line of credit	12,000			12,000
Long-term debt, net of current portion	$	1,155,049		$	1,160,127

Schedule of Future Annual Payments of Long-term Debt

Future annual principal payments of long-term debt as of September 30, 2019 are as follows: 

	Amount
Remainder of 2019	$	3,000
2020	12,000
2021	12,000
2022	562,563
2023	6,250
Thereafter	592,187
Total	$	1,188,000

XML

Condensed consolidated statements of comprehensive income (loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income including non-controlling interests	$ 29,692	$ 20,472	$ 101,158	$ 74,384
Other comprehensive income (loss), net:
Unrealized gain on interest rate caps, net of tax	0	606	0	989
Foreign currency translation adjustments	(62)	40	95	(23)
Total other comprehensive income, net	(62)	646	95	966
Total comprehensive income including non-controlling interests	29,630	21,118	101,253	75,350
Less: total comprehensive income attributable to non-controlling interests	3,915	3,007	13,128	11,221
Total comprehensive income attributable to Planet Fitness, Inc.	$ 25,715	$ 18,111	$ 88,125	$ 64,129

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2019	Nov. 01, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	001-37534
Entity Registrant Name	PLANET FITNESS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	38-3942097
Entity Address, Address Line One	4 Liberty Lane West
Entity Address, City or Town	Hampton
Entity Address, State or Province	NH
Entity Address, Postal Zip Code	03842
City Area Code	603
Local Phone Number	750-0001
Title of 12(b) Security	Class A common stock, $0.0001 Par Value
Trading Symbol	PLNT
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001637207
Current Fiscal Year End Date	--12-31
Class A Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		81,792,537
Class B Common Stock
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		8,561,920

XML

Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands		9 Months Ended
	Jan. 01, 2019	Sep. 30, 2019	Sep. 30, 2018
Significant Accounting Policies [Line Items]
Present value of lease liabilities		$ 142,473
Cumulative transition adjustment		$ (1,713)	$ (9,192)
Planet Fitness NAF, LLC
Significant Accounting Policies [Line Items]
Percentage of franchise membership billing revenue		2.00%
ASU 2016-02
Significant Accounting Policies [Line Items]
Present value of lease liabilities	$ 130,000
Cumulative transition adjustment	$ 1,713

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Related party transactions (Tables)

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

Activity with entities considered to be related parties is summarized below: 

	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Franchise revenue	$	505	$	897	$	1,735	$	2,453
Equipment revenue	883		1,472		2,325		1,782
Total revenue from related parties	$	1,388	$	2,369	4,060		$	4,235

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Corporate-Owned and Franchisee-Owned Stores (Tables)

9 Months Ended

Sep. 30, 2019

Franchisors [Abstract]

Schedule of Changes in Corporate-Owned and Franchisee-Owned Stores

The following table shows changes in our corporate-owned and franchisee-owned stores for the three and nine months ended September 30, 2019 and 2018:

	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Franchisee-owned stores:
Stores operated at beginning of period	1,779		1,540		1,666		1,456
New stores opened	39		40		157		131
Stores debranded, sold or consolidated(1)	(1	)	(7	)	(6	)	(14	)
Stores operated at end of period	1,817		1,573		1,817		1,573
Corporate-owned stores:
Stores operated at beginning of period	80		68		76		62
New stores opened	2		1		2		1
Stores acquired from franchisees	—		4		4		10
Stores operated at end of period	82		73		82		73
Total stores:
Stores operated at beginning of period	1,859		1,608		1,742		1,518
New stores opened	41		41		159		132
Stores acquired, debranded, sold or consolidated(1)	(1	)	(3	)	(2	)	(4	)
Stores operated at end of period	1,899		1,646		1,899		1,646

 (1)

The term “debrand” refers to a franchisee-owned store whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. We retain the right to prevent debranded stores from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s store with another store located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining store.

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Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Planet Fitness, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Holdings Units, are exchangeable into shares of Class A common stock on a one-for-one basis.

The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:  

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Numerator
Net income	$	29,692	$	20,472	$	101,158	$	74,384
Less: net income attributable to non-controlling interests	3,915		3,001		13,128		11,158
Net income attributable to Planet Fitness, Inc.	$	25,777	$	17,471	$	88,030	$	63,226
Denominator
Weighted-average shares of Class A common stock outstanding - basic	83,157,430		88,047,401		83,699,609		87,727,300
Effect of dilutive securities:
Stock options	606,888		382,499		609,788		319,610
Restricted stock units	42,588		27,904		44,775		17,141
Weighted-average shares of Class A common stock outstanding - diluted	83,806,906		88,457,804		84,354,172		88,064,051
Earnings per share of Class A common stock - basic	$	0.31	$	0.20	$	1.05	$	0.72
Earnings per share of Class A common stock - diluted	$	0.31	$	0.20	$	1.04	$	0.72

Weighted average shares of Class B common stock of 8,579,094 and 10,004,682 for the three months ended September 30, 2019 and 2018, respectively, and 8,798,695 and 10,550,857 for the nine months ended September 30, 2019 and 2018, respectively, were evaluated under the if-converted method for potential dilutive effects and were determined to be anti-dilutive. Weighted average stock options outstanding of 76,455 and 36,342 for the three months ended September 30, 2019 and 2018, respectively, and 50,063 and 114,628 for the nine months ended September 30, 2019 and 2018, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive. Weighted average restricted stock units outstanding of 713 and 0 for the three months ended September 30, 2019 and 2018, respectively, and 1,688 and 11,245 for the nine months ended September 30, 2019 and 2018, respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.

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Long-Term Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt as of September 30, 2019 and December 31, 2018 consists of the following: 

	September 30, 2019			December 31, 2018
Class A-2-I notes	$	569,250		$	573,563
Class A-2-II notes	618,750			623,437
Total debt, excluding deferred financing costs	1,188,000			1,197,000
Deferred financing costs, net of accumulated amortization	(20,951		)	(24,873		)
Total debt	1,167,049			1,172,127
Current portion of long-term debt and line of credit	12,000			12,000
Long-term debt, net of current portion	$	1,155,049		$	1,160,127

Future annual principal payments of long-term debt as of September 30, 2019 are as follows: 

	Amount
Remainder of 2019	$	3,000
2020	12,000
2021	12,000
2022	562,563
2023	6,250
Thereafter	592,187
Total	$	1,188,000

On August 1, 2018, Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, entered into a base indenture and a related supplemental indenture (collectively, the “Indenture”) under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued Series 2018-1 4.262% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”) with an initial principal amount of $575,000 and Series 2018-1 4.666% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes” and, together with the Class A-2-I Notes, the “Class A-2 Notes”) with an initial principal amount of $625,000. In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility that allows for the issuance of up to $75,000 in Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes” and together with the Class A-2 Notes, the “Series 2018-1 Senior Notes”), and certain letters of credit, all of which was undrawn as of both September 30, 2019 and December 31, 2018. The Series 2018-1 Senior Notes were issued in a securitization transaction pursuant to which most of the Company’s domestic revenue-generating assets, consisting principally of franchise-related agreements, certain corporate-owned store assets, equipment supply agreements and intellectual property and license agreements for the use of intellectual property, were assigned to the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned indirect subsidiaries of the Company that act as guarantors of the Series 2018-1 Senior Notes and that have pledged substantially all of their assets to secure the Series 2018-1 Senior Notes.

Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Class A-2 Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the Class A-2 Notes is in September 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the Class A-2-I Notes will be repaid in September 2022 and the Class A-2-II Notes will be repaid in September 2025 (together, the “Anticipated Repayment Dates”). If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture.

The Variable Funding Notes will accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars, or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin and as specified in the Variable Funding Note agreement. There is a commitment fee on the unused portion of the Variable Funding Notes of 0.5% based on utilization. It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to September 2023, subject to two additional one-year extensions. Following the anticipated repayment date (and any extensions thereof) additional interest will accrue on the Variable Funding Notes equal to 5.0% per year.

In connection with the issuance of the Series 2018-1 Senior Notes, the Company incurred debt issuance costs of $27,133. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Class A-2 Notes utilizing the effective interest rate method.

The Series 2018-1 Senior Notes are subject to covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Series 2018-1 Senior Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Series 2018-1 Senior Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information and similar matters. The Series 2018-1 Senior Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to failure

to maintain stated debt service coverage ratios, certain manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled Anticipated Repayment Dates. The Series 2018-1 Senior Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal, or other amounts due on or with respect to the Series 2018-1 Senior Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments.

In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee (the “Trustee”) for the benefit of the trustee and the noteholders, and are restricted in their use. The Company holds restricted cash which primarily represents cash collections held by the Trustee, interest, principal, and commitment fee reserves held by the Trustee related to the Company’s Series 2018-1 Senior Notes. As of September 30, 2019, the Company had restricted cash held by the Trustee of $30,499. Restricted cash has been combined with cash and cash equivalents when reconciling the beginning and end of period balances in the consolidated statements of cash flows.

The proceeds from the issuance of the Class A-2 Notes were used to repay all amounts outstanding on the Term Loan B under the Company’s prior credit facility. As a result, the Company recorded a loss on early extinguishment of debt of $4,570 in August 2018, primarily consisting of the write-off of deferred costs related to the prior credit facility. In connection with the repayment of the Term Loan B, the Company terminated the related interest rate caps with notional amounts totaling $219,837, which had been designated as a cash flow hedge. See Note 7 for more information on the interest rate caps.

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Income Taxes - Additional information (Detail) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018	Sep. 30, 2019 USD ($) agreement shares	Sep. 30, 2018	Dec. 31, 2018 USD ($)
Tax Credit Carryforward [Line Items]
Effective income tax rate	25.80%	26.00%	21.00%	23.90%
Net deferred tax assets	$ 416,678		$ 416,678		$ 412,538
Total liability related to uncertain tax positions	260		$ 260		300
Number of tax receivable agreements | agreement			2
Percentage of remaining tax savings			15.00%
Tax benefit obligation	$ 433,390		$ 433,390		$ 429,233
TRA Holders
Tax Credit Carryforward [Line Items]
Applicable tax savings	85.00%		85.00%
Decrease in deferred tax assets			$ 517
Deferred tax asset	$ 20,340		20,340
Deferred tax liability	$ 17,016		$ 17,016
Class A Common Stock
Tax Credit Carryforward [Line Items]
Number of shares exchanged | shares			885,810
Class A Common Stock | TRA Holders
Tax Credit Carryforward [Line Items]
Number of shares exchanged | shares			885,810

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Related Party Transactions - Schedule of Related Party Transactions (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Related Party Transaction [Line Items]
Total revenue from related parties	$ 1,388	$ 2,369	$ 4,060	$ 4,235
Franchise revenue
Related Party Transaction [Line Items]
Total revenue from related parties	505	897	1,735	2,453
Equipment revenue
Related Party Transaction [Line Items]
Total revenue from related parties	$ 883	$ 1,472	$ 2,325	$ 1,782

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Segments - Summary of Financial Information for the Company's Reportable Segments (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information [Line Items]
Revenue	$ 166,815	$ 136,656	$ 497,292	$ 398,538
Total Segment EBITDA	64,832	52,409	199,005	156,911
Corporate And Other Non Segment
Segment Reporting Information [Line Items]
Total Segment EBITDA	(10,036)	(9,599)	(33,968)	(27,576)
Franchise revenue
Segment Reporting Information [Line Items]
Revenue	66,709	54,822	204,283	167,584
Franchise revenue | Operating Segments
Segment Reporting Information [Line Items]
Total Segment EBITDA	44,328	37,075	141,548	113,793
Franchise revenue | US
Segment Reporting Information [Line Items]
Revenue	65,494	53,528	200,111	164,225
Franchise revenue | International
Segment Reporting Information [Line Items]
Revenue	1,215	1,294	4,172	3,359
Corporate-owned Stores
Segment Reporting Information [Line Items]
Revenue	40,742	35,406	118,481	102,365
Corporate-owned Stores | Operating Segments
Segment Reporting Information [Line Items]
Total Segment EBITDA	16,799	15,279	50,505	42,115
Corporate-owned Stores | US
Segment Reporting Information [Line Items]
Revenue	39,637	34,323	115,178	99,020
Corporate-owned Stores | International
Segment Reporting Information [Line Items]
Revenue	1,105	1,083	3,303	3,345
Equipment revenue
Segment Reporting Information [Line Items]
Revenue	59,364	46,428	174,528	128,589
Equipment revenue | Operating Segments
Segment Reporting Information [Line Items]
Total Segment EBITDA	13,741	9,654	40,920	28,579
Equipment revenue | US
Segment Reporting Information [Line Items]
Revenue	$ 59,364	$ 46,428	$ 174,528	$ 128,589

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators Used to Compute Basic and Diluted Earnings per Share

The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:  

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Numerator
Net income	$	29,692	$	20,472	$	101,158	$	74,384
Less: net income attributable to non-controlling interests	3,915		3,001		13,128		11,158
Net income attributable to Planet Fitness, Inc.	$	25,777	$	17,471	$	88,030	$	63,226
Denominator
Weighted-average shares of Class A common stock outstanding - basic	83,157,430		88,047,401		83,699,609		87,727,300
Effect of dilutive securities:
Stock options	606,888		382,499		609,788		319,610
Restricted stock units	42,588		27,904		44,775		17,141
Weighted-average shares of Class A common stock outstanding - diluted	83,806,906		88,457,804		84,354,172		88,064,051
Earnings per share of Class A common stock - basic	$	0.31	$	0.20	$	1.05	$	0.72
Earnings per share of Class A common stock - diluted	$	0.31	$	0.20	$	1.04	$	0.72

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Revenue recognition (Tables)

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Contract Liabilities

The following table reflects the change in contract liabilities between December 31, 2018 and September 30, 2019.

	Contract liabilities
Balance at December 31, 2018	$	49,862
Revenue recognized that was included in the contract liability at the beginning of the year	(23,082		)
Increase, excluding amounts recognized as revenue during the period	29,390
Balance at September 30, 2019	$	56,170

Remaining Performance Obligation

The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2019. The Company has elected to exclude short term contracts, sales and usage based royalties and any other variable consideration recognized on an “as invoiced” basis.

Contract liabilities to be recognized in:	Amount
Remainder of 2019	$	12,422
2020	13,129
2021	3,279
2022	3,061
2023	2,818
Thereafter	21,461
Total	$	56,170

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Summary of Significant Accounting Policies - Summary of Company's Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Carrying value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 1,188,000	$ 1,197,000
Estimated fair value
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term debt	$ 1,230,305	$ 1,188,985

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Stockholder's Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholder's Equity

Stockholder’s Equity

Pursuant to the exchange agreement between the Company and the Continuing LLC Owners, the Continuing LLC Owners (or certain permitted transferees thereof) have the right, from time to time and subject to the terms of the exchange agreement, to exchange their Holdings Units, along with a corresponding number of shares of Class B common stock, for shares of Class A common stock (or cash at the option of the Company) on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and similar transactions. In connection with any exchange of Holdings Units for shares of Class A common stock by a Continuing LLC Owner, the number of Holdings Units held by the Company is correspondingly increased as it acquires the exchanged Holdings Units, and a corresponding number of shares of Class B common stock are canceled.

During the nine months ended September 30, 2019, certain existing holders of Holdings Units exercised their exchange rights and exchanged 885,810 Holdings Units for 885,810 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 885,810 shares of Class B common stock were surrendered by the holders of Holdings Units that exercised their exchange rights and canceled. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 885,810 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.

As a result of the above transactions, as of September 30, 2019:

• Holders of our Class A common stock owned 81,773,267 shares of our Class A common stock, representing 90.5% of the voting power in the Company and, through the Company, 81,773,267 Holdings Units representing 90.5% of the economic interest in Pla-Fit Holdings; and

• the Continuing LLC Owners collectively owned 8,561,920 Holdings Units, representing 9.5% of the economic interest in Pla-Fit Holdings, and 8,561,920 shares of our Class B common stock, representing 9.5% of the voting power in the Company.

Share repurchase program

On August 3, 2018, our board of directors approved an increase to the total amount of the previously approved share repurchase program to $500,000.

On November 13, 2018, the Company entered into a $300,000 accelerated share repurchase agreement (the “ASR Agreement”) with Citibank, N.A. (“the Bank”). Pursuant to the terms of the ASR Agreement, on November 14, 2018, the Company paid the Bank $300,000 upfront in cash and received 4,607,410 shares of the Company’s Class A common stock, which were retired, and the Company elected to record as a reduction to retained earnings of $240,000. Final settlement of the ASR Agreement occurred on April 30, 2019. At final settlement, the Bank delivered 524,124 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $58.46 over the term of the ASR agreement, which were retired. This had been evaluated as an unsettled forward contract indexed to our own stock, with $60,000 classified as a reduction to retained earnings at the original date of payment.

During the three months ended September 30, 2019, the Company purchased 2,272,001 shares of its Class A common stock for an average purchase price of $69.51 per share, completing its previously approved $500,000 share repurchase program.

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible assets

Goodwill and Intangible Assets

A summary of goodwill and intangible assets at September 30, 2019 and December 31, 2018 is as follows: 

September 30, 2019	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,093	(108,948		)	$	64,145
Noncompete agreements	5.0	14,500		(14,500		)	—
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.7	28,089		(11,259		)	16,830
		219,082		(138,107		)	80,975
Indefinite-lived intangible:
Trade and brand names	N/A	146,600		—			146,600
Total intangible assets		$	365,682	$	(138,107	)	$	227,575
Goodwill		$	206,752	$	—		$	206,752

December 31, 2018	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,063	$	(99,439	)	$	73,624
Noncompete agreements	5.0	14,500		(14,500		)	—
Favorable leases	8.0	4,017		(2,345		)	1,672
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.0	21,349		(8,615		)	12,734
		216,329		(128,299		)	88,030
Indefinite-lived intangible:
Trade and brand names	N/A	146,300		—			146,300
Total intangible assets		$	362,629	$	(128,299	)	$	234,330
Goodwill		$	199,513	$	—		$	199,513

In connection with the adoption of ASC 842, as of January 1, 2019, the Company has derecognized the favorable leases intangible asset, and the favorable leases balance is now included in the ROU asset, net balance (Note 16). The Company determined that no impairment charges were required during any periods presented and the increase to goodwill was due to the acquisition of four franchisee-owned stores on May 30, 2019 (Note 4).

Amortization expense related to the intangible assets totaled $4,160 and $4,027 for the three months ended September 30, 2019 and 2018, respectively and $12,186 and $12,052 for the nine months ended September 30, 2019 and 2018, respectively. The anticipated annual amortization expense related to intangible assets to be recognized in future years as of September 30, 2019 is as follows:

	Amount
Remainder of 2019	$	4,146
2020	14,968
2021	15,053
2022	15,280
2023	15,185
Thereafter	16,343
Total	$	80,975

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Segments - Additional Information (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) segment	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | segment			3
Number of operating segments | segment			0
Revenue	$ 166,815,000	$ 136,656,000	$ 497,292,000	$ 398,538,000
Assets	1,420,232,000		1,420,232,000		$ 1,353,416,000
Franchise revenue
Segment Reporting Information [Line Items]
Revenue	66,709,000	54,822,000	204,283,000	167,584,000
Franchise revenue | Placement Services
Segment Reporting Information [Line Items]
Revenue	4,277,000	2,518,000	12,112,000	7,694,000
Corporate-owned Stores
Segment Reporting Information [Line Items]
Revenue	40,742,000	$ 35,406,000	118,481,000	$ 102,365,000
Corporate-owned Stores | Canada
Segment Reporting Information [Line Items]
Long-lived assets	1,204,000		1,204,000		1,892,000
Intersegment Eliminations
Segment Reporting Information [Line Items]
Revenue			0
Operating Segments | Franchise revenue
Segment Reporting Information [Line Items]
Assets	189,192,000		189,192,000		185,899,000
Operating Segments | Corporate-owned Stores
Segment Reporting Information [Line Items]
Assets	390,101,000		390,101,000		243,221,000
Unallocated
Segment Reporting Information [Line Items]
Assets	$ 645,917,000		$ 645,917,000		713,834,000
Reclassification | Operating Segments | Franchise revenue
Segment Reporting Information [Line Items]
Assets					(133,523,000)
Reclassification | Unallocated
Segment Reporting Information [Line Items]
Assets					$ 133,523,000

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Earnings Per Share - Reconciliation of Numerators and Denominators Used to Compute Basic and Diluted Earnings per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Numerator
Net income	$ 29,692	$ 20,472	$ 101,158	$ 74,384
Less: net income attributable to non-controlling interests	3,915	3,001	13,128	11,158
Net income attributable to Planet Fitness, Inc.	$ 25,777	$ 17,471	$ 88,030	$ 63,226
Stock Options
Effect of dilutive securities:
Weighted-average shares outstanding adjustment (in shares)	606,888	382,499	609,788	319,610
Restricted Stock Units
Effect of dilutive securities:
Weighted-average shares outstanding adjustment (in shares)	42,588	27,904	44,775	17,141
Class A Common Stock
Denominator
Weighted-average shares of Class A common stock outstanding - basic (in shares)	83,157,430	88,047,401	83,699,609	87,727,300
Effect of dilutive securities:
Weighted-average shares of Class A common stock outstanding - diluted (in shares)	83,806,906	88,457,804	84,354,172	88,064,051
Earnings per share of Class A common stock - basic (in dollars per share)	$ 0.31	$ 0.20	$ 1.05	$ 0.72
Earnings per share of Class A common stock - diluted (in dollars per share)	$ 0.31	$ 0.20	$ 1.04	$ 0.72

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Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Party Transaction [Line Items]
Liability payable under tax benefit obligations	$ 55,478		$ 55,478		$ 59,458
Administrative fees charged	1,388	$ 2,369	4,060	$ 4,235
Planet Fitness NAF, LLC
Related Party Transaction [Line Items]
Administrative fees charged		$ 676		$ 1,872
Area Development Agreements
Related Party Transaction [Line Items]
Deferred area development revenue from related parties	260		260		$ 779
Administrative Service | Planet Fitness NAF, LLC
Related Party Transaction [Line Items]
Administrative fees charged	402		1,771
Civil Action Brought By Former Employee | Pending Litigation
Related Party Transaction [Line Items]
Receivables due from related parties	$ 412		$ 412

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Leases - Additional Information (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Lessee, Lease, Description [Line Items]
Lease payments for leases signed but not yet commenced	$ 34,456
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term	1 year
Renewal term	3 years
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term	10 years
Renewal term	10 years

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Segments - Summary of Company's Goodwill by Reportable Segment (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Segment Reporting, Other Significant Reconciling Item [Line Items]
Goodwill, net carrying amount	$ 206,752	$ 199,513
Franchise revenue
Segment Reporting, Other Significant Reconciling Item [Line Items]
Goodwill, net carrying amount	16,938	16,938
Corporate-owned Stores
Segment Reporting, Other Significant Reconciling Item [Line Items]
Goodwill, net carrying amount	97,148	89,909
Equipment revenue
Segment Reporting, Other Significant Reconciling Item [Line Items]
Goodwill, net carrying amount	$ 92,666	$ 92,666

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Variable Interest Entities - Additional Information (Detail) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]
Maximum obligation of guarantees of leases and debt	$ 10,376	$ 732
Franchisee lease term, maximum	10 years

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Goodwill and Intangible Assets - Additional Information (Detail)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($) store	Sep. 30, 2018 USD ($) store	Sep. 30, 2019 USD ($) store	Sep. 30, 2018 USD ($) store	Dec. 31, 2018 USD ($) store	Jun. 30, 2019 store	May 30, 2019 store	Jun. 30, 2018 store	Dec. 31, 2017 store
Goodwill And Intangible Assets [Line Items]
Impairment charges | $			$ 0		$ 0
Number of owned and franchised locations | store	1,899	1,646	1,899	1,646	1,742	1,859		1,608	1,518
Amortization of intangible assets | $	$ 4,160,000	$ 4,027,000	$ 12,186,000	$ 12,052,000
Maine Acquisition
Goodwill And Intangible Assets [Line Items]
Number of owned and franchised locations | store							4

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Long-Term Debt - Narrative (Details)		1 Months Ended		9 Months Ended
	Aug. 01, 2018 USD ($) extension	Sep. 30, 2023	Aug. 31, 2018 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Debt issuance costs incurred	$ 27,133,000			$ 0	$ 27,191,000
Restricted cash				30,499,000		$ 30,708,000
Loss on extinguishment of debt			$ 4,570,000	$ 0	$ 4,570,000
Interest rate caps | Cash Flow Hedging
Debt Instrument [Line Items]
Derivative liability, notional amount	219,837,000
Variable funding notes | Revolving Financing Facility
Debt Instrument [Line Items]
Debt face amount	$ 75,000,000
Commitment fee percentage	0.50%
Number of additional extensions | extension	2
Term of extension	1 year
Variable funding notes | Revolving Financing Facility | Scenario, Forecast
Debt Instrument [Line Items]
Line of credit interest rate		5.00%
Class A-2-I notes | Senior fixed-rate term notes
Debt Instrument [Line Items]
Fixed interest rate	4.262%
Debt face amount	$ 575,000,000
Class A-2-II notes | Senior fixed-rate term notes
Debt Instrument [Line Items]
Fixed interest rate	4.666%
Debt face amount	$ 625,000,000

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Goodwill and Intangible Assets

A summary of goodwill and intangible assets at September 30, 2019 and December 31, 2018 is as follows: 

September 30, 2019	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,093	(108,948		)	$	64,145
Noncompete agreements	5.0	14,500		(14,500		)	—
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.7	28,089		(11,259		)	16,830
		219,082		(138,107		)	80,975
Indefinite-lived intangible:
Trade and brand names	N/A	146,600		—			146,600
Total intangible assets		$	365,682	$	(138,107	)	$	227,575
Goodwill		$	206,752	$	—		$	206,752

December 31, 2018	Weighted average amortization period (years)	Gross carrying amount		Accumulated amortization			Net carrying Amount
Customer relationships	11.0	$	173,063	$	(99,439	)	$	73,624
Noncompete agreements	5.0	14,500		(14,500		)	—
Favorable leases	8.0	4,017		(2,345		)	1,672
Order backlog	0.4	3,400		(3,400		)	—
Reacquired franchise rights	7.0	21,349		(8,615		)	12,734
		216,329		(128,299		)	88,030
Indefinite-lived intangible:
Trade and brand names	N/A	146,300		—			146,300
Total intangible assets		$	362,629	$	(128,299	)	$	234,330
Goodwill		$	199,513	$	—		$	199,513

Summary of Amortization expenses

The anticipated annual amortization expense related to intangible assets to be recognized in future years as of September 30, 2019 is as follows:

	Amount
Remainder of 2019	$	4,146
2020	14,968
2021	15,053
2022	15,280
2023	15,185
Thereafter	16,343
Total	$	80,975

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Condensed consolidated statements of operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue:
Revenue	$ 166,815	$ 136,656	$ 497,292	$ 398,538
Operating costs and expenses:
Cost of revenue	46,194	36,871	135,071	100,114
Store operations	22,295	18,751	63,363	55,154
Selling, general and administrative	20,928	17,233	57,944	52,066
National advertising fund expense	12,652	11,377	36,986	32,997
Depreciation and amortization	11,832	8,863	32,316	25,947
Other (gain) loss	(147)	(12)	99	958
Total operating costs and expenses	113,754	93,083	325,779	267,236
Income from operations	53,061	43,573	171,513	131,302
Other expense, net:
Interest income	1,808	2,025	5,585	2,480
Interest expense	(14,807)	(17,909)	(44,192)	(35,725)
Other expense	(61)	(27)	(4,824)	(338)
Total other expense, net	(13,060)	(15,911)	(43,431)	(33,583)
Income before income taxes	40,001	27,662	128,082	97,719
Provision for income taxes	10,309	7,190	26,924	23,335
Net income	29,692	20,472	101,158	74,384
Less net income attributable to non-controlling interests	3,915	3,001	13,128	11,158
Net income attributable to Planet Fitness, Inc.	$ 25,777	$ 17,471	$ 88,030	$ 63,226
Class A Common Stock
Net income per share of Class A common stock:
Basic (in dollars per share)	$ 0.31	$ 0.20	$ 1.05	$ 0.72
Diluted (in dollars per share)	$ 0.31	$ 0.20	$ 1.04	$ 0.72
Weighted-average shares of Class A common stock outstanding:
Basic (in shares)	83,157,430	88,047,401	83,699,609	87,727,300
Diluted (in shares)	83,806,906	88,457,804	84,354,172	88,064,051
Franchise
Revenue:
Revenue	$ 53,443	$ 41,997	$ 164,624	$ 129,575
Commission income
Revenue:
Revenue	614	1,448	2,673	5,012
National advertising fund
Revenue:
Revenue	12,652	11,377	36,986	32,997
Corporate-owned stores
Revenue:
Revenue	40,742	35,406	118,481	102,365
Equipment
Revenue:
Revenue	$ 59,364	$ 46,428	$ 174,528	$ 128,589

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Business Organization

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Organization

Business Organization

Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with more than 14.1 million members and 1,899 owned and franchised locations (referred to as stores) in 50 states, the District of Columbia, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico as of September 30, 2019.

The Company serves as the reporting entity for its various subsidiaries that operate three distinct lines of business:

• Licensing and selling franchises under the Planet Fitness trade name.

• Owning and operating fitness centers under the Planet Fitness trade name.

• Selling fitness-related equipment to franchisee-owned stores.

The Company was formed as a Delaware corporation on March 16, 2015 for the purpose of facilitating an initial public offering (the “IPO”), which was completed on August 11, 2015 and related transactions in order to carry on the business of Pla-Fit Holdings, LLC and its subsidiaries (“Pla-Fit Holdings”). As of August 5, 2015, in connection with the recapitalization transactions that occurred prior to the IPO, the Company became the sole managing member and holder of 100% of the voting power of Pla-Fit Holdings. Pla-Fit Holdings owns 100% of Planet Intermediate, LLC, which has no operations but is the 100% owner of Planet Fitness Holdings, LLC, a franchisor and operator of fitness centers through its subsidiaries. With respect to the Company, Pla-Fit Holdings and Planet Intermediate, LLC, each entity owns nothing other than the respective entity below it in the corporate structure and each entity has no other material operations.

The Company is a holding company whose principal asset is a controlling equity interest in Pla-Fit Holdings. As the sole managing member of Pla-Fit Holdings, the Company operates and controls all of the business and affairs of Pla-Fit Holdings, and through Pla-Fit Holdings, conducts its business. As a result, the Company consolidates Pla-Fit Holdings’ financial results and reports a non-controlling interest related to the portion of limited liability company units of Pla-Fit Holdings (“Holdings Units”) not owned by the Company. Unless otherwise specified, “the Company” refers to both Planet Fitness, Inc. and Pla-Fit Holdings throughout the remainder of these notes.

As of September 30, 2019, Planet Fitness, Inc. held 100.0% of the voting interest and 90.5% of the economic interest of Pla-Fit Holdings and the holders of Holdings Units of Pla-Fit Holdings (the “Continuing LLC Owners”) held the remaining 9.5% economic interest in Pla-Fit Holdings.

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Summary of significant accounting policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of presentation and consolidation

Basis of presentation and consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements as of and for the three and nine months ended September 30, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the disclosures required by U.S. GAAP. These interim condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “Annual Report”) filed with the SEC on March 1, 2019. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

As discussed in Note 1, Planet Fitness, Inc. consolidates Pla-Fit Holdings. The Company also consolidates entities in which it has a controlling financial interest, the usual condition of which is ownership of a majority voting interest. The Company also considers for consolidation certain interests where the controlling financial interest may be achieved through arrangements that do not involve voting interests. Such an entity, known as a variable interest entity (“VIE”), is required to be consolidated by its primary beneficiary. The primary beneficiary of a VIE is considered to possess the power to direct the activities of the VIE that most significantly

impact its economic performance and has the obligation to absorb losses or the rights to receive benefits from the VIE that are significant to it. The principal entities in which the Company possesses a variable interest include franchise entities and certain other entities. The Company is not deemed to be the primary beneficiary for Planet Fitness franchise entities. Therefore, these entities are not consolidated.

The results of the Company have been consolidated with Matthew Michael Realty LLC (“MMR”), PF Melville LLC (“PF Melville”), and Planet Fitness NAF, LLC (the “NAF”) based on the determination that the Company is the primary beneficiary with respect to these VIEs. MMR and PF Melville are real estate holding companies that derive a majority of their financial support from the Company through lease agreements for corporate stores. See Note 3 for further information related to the Company’s VIEs. The NAF is an advertising fund on behalf of which the Company collects 2% of gross monthly membership dues from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to support our national marketing campaigns, our social media platforms and the development of local advertising materials.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of assets and liabilities in connection with acquisitions, valuation of equity-based compensation awards, the evaluation of the recoverability of goodwill and long-lived assets, including intangible assets, income taxes, including deferred tax assets and liabilities and reserves for unrecognized tax benefits, the liability for the Company’s tax benefit arrangements, and the value of the lease liability and related right-of-use asset recorded in accordance with ASC 842 (see Note 2(d) and 16).

Fair Value

Fair Value

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Recent accounting pronouncements

Recent accounting pronouncements

In February 2016, the FASB established Topic 842, Leases, by issuing ASU No. 2016-02, Leases, in February 2016. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. This guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The new guidance requires lessees to recognize the assets and liabilities on the balance sheet for the rights and obligations created by leases with lease terms of more than 12 months, amends various other aspects of accounting for leases by lessees and lessors, and requires enhanced disclosures. Leases will be

classified as finance or operating, with the classification affecting the pattern and classification of expense recognition within the income statement.

The Company adopted the new standard on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information has not been updated and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The new guidance also provides several practical expedients and policies that companies may elect upon transition. The Company has elected the package of practical expedients under which it did not reassess the classification of its existing leases, reevaluate whether any expired or existing contracts are or contain leases or reassess initial direct costs under the new guidance. The Company did not elect the practical expedient pertaining to land easements, as it is not applicable to its leases. Additionally, the Company elected to use the practical expedient that permits a reassessment of lease terms for existing leases using hindsight.

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption. This means, for those leases that qualify, the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components.

Upon transition to the new guidance on January 1, 2019, the Company recognized approximately $130,000 of operating lease liabilities. Additionally, the Company recorded ROU assets in a corresponding amount, net of amounts reclassified from other assets and liabilities, including deferred rent, tenant improvement allowances, and favorable lease assets, as specified by the new lease guidance. In connection with the election of the hindsight practical expedient related to reassessing lease terms for existing leases as of January 1, 2019, the Company recorded a cumulative transition adjustment of $1,713 through retained earnings, net of tax.

The FASB issued ASU No. 2017-4, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, in January 2017. This guidance eliminates the requirement to calculate the implied fair value, essentially eliminating step two from the goodwill impairment test. The new standard requires goodwill impairment to be based upon the results of step one of the impairment test, which is defined as the excess of the carrying value of a reporting unit over its fair value. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year. This new guidance is not expected to have a material impact on the Company’s consolidated financial statements.

The FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, in August 2018. The guidance helps align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This guidance will be effective for fiscal years beginning after December 15, 2019, including interim periods within that year, but allows for early adoption. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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Segments

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segments

Segments

The Company has three reportable segments: (i) Franchise; (ii) Corporate-owned stores; and (iii) Equipment.  

The Company’s operations are organized and managed by type of products and services and segment information is reported accordingly. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. The CODM reviews financial performance and allocates resources by reportable segment. There have been no operating segments aggregated to arrive at the Company’s reportable segments.

The Franchise segment includes operations related to the Company’s franchising business in the United States, Puerto Rico, Canada, the Dominican Republic, Panama and Mexico, including revenues and expenses from the NAF beginning on January 1, 2018 (see Note 15). The Corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the United States and Canada. The Equipment segment includes the sale of equipment to our United States franchisee-owned stores.

The accounting policies of the reportable segments are the same as those described in Note 2. The Company evaluates the performance of its segments and allocates resources to them based on revenue and earnings before interest, taxes, depreciation, and amortization, referred to as Segment EBITDA. Revenues for all operating segments include only transactions with unaffiliated customers and include no intersegment revenues.

The tables below summarize the financial information for the Company’s reportable segments for the three and nine months ended September 30, 2019 and 2018. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.

 

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue
Franchise segment revenue - U.S.	$	65,494	$	53,528	$	200,111	$	164,225
Franchise segment revenue - International	1,215		1,294		4,172		3,359
Franchise segment total	66,709		54,822		204,283		167,584
Corporate-owned stores - U.S.	39,637		34,323		115,178		99,020
Corporate-owned stores - International	1,105		1,083		3,303		3,345
Corporate-owned stores total	40,742		35,406		118,481		102,365
Equipment segment - U.S.	59,364		46,428		174,528		128,589
Equipment segment total	59,364		46,428		174,528		128,589
Total revenue	$	166,815	$	136,656	$	497,292	$	398,538

Franchise segment revenue includes franchise revenue, NAF revenue, and commission income.

Franchise revenue includes revenue generated from placement services of $4,277 and $2,518 for the three months ended September 30, 2019 and 2018, respectively, and $12,112 and $7,694 for the nine months September 30, 2019 and 2018, respectively. 

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Segment EBITDA
Franchise	$	44,328		$	37,075		$	141,548		$	113,793
Corporate-owned stores	16,799			15,279			50,505			42,115
Equipment	13,741			9,654			40,920			28,579
Corporate and other	(10,036		)	(9,599		)	(33,968		)	(27,576		)
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911

The following table reconciles total Segment EBITDA to income before taxes:

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911
Less:
Depreciation and amortization	11,832			8,863			32,316			25,947
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income from operations	53,061			43,573			171,513			131,302
Interest income	1,808			2,025			5,585			2,480
Interest expense	(14,807		)	(17,909		)	(44,192		)	(35,725		)
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income before income taxes	$	40,001		$	27,662		$	128,082		$	97,719

The following table summarizes the Company’s assets by reportable segment: 

	September 30, 2019		December 31, 2018
Franchise	$	189,192	$	185,899
Corporate-owned stores	390,101		243,221
Equipment	195,022		210,462
Unallocated	645,917		713,834
Total consolidated assets	$	1,420,232	$	1,353,416

The table above includes $1,204 and $1,892 of long-lived assets located in the Company’s corporate-owned stores in Canada as of September 30, 2019 and December 31, 2018, respectively. All other assets are located in the U.S.

For the segment footnote disclosure as of December 31, 2018, an immaterial error of $133,523 has been corrected to appropriately classify assets from the franchise segment to the unallocated segment at December 31, 2018. This correction does not impact the Company’s previously reported consolidated balance sheets, consolidated statements of cash flow or statements of operations.

The following table summarizes the Company’s goodwill by reportable segment: 

	September 30, 2019		December 31, 2018
Franchise	$	16,938	$	16,938
Corporate-owned stores	97,148		89,909
Equipment	92,666		92,666
Consolidated goodwill	$	206,752	$	199,513

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Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

Derivative Instruments and Hedging Activities

Prior to the refinancing transactions described in Note 6, the Company used interest-rate-related derivative instruments to manage its exposure related to changes in interest rates on its variable-rate debt instruments. The Company does not enter into derivative instruments for any purpose other than cash flow hedging. The Company does not speculate using derivative instruments.

In order to manage the market risk arising from the previously outstanding term loans, the Company entered into a series of interest rate caps. As of September 30, 2019 and December 31, 2018, the Company had no interest rate cap agreements outstanding. In connection with the issuance of the Class A-2 Notes, the Company terminated the interest rate caps it had entered into in order to hedge interest expense on its previously outstanding term loans.

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Variable Interest Entities

9 Months Ended

Sep. 30, 2019

Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]

Variable Interest Entities

Variable Interest Entities

The carrying values of VIEs included in the consolidated financial statements as of September 30, 2019 and December 31, 2018 are as follows: 

	September 30, 2019				December 31, 2018
	Assets		Liabilities		Assets		Liabilities
PF Melville	$	2,722	$	—	$	4,787	$	—
MMR	2,233		—		3,563		—
Total	$	4,955	$	—	$	8,350	$	—

The Company also has variable interests in certain franchisees mainly through the guarantee of lease agreements. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $10,376 and $732 as of September 30, 2019 and December 31, 2018, respectively. In 2019, in connection with a real estate partnership, the Company began guaranteeing certain leases of its franchisees up to a maximum period of ten years with earlier expiration dates possible if certain conditions are met.

The amount of the Company’s maximum obligation represents a loss that the Company could incur from the variability in credit exposure without consideration of possible recoveries through insurance or other means. In addition, the amount bears no relation to the ultimate settlement estimated to be incurred from the Company’s involvement with these entities, which is not material.

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is the sole managing member of Pla-Fit Holdings, which is treated as a partnership for U.S. federal and certain state and local income taxes. As a partnership, Pla-Fit Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Pla-Fit Holdings is passed through to and included in the taxable income or loss of its members, including the Company, on a pro-rata basis.

Planet Fitness, Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to our allocable share of any taxable income of Pla-Fit Holdings. The Company’s effective tax rate was 25.8% and 26.0% for the three months ended September 30, 2019 and 2018, respectively and 21.0% and 23.9% for the nine months ended September 30, 2019 and 2018, respectively. The effective tax rate for the three months ended September 30, 2019 differed from the U.S. federal statutory rate of 21% primarily due to state and local taxes, partially offset by income attributable to non-controlling interest. The effective tax rate for the nine months ended September 30, 2019 of 21% included the impact of state and local taxes, offset by income attributable to non-controlling interest. The Company was also subject to taxes in foreign jurisdictions. Undistributed earnings of foreign operations were not material for the three and nine months ended September 30, 2019 and 2018.

Net deferred tax assets of $416,678 and $412,538 as of September 30, 2019 and December 31, 2018, respectively, relate primarily to the tax effects of temporary differences in the book basis as compared to the tax basis of our investment in Pla-Fit Holdings as a result of the secondary offerings, other exchanges, recapitalization transactions and the IPO. As of September 30, 2019, the Company does not have any net operating loss carryforwards.

As of September 30, 2019 and December 31, 2018, the total liability related to uncertain tax positions was $260 and $300, respectively. The Company recognizes interest accrued and penalties, if applicable, related to unrecognized tax benefits in income tax expense. Interest and penalties for the three and nine months ended September 30, 2019 and 2018 were not material.

Tax benefit arrangements

The Company’s acquisition of Holdings Units in connection with the IPO and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to certain existing and previous equity owners of Pla-Fit Holdings (the “TRA Holders”) 85% of the applicable tax savings, if any, in U.S. federal and state income tax that the Company is deemed to realize as a result of certain tax attributes of their Holdings Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the exchanges of their Holdings Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the tax receivable agreement (including imputed interest). Under the second tax receivable agreement, the Company generally is required to pay to TSG AIV II-A L.P and TSG PF Co-Investors A L.P. (the “Direct TSG Investors”) 85% of the amount of tax savings, if any, that the Company is deemed to realize as a result of the tax attributes of the Holdings Units held in respect of the Direct TSG Investors’ interest in the Company, which resulted from the Direct TSG Investors’ purchase of interests in Pla-Fit Holdings in 2012, and certain other tax benefits. Under both agreements, the Company generally retains the benefit of the remaining 15% of the applicable tax savings.

During the nine months ended September 30, 2019, 885,810 Holdings Units were exchanged by the TRA Holders for newly issued shares of Class A common stock, resulting in an increase in the tax basis of the net assets of Pla-Fit Holdings subject to the provisions of the tax receivable agreements. As a result of the change in Planet Fitness, Inc.’s ownership percentage of Pla-Fit Holdings, we recorded a decrease to our net deferred tax assets of $517 during the nine months ended September 30, 2019. As a result of these exchanges, during the nine months ended September 30, 2019, we also recognized deferred tax assets in the amount of $20,340, and corresponding tax benefit arrangement liabilities of $17,016, representing approximately 85% of the tax benefits due to the TRA Holders. The offset to the entries recorded in connection with exchanges was to equity.

As of September 30, 2019 and December 31, 2018, the Company had a liability of $433,390 and $429,233, respectively, related to its projected obligations under the tax benefit arrangements. Projected future payments under the tax benefit arrangements are as follows:

	Amount
Remainder of 2019	$	7,307
2020	25,965
2021	26,584
2022	27,141
2023	27,679
Thereafter	318,714
Total	$	433,390

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Segments (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Summary of Financial Information for the Company's Reportable Segments

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Segment EBITDA
Franchise	$	44,328		$	37,075		$	141,548		$	113,793
Corporate-owned stores	16,799			15,279			50,505			42,115
Equipment	13,741			9,654			40,920			28,579
Corporate and other	(10,036		)	(9,599		)	(33,968		)	(27,576		)
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911

The tables below summarize the financial information for the Company’s reportable segments for the three and nine months ended September 30, 2019 and 2018. The “Corporate and other” category, as it relates to Segment EBITDA, primarily includes corporate overhead costs, such as payroll and related benefit costs and professional services which are not directly attributable to any individual segment.

 

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
Revenue
Franchise segment revenue - U.S.	$	65,494	$	53,528	$	200,111	$	164,225
Franchise segment revenue - International	1,215		1,294		4,172		3,359
Franchise segment total	66,709		54,822		204,283		167,584
Corporate-owned stores - U.S.	39,637		34,323		115,178		99,020
Corporate-owned stores - International	1,105		1,083		3,303		3,345
Corporate-owned stores total	40,742		35,406		118,481		102,365
Equipment segment - U.S.	59,364		46,428		174,528		128,589
Equipment segment total	59,364		46,428		174,528		128,589
Total revenue	$	166,815	$	136,656	$	497,292	$	398,538

Reconciliation of Total Segment EBITDA to Income Before Taxes

The following table reconciles total Segment EBITDA to income before taxes:

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Total Segment EBITDA	$	64,832		$	52,409		$	199,005		$	156,911
Less:
Depreciation and amortization	11,832			8,863			32,316			25,947
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income from operations	53,061			43,573			171,513			131,302
Interest income	1,808			2,025			5,585			2,480
Interest expense	(14,807		)	(17,909		)	(44,192		)	(35,725		)
Other expense	(61		)	(27		)	(4,824		)	(338		)
Income before income taxes	$	40,001		$	27,662		$	128,082		$	97,719

Summary of Company's Assets by Reportable Segment

The following table summarizes the Company’s assets by reportable segment: 

	September 30, 2019		December 31, 2018
Franchise	$	189,192	$	185,899
Corporate-owned stores	390,101		243,221
Equipment	195,022		210,462
Unallocated	645,917		713,834
Total consolidated assets	$	1,420,232	$	1,353,416

Summary of Company's Goodwill by Reportable Segment

The following table summarizes the Company’s goodwill by reportable segment: 

	September 30, 2019		December 31, 2018
Franchise	$	16,938	$	16,938
Corporate-owned stores	97,148		89,909
Equipment	92,666		92,666
Consolidated goodwill	$	206,752	$	199,513

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Business Organization - Additional Information (Detail) member in Millions	9 Months Ended
	Sep. 30, 2019 member store state segment	Jun. 30, 2019 store	Dec. 31, 2018 store	Sep. 30, 2018 store	Jun. 30, 2018 store	Dec. 31, 2017 store	Aug. 05, 2015
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Number of owned and franchised locations | store	1,899	1,859	1,742	1,646	1,608	1,518
Number of states in which entity operates | state	50
Number of reportable segments | segment	3
Pla-Fit Holdings, LLC
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Percentage of ownership	100.00%						100.00%
Percentage of economic interest	90.50%
Pla-Fit Holdings, LLC | Holdings Units
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Percentage of economic interest	9.50%
Planet Intermediate, LLC | Pla-Fit Holdings, LLC
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Percentage of ownership							100.00%
Planet Fitness Holdings, LLC | Planet Intermediate, LLC
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Percentage of ownership							100.00%
Minimum
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Number of members (more than) | member	14.1

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Income Taxes - Schedule of Future Payments Under Tax Benefit Arrangements (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Remainder of 2019	$ 7,307
2020	25,965
2021	26,584
2022	27,141
2023	27,679
Thereafter	318,714
Total	$ 433,390	$ 429,233

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Stockholder's Equity - Additional Information (Detail) - USD ($)			3 Months Ended		9 Months Ended
	Apr. 30, 2019	Nov. 14, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Nov. 13, 2018	Aug. 03, 2018
Class of Stock [Line Items]
Stock repurchase program, authorized amount								$ 500,000,000
Repurchase and retirement of common stock			$ 157,945,000	$ 42,090,000	$ 157,946,000	$ 42,090,000
Pla-Fit Holdings, LLC
Class of Stock [Line Items]
Number of shares exchanged					885,810
Holdings Units
Class of Stock [Line Items]
Number of shares exchanged					885,810
Investor | Secondary Offering and Exchange
Class of Stock [Line Items]
Number of units held by owners (in shares)			81,773,267		81,773,267
Investor | Pla-Fit Holdings, LLC | Secondary Offering and Exchange
Class of Stock [Line Items]
Percentage of economic interest					90.50%
Continuing LLC Owners | Secondary Offering and Exchange
Class of Stock [Line Items]
Number of units held by owners (in shares)			8,561,920		8,561,920
Continuing LLC Owners | Pla-Fit Holdings, LLC | Secondary Offering and Exchange
Class of Stock [Line Items]
Percentage of economic interest					9.50%
Holdings Units
Class of Stock [Line Items]
Shares exchanged for Class A common stock					1
Class A Common Stock
Class of Stock [Line Items]
Number of shares exchanged					885,810
Class A Common Stock | Investor | Secondary Offering and Exchange
Class of Stock [Line Items]
Number of units held by owners (in shares)			81,773,267		81,773,267
Class A Common Stock | Investor | Pla-Fit Holdings, LLC | Secondary Offering and Exchange
Class of Stock [Line Items]
Percentage of voting interests acquired			90.50%		90.50%
Class B Common Stock
Class of Stock [Line Items]
Shares exchanged for Class A common stock					1
Number of shares exchanged					885,810
Class B Common Stock | Continuing LLC Owners | Secondary Offering and Exchange
Class of Stock [Line Items]
Number of units held by owners (in shares)			8,561,920		8,561,920
Class B Common Stock | Continuing LLC Owners | Pla-Fit Holdings, LLC | Secondary Offering and Exchange
Class of Stock [Line Items]
Percentage of voting interests acquired			9.50%		9.50%
ASR Agreement
Class of Stock [Line Items]
Stock repurchase program, authorized amount							$ 300,000,000
Repurchase and retirement of common stock	$ 60,000,000	$ 240,000,000
ASR Agreement | Class A Common Stock
Class of Stock [Line Items]
Stock repurchased (in shares)	524,124	4,607,410	2,272,001
Weighted average cost per share (in dollars per share)	$ 58.46		$ 69.51

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Leases - Under previous guidance (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Leases [Abstract]
2019	$ 15,911
2020	15,219
2021	13,454
2022	12,561
2023	11,133
Thereafter	45,324
Total	$ 113,602

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Acquisitions - Purchase Consideration Allocation (Details) - USD ($) $ in Thousands	Sep. 30, 2019	May 30, 2019	Dec. 31, 2018	Aug. 10, 2018	Jan. 01, 2018
Business Acquisition [Line Items]
Goodwill	$ 206,752		$ 199,513
Maine Acquisition
Business Acquisition [Line Items]
Fixed assets		$ 999
Unfavorable leases, net		(140)
Other assets		78
Goodwill		7,239
Liabilities assumed, including deferred revenues		(145)
Net assets acquired		14,801
Colorado Acquisition
Business Acquisition [Line Items]
Fixed assets				$ 3,873
Other assets				143
Goodwill				8,476
Liabilities assumed, including deferred revenues				(83)
Net assets acquired				17,239
Long Island Acquisition
Business Acquisition [Line Items]
Fixed assets					$ 4,672
Other assets					275
Goodwill					14,056
Liabilities assumed, including deferred revenues					(310)
Net assets acquired					28,153
Reacquired franchise rights | Maine Acquisition
Business Acquisition [Line Items]
Intangible assets		6,740
Reacquired franchise rights | Colorado Acquisition
Business Acquisition [Line Items]
Intangible assets				4,610
Reacquired franchise rights | Long Island Acquisition
Business Acquisition [Line Items]
Intangible assets					7,640
Customer relationships | Maine Acquisition
Business Acquisition [Line Items]
Intangible assets		$ 30
Customer relationships | Colorado Acquisition
Business Acquisition [Line Items]
Intangible assets				140
Customer relationships | Long Island Acquisition
Business Acquisition [Line Items]
Intangible assets					1,150
Favorable leases, net | Colorado Acquisition
Business Acquisition [Line Items]
Intangible assets				$ 80
Favorable leases, net | Long Island Acquisition
Business Acquisition [Line Items]
Intangible assets					520
Reacquired area development rights | Long Island Acquisition
Business Acquisition [Line Items]
Intangible assets					$ 150

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Long-Term Debt - Schedule of Long-Term Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Total debt, excluding deferred financing costs	$ 1,188,000	$ 1,197,000
Deferred financing costs, net of accumulated amortization	(20,951)	(24,873)
Total debt	1,167,049	1,172,127
Current portion of long-term debt and line of credit	12,000	12,000
Long-term debt, net of current maturities	1,155,049	1,160,127
Class A-2-I notes | Senior fixed-rate term notes
Debt Instrument [Line Items]
Total debt, excluding deferred financing costs	569,250	573,563
Class A-2-II notes | Senior fixed-rate term notes
Debt Instrument [Line Items]
Total debt, excluding deferred financing costs	$ 618,750	$ 623,437

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Revenue recognition - Schedule of Contract Liabilities (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Contract liabilities
Beginning Balance	$ 49,862
Revenue recognized that was included in the contract liability at the beginning of the year	(23,082)
Increase, excluding amounts recognized as revenue during the period	29,390
Ending Balance	$ 56,170

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Segments - Reconciliation of Total Segment EBITDA to Income Before Taxes (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting [Abstract]
Total Segment EBITDA	$ 64,832	$ 52,409	$ 199,005	$ 156,911
Depreciation and amortization	11,832	8,863	32,316	25,947
Other expense	(61)	(27)	(4,824)	(338)
Income from operations	53,061	43,573	171,513	131,302
Interest income	1,808	2,025	5,585	2,480
Interest expense	(14,807)	(17,909)	(44,192)	(35,725)
Income before income taxes	$ 40,001	$ 27,662	$ 128,082	$ 97,719

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Leases Leases - Components of Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Operating lease cost	$ 5,317	$ 15,117
Variable lease cost	2,118	6,091
Total lease cost	$ 7,435	$ 21,208

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Condensed consolidated statements of cash flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net income	$ 101,158	$ 74,384
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	32,316	25,947
Amortization of deferred financing costs	4,014	2,041
Amortization of favorable leases	0	280
Amortization of asset retirement obligations	178	0
Amortization of interest rate caps	0	1,170
Deferred tax expense	15,666	19,654
Loss on extinguishment of debt	0	4,570
Loss (gain) on re-measurement of tax benefit arrangement	4,638	(354)
Provision for bad debts	13	8
Loss on reacquired franchise rights	0	360
(Gain) loss on disposal of property and equipment	(84)	542
Equity-based compensation	3,565	4,137
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable	12,779	10,922
Due to and due from related parties	(344)	3,174
Inventory	2,509	(3,450)
Other assets and other current assets	(4,628)	4,972
Accounts payable and accrued expenses	(12,939)	2,426
Other liabilities and other current liabilities	1,510	(2,869)
Income taxes	3,047	1,028
Payable pursuant to tax benefit arrangements	(17,476)	(21,706)
Equipment deposits	658	4,950
Deferred revenue	6,103	7,544
Leases and deferred rent	54	4,156
Net cash provided by operating activities	152,737	143,886
Cash flows from investing activities:
Additions to property and equipment	(37,138)	(18,601)
Acquisition of franchises	(14,801)	(45,752)
Proceeds from sale of property and equipment	84	196
Purchase of intellectual property	(300)	0
Net cash used in investing activities	(52,155)	(64,157)
Cash flows from financing activities:
Principal payments on capital lease obligations	(59)	(35)
Proceeds from issuance of long-term debt	0	1,200,000
Repayment of long-term debt	(9,000)	(709,469)
Payment of deferred financing and other debt-related costs	0	(27,191)
Exercise of stock options and ESPP proceeds	1,892	1,106
Repurchase and retirement of Class A common stock	(157,945)	(42,090)
Dividend equivalent payments	(229)	(881)
Distributions to Continuing LLC Members	(5,499)	(5,369)
Net cash (used in) provided by financing activities	(170,840)	416,071
Effects of exchange rate changes on cash and cash equivalents	370	(234)
Net (decrease) increase in cash, cash equivalents and restricted cash	(69,888)	495,566
Cash, cash equivalents and restricted cash, beginning of period	320,139	113,080
Cash, cash equivalents and restricted cash, end of period	250,251	608,646
Supplemental cash flow information:
Net cash paid for income taxes	9,061	3,777
Cash paid for interest	40,335	20,015
Non-cash investing activities:
Non-cash additions to property and equipment	$ 4,837	$ 2,217

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Condensed consolidated balance sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 219,752	$ 289,431
Restricted cash	30,499	30,708
Accounts receivable, net of allowance for bad debts of $37 and $84 at September 30, 2019 and December 31, 2018, respectively	29,398	38,960
Inventory	2,612	5,122
Restricted assets – national advertising fund	657	0
Prepaid expenses	8,649	4,947
Other receivables	9,232	12,548
Other current assets	5,471	6,824
Total current assets	306,270	388,540
Property and equipment, net of accumulated depreciation of $70,083, as of September 30, 2019 and $53,086 as of December 31, 2018	131,454	114,367
Right-of-use assets, net	127,746
Intangible assets, net	227,575	234,330
Goodwill	206,752	199,513
Deferred income taxes	418,745	414,841
Other assets, net	1,690	1,825
Total assets	1,420,232	1,353,416
Current liabilities:
Current maturities of long-term debt	12,000	12,000
Accounts payable	23,037	30,428
Accrued expenses	25,737	32,384
Equipment deposits	8,566	7,908
Restricted liabilities – national advertising fund	657	0
Deferred revenue, current	24,638	23,488
Payable pursuant to tax benefit arrangements, current	25,506	24,765
Other current liabilities	15,780	430
Total current liabilities	135,921	131,403
Long-term debt, net of current maturities	1,155,049	1,160,127
Deferred rent, net of current portion		10,083
Lease liabilities, net of current portion	127,646
Deferred revenue, net of current portion	31,532	26,374
Deferred tax liabilities	2,067	2,303
Payable pursuant to tax benefit arrangements, net of current portion	407,884	404,468
Other liabilities	2,250	1,447
Total noncurrent liabilities	1,726,428	1,604,802
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
Accumulated other comprehensive income	189	94
Additional paid in capital	27,240	19,732
Accumulated deficit	(466,032)	(394,410)
Total stockholders’ deficit attributable to Planet Fitness Inc.	(438,594)	(374,574)
Non-controlling interests	(3,523)	(8,215)
Total stockholders’ deficit	(442,117)	(382,789)
Total liabilities and stockholders’ deficit	1,420,232	1,353,416
Class A Common Stock
Stockholders’ equity (deficit):
Common stock, value	8	9
Class B Common Stock
Stockholders’ equity (deficit):
Common stock, value	$ 1	$ 1

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2019

Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract]

Carrying Value of Variable Interest Entities of Consolidated Financial Statements

The carrying values of VIEs included in the consolidated financial statements as of September 30, 2019 and December 31, 2018 are as follows: 

	September 30, 2019				December 31, 2018
	Assets		Liabilities		Assets		Liabilities
PF Melville	$	2,722	$	—	$	4,787	$	—
MMR	2,233		—		3,563		—
Total	$	4,955	$	—	$	8,350	$	—

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Revenue recognition

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue recognition

Revenue recognition

Contract Liabilities

Contract liabilities consist of deferred revenue resulting from initial and renewal franchise fees and area development agreement (“ADA”) fees paid by franchisees, as well as transfer fees, which are generally recognized on a straight-line basis over the term of the underlying franchise agreement. Also included are corporate-owned store enrollment fees, annual fees and monthly fees as well as deferred equipment rebates relating to our equipment business. We classify these contract liabilities as deferred revenue in our condensed consolidated balance sheets. The following table reflects the change in contract liabilities between December 31, 2018 and September 30, 2019.

	Contract liabilities
Balance at December 31, 2018	$	49,862
Revenue recognized that was included in the contract liability at the beginning of the year	(23,082		)
Increase, excluding amounts recognized as revenue during the period	29,390
Balance at September 30, 2019	$	56,170

The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2019. The Company has elected to exclude short term contracts, sales and usage based royalties and any other variable consideration recognized on an “as invoiced” basis.

Contract liabilities to be recognized in:	Amount
Remainder of 2019	$	12,422
2020	13,129
2021	3,279
2022	3,061
2023	2,818
Thereafter	21,461
Total	$	56,170

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Acquisitions - Narrative (Details) $ in Thousands	May 30, 2019 USD ($) store	Aug. 10, 2018 USD ($) store	Jan. 01, 2018 USD ($) store	Sep. 30, 2019 store	Jun. 30, 2019 store	Dec. 31, 2018 store	Sep. 30, 2018 store	Jun. 30, 2018 store	Dec. 31, 2017 store
Business Acquisition [Line Items]
Number of owned and franchised locations | store				1,899	1,859	1,742	1,646	1,608	1,518
Maine Acquisition
Business Acquisition [Line Items]
Number of owned and franchised locations | store	4
Acquisition, gross cash payments	$ 14,801
Colorado Acquisition
Business Acquisition [Line Items]
Number of owned and franchised locations | store		4
Acquisition, gross cash payments		$ 17,249
Loss on reacquired franchise rights		10
Consideration transferred		$ 17,239
Long Island Acquisition
Business Acquisition [Line Items]
Number of owned and franchised locations | store			6
Acquisition, gross cash payments			$ 28,503
Loss on reacquired franchise rights			350
Consideration transferred			$ 28,153

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Goodwill and Intangible Assets - Summary of Amortization expenses (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2019	$ 4,146
2020	14,968
2021	15,053
2022	15,280
2023	15,185
Thereafter	16,343
Net carrying Amount	$ 80,975	$ 88,030

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Leases Leases - Supplemental Disclosures of Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Leases [Abstract]
Cash paid for lease liabilities	$ 4,958	$ 14,323
Operating assets obtained in exchange for operating lease liabilities	$ 16,173	$ 19,154

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Revenue recognition - Remaining Performance Obligation (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 56,170
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 12,422
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction	3 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 13,129
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 3,279
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 3,061
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 2,818
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 21,461
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, expected timing of satisfaction

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Segments - Summary of Company's Assets by Reportable Segment (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Segment Reporting, Asset Reconciling Item [Line Items]
Total consolidated assets	$ 1,420,232	$ 1,353,416
Operating Segments | Franchise revenue
Segment Reporting, Asset Reconciling Item [Line Items]
Total consolidated assets	189,192	185,899
Operating Segments | Corporate-owned Stores
Segment Reporting, Asset Reconciling Item [Line Items]
Total consolidated assets	390,101	243,221
Operating Segments | Equipment revenue
Segment Reporting, Asset Reconciling Item [Line Items]
Total consolidated assets	195,022	210,462
Unallocated
Segment Reporting, Asset Reconciling Item [Line Items]
Total consolidated assets	$ 645,917	$ 713,834

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Purchase Consideration Allocation

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	999
Reacquired franchise rights	6,740
Customer relationships	30
Unfavorable leases, net	(140		)
Other assets	78
Goodwill	7,239
Liabilities assumed, including deferred revenues	(145		)
	$	14,801

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	4,672
Reacquired franchise rights	7,640
Customer relationships	1,150
Favorable leases, net	520
Reacquired area development rights	150
Other assets	275
Goodwill	14,056
Liabilities assumed, including deferred revenues	(310		)
	$	28,153

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	3,873
Reacquired franchise rights	4,610
Customer relationships	140
Favorable leases, net	80
Other assets	143
Goodwill	8,476
Liabilities assumed, including deferred revenues	(83		)
	$	17,239

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

The Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.

Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes.

The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.

Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

For periods prior to January 1, 2019, the Company recognized rent expense related to leases on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, was recorded as deferred rent in the Company’s consolidated balance sheets.

Leases	Classification	September 30, 2019
Assets
Operating lease assets	Right of use asset, net	$	127,746
Finance lease assets	Property and equipment, net of accumulated depreciation	252
Total lease assets		$	127,998
Liabilities
Current:
Operating	Other current liabilities	$	14,543
Noncurrent:
Operating	Lease liabilities, net of current portion	127,646
Financing	Other liabilities	284
Total lease liabilities		$	142,473
Weighted-average remaining lease term (years) - operating leases		8.9
Weighted-average discount rate - operating leases		5.1		%

During the three and nine months ended September 30, 2019, the components of lease cost were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	5,317	$	15,117
Variable lease cost	2,118		6,091
Total lease cost	$	7,435	$	21,208

The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Cash paid for lease liabilities	$	4,958	$	14,323
Operating assets obtained in exchange for operating lease liabilities	$	16,173	$	19,154

As of September 30, 2019, maturities of lease liabilities were as follows:

	Amount
Remainder of 2019	$	5,019
2020	21,491
2021	22,055
2022	21,751
2023	20,594
Thereafter	89,594
Total lease payments	$	180,504
Less: imputed interest	38,031
Present value of lease liabilities	$	142,473

As of September 30, 2019, operating lease payments exclude approximately $34,456 of legally binding minimum lease payments for leases signed but not yet commenced.

As of December 31, 2018, under the previous accounting guidance for leases, approximate annual future commitments under noncancelable operating leases were as follows:

	Amount
2019	15,911
2020	15,219
2021	13,454
2022	12,561
2023	11,133
Thereafter	45,324
Total	113,602

Leases

Leases

The Company leases space to operate corporate-owned stores, equipment, office, and warehouse space. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. For leases beginning in 2019 and later, we account for fixed lease and non-lease components together as a single, combined lease component. Variable lease costs, which may include common area maintenance, insurance, and taxes are not included in the lease liability and are expensed in the period incurred.

Our corporate-owned store leases generally have remaining terms of one to ten years, and typically include one or more renewal options, with renewal terms that can generally extend the lease term from three to ten years or more. The exercise of lease renewal options is at our sole discretion. The Company includes options to renew in the expected term when they are reasonably certain to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term.

Operating lease assets and liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating lease ROU assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs and lease incentives. To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases based upon interpolated rates using our Class A-2 Notes.

The Company has certain non-real estate leases that are accounted for as finance leases under ASC 842, which is similar to the accounting for capital leases under the previous standard. These leases are immaterial, and therefore the Company has not included them in them in the tables below, except for their location on the consolidated balance sheet.

Our leases typically contain rent escalations over the lease term. We recognize expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce our ROU asset related to the lease. These tenant incentives are amortized as reduction of rent expense over the lease term.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

For periods prior to January 1, 2019, the Company recognized rent expense related to leases on a straight-line basis over the term of the lease. The difference between rent expense and rent paid, if any, as a result of escalation provisions and lease incentives, such as tenant improvements provided by lessors, was recorded as deferred rent in the Company’s consolidated balance sheets.

Leases	Classification	September 30, 2019
Assets
Operating lease assets	Right of use asset, net	$	127,746
Finance lease assets	Property and equipment, net of accumulated depreciation	252
Total lease assets		$	127,998
Liabilities
Current:
Operating	Other current liabilities	$	14,543
Noncurrent:
Operating	Lease liabilities, net of current portion	127,646
Financing	Other liabilities	284
Total lease liabilities		$	142,473
Weighted-average remaining lease term (years) - operating leases		8.9
Weighted-average discount rate - operating leases		5.1		%

During the three and nine months ended September 30, 2019, the components of lease cost were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	5,317	$	15,117
Variable lease cost	2,118		6,091
Total lease cost	$	7,435	$	21,208

The Company’s costs related to short-term leases, those with a duration between one and twelve months, were immaterial.

Supplemental disclosures of cash flow information related to leases were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Cash paid for lease liabilities	$	4,958	$	14,323
Operating assets obtained in exchange for operating lease liabilities	$	16,173	$	19,154

As of September 30, 2019, maturities of lease liabilities were as follows:

	Amount
Remainder of 2019	$	5,019
2020	21,491
2021	22,055
2022	21,751
2023	20,594
Thereafter	89,594
Total lease payments	$	180,504
Less: imputed interest	38,031
Present value of lease liabilities	$	142,473

As of September 30, 2019, operating lease payments exclude approximately $34,456 of legally binding minimum lease payments for leases signed but not yet commenced.

As of December 31, 2018, under the previous accounting guidance for leases, approximate annual future commitments under noncancelable operating leases were as follows:

	Amount
2019	15,911
2020	15,219
2021	13,454
2022	12,561
2023	11,133
Thereafter	45,324
Total	113,602

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Condensed consolidated statement of changes in equity (deficit) (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Accumulated other comprehensive (loss) income	Additional paid- in capital	Accumulated deficit	Non-controlling interests	Class A Common Stock	Class A Common Stock Common stock	Class B Common Stock	Class B Common Stock Common stock
Beginning balance (in shares) at Dec. 31, 2017							87,188		11,193
Beginning balance at Dec. 31, 2017	$ (136,937)	$ (648)	$ 12,118	$ (130,966)	$ (17,451)		$ 9		$ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	74,384			63,226	11,158
Equity-based compensation expense	4,137		4,140	(3)
Exchanges of Class B common stock, shares issued							1,640		(1,640)
Exchanges of Class B common stock		1	(2,913)		2,912
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)							81
Exercise of stock options, vesting of restricted share units and ESPP share purchase	1,106		1,106
Repurchase/Retirement of common stock (in shares)							(824)		(9)
Repurchase/Retirement of common stock	(42,090)			(42,090)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	2,786		2,786
Distributions paid to members of Pla-Fit Holdings	(5,369)				(5,369)
Cumulative effect adjustment	(9,192)			(9,192)
Forfeiture of dividend equivalents	61			61
Other comprehensive income	966	903			63
Ending balance (in shares) at Sep. 30, 2018							88,085		9,544
Ending balance at Sep. 30, 2018	(110,148)	256	17,237	(118,964)	(8,687)		$ 9		$ 1
Beginning balance (in shares) at Jun. 30, 2018							87,932		10,471
Beginning balance at Jun. 30, 2018	(91,248)	(385)	14,744	(94,348)	(11,269)		$ 9		$ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	20,472			17,471	3,001
Equity-based compensation expense	1,450		1,450
Exchanges of Class B common stock, shares issued							927		(927)
Exchanges of Class B common stock		1	(1,442)		1,441
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)							50
Exercise of stock options, vesting of restricted share units and ESPP share purchase	706		706
Repurchase/Retirement of common stock (in shares)							(824)
Repurchase/Retirement of common stock	(42,090)			(42,090)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	1,779		1,779
Distributions paid to members of Pla-Fit Holdings	(1,866)				(1,866)
Forfeiture of dividend equivalents	3			3
Other comprehensive income	646	640			6
Ending balance (in shares) at Sep. 30, 2018							88,085		9,544
Ending balance at Sep. 30, 2018	(110,148)	256	17,237	(118,964)	(8,687)		$ 9		$ 1
Beginning balance (in shares) at Dec. 31, 2018						83,584	83,584	9,448	9,448
Beginning balance at Dec. 31, 2018	(382,789)	94	19,732	(394,410)	(8,215)		$ 9		$ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	101,158			88,030	13,128
Equity-based compensation expense	3,565		3,565
Exchanges of Class B common stock, shares issued							886		(886)
Exchanges of Class B common stock			(1,172)		1,172
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)							99
Exercise of stock options, vesting of restricted share units and ESPP share purchase	2,035		2,035
Repurchase/Retirement of common stock (in shares)							(2,796)
Repurchase/Retirement of common stock	(157,946)		273	(157,945)	(273)		$ (1)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	2,807		2,807
Non-cash adjustments to VIEs	(3,836)				(3,836)
Distributions paid to members of Pla-Fit Holdings	(5,499)				(5,499)
Cumulative effect adjustment	(1,713)			(1,713)
Forfeiture of dividend equivalents	6			6
Other comprehensive income	95	95
Ending balance (in shares) at Sep. 30, 2019						81,773	81,773	8,562	8,562
Ending balance at Sep. 30, 2019	(442,117)	189	27,240	(466,032)	(3,523)		$ 8		$ 1
Beginning balance (in shares) at Jun. 30, 2019							83,995		8,582
Beginning balance at Jun. 30, 2019	(314,372)	251	24,495	(333,870)	(5,257)		$ 8		$ 1
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	29,692			25,777	3,915
Equity-based compensation expense	1,286		1,286
Exchanges of Class B common stock, shares issued							20		(20)
Exercise of stock options, vesting of restricted share units and ESPP share purchase (in shares)							30
Exercise of stock options, vesting of restricted share units and ESPP share purchase	826		826
Repurchase/Retirement of common stock (in shares)							(2,272)
Repurchase/Retirement of common stock	(157,945)		209	(157,945)	(209)
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock	424		424
Non-cash adjustments to VIEs	(215)				(215)
Distributions paid to members of Pla-Fit Holdings	(1,757)				(1,757)
Forfeiture of dividend equivalents	6			6
Other comprehensive income	(62)	(62)
Ending balance (in shares) at Sep. 30, 2019						81,773	81,773	8,562	8,562
Ending balance at Sep. 30, 2019	$ (442,117)	$ 189	$ 27,240	$ (466,032)	$ (3,523)		$ 8		$ 1

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Condensed consolidated balance sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Accounts receivable, allowance for bad debts	$ 37	$ 84
Accumulated depreciation	$ 70,083	$ 53,086
Class A Common Stock
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	81,773,000	83,584,000
Common stock, shares outstanding	81,773,000	83,584,000
Class B Common Stock
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	8,562,000	9,448,000
Common stock, shares outstanding	8,562,000	9,448,000

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Commitments and contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and contingencies

From time to time, and in the ordinary course of business, the Company is subject to various claims, charges, and litigation, such as employment-related claims and slip and fall cases.

On May 3, 2019, the Company and other defendants received a joint and several judgment against them in the amount of $6,185, inclusive of accrued interest, in a civil action brought by a former employee. As of September 30, 2019, the Company has estimated its obligation related to this matter to be approximately $1,237, which is included in other current liabilities on the condensed consolidated balance sheet. In connection with 2012 acquisition of Pla-Fit Holdings on November 8, 2012, the sellers are obligated to indemnify the Company related to this specific matter. The Company has therefore recorded an offsetting indemnification receivable of $1,237 in other receivables on the Company’s condensed consolidated balance sheet, of which $412 is due from a related party. As of September 30, there is an additional $4,272 of potential incremental interest being sought by the plaintiff; however, the Company does not currently believe that payment of the incremental interest is probable and therefore has not recorded such amount as of September 30, 2019.

The Company is not currently aware of any other legal proceedings or claims that the Company believes will have, individually or in the aggregate, a material adverse effect on the Company’s financial position or result of operations.

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Amounts due from related parties of $412 as of September 30, 2019 recorded within other receivables on the condensed consolidated balance sheet relate to a potential indemnification reimbursement for an outstanding legal matter, see Note 12.

Activity with entities considered to be related parties is summarized below: 

	For the three months ended September 30,				For the nine months ended September 30,
	2019		2018		2019		2018
Franchise revenue	$	505	$	897	$	1,735	$	2,453
Equipment revenue	883		1,472		2,325		1,782
Total revenue from related parties	$	1,388	$	2,369	4,060		$	4,235

Additionally, the Company had deferred area development agreement revenue from related parties of $260 and $779 as of September 30, 2019 and December 31, 2018, respectively.

The Company had payables to related parties pursuant to tax benefit arrangements of $55,478 and $59,458, as of September 30, 2019 and December 31, 2018, respectively (see Note 11).

The Company provides administrative services to the NAF and charges NAF a fee for providing these services. The services provided include accounting services, information technology, data processing, product development, legal and administrative support, and other operating expenses, which amounted to $402 and $676 for the three months ended September 30, 2019 and 2018, respectively, and $1,771 and $1,872 for the nine months ended September 30, 2019 and 2018, respectively.

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Acquisitions

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisitions

Acquisitions

Maine Acquisition

On May 30, 2019, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Maine for a cash payment of $14,801. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	999
Reacquired franchise rights	6,740
Customer relationships	30
Unfavorable leases, net	(140		)
Other assets	78
Goodwill	7,239
Liabilities assumed, including deferred revenues	(145		)
	$	14,801

The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.

The acquisition was not material to the results of operations of the Company.

Colorado Acquisition

On August 10, 2018, the Company purchased from one of its franchisees certain assets associated with four franchisee-owned stores in Colorado for a cash payment of $17,249. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $10, which has been reflected in other operating costs in the statement of operations. The loss incurred reduced the net purchase price to $17,239. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	3,873
Reacquired franchise rights	4,610
Customer relationships	140
Favorable leases, net	80
Other assets	143
Goodwill	8,476
Liabilities assumed, including deferred revenues	(83		)
	$	17,239

The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.

The acquisition was not material to the results of operations of the Company.

Long Island Acquisition

On January 1, 2018, the Company purchased from one of its franchisees certain assets associated with six franchisee-owned stores in New York for a cash payment of $28,503. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $350, which has been reflected in other operating costs in the statement of operations. The loss incurred reduced the net purchase price to $28,153. The Company financed the purchase through cash on hand. The acquired stores are included in the Corporate-owned stores segment.

The purchase consideration was allocated as follows:

	Amount
Fixed assets	$	4,672
Reacquired franchise rights	7,640
Customer relationships	1,150
Favorable leases, net	520
Reacquired area development rights	150
Other assets	275
Goodwill	14,056
Liabilities assumed, including deferred revenues	(310		)
	$	28,153

The goodwill created through the purchase is attributable to the assumed future value of the cash flows from the stores acquired. The goodwill is amortizable and deductible for tax purposes over 15 years.

The acquisition was not material to the results of operations of the Company.

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Income Taxes (Tables)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Future Payments Under Tax Benefit Arrangements

Projected future payments under the tax benefit arrangements are as follows:

	Amount
Remainder of 2019	$	7,307
2020	25,965
2021	26,584
2022	27,141
2023	27,679
Thereafter	318,714
Total	$	433,390

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Balance Sheet Classification of Lease Assets and Liabilities

Leases	Classification	September 30, 2019
Assets
Operating lease assets	Right of use asset, net	$	127,746
Finance lease assets	Property and equipment, net of accumulated depreciation	252
Total lease assets		$	127,998
Liabilities
Current:
Operating	Other current liabilities	$	14,543
Noncurrent:
Operating	Lease liabilities, net of current portion	127,646
Financing	Other liabilities	284
Total lease liabilities		$	142,473
Weighted-average remaining lease term (years) - operating leases		8.9
Weighted-average discount rate - operating leases		5.1		%

Components of Lease Cost

During the three and nine months ended September 30, 2019, the components of lease cost were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	5,317	$	15,117
Variable lease cost	2,118		6,091
Total lease cost	$	7,435	$	21,208

Supplemental disclosures of cash flow information related to leases were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Cash paid for lease liabilities	$	4,958	$	14,323
Operating assets obtained in exchange for operating lease liabilities	$	16,173	$	19,154

Schedule of Supplemental Disclosures of Cash Flow Information Related to Leases

During the three and nine months ended September 30, 2019, the components of lease cost were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	5,317	$	15,117
Variable lease cost	2,118		6,091
Total lease cost	$	7,435	$	21,208

Supplemental disclosures of cash flow information related to leases were as follows:

	Three months ended September 30, 2019		Nine months ended September 30, 2019
Cash paid for lease liabilities	$	4,958	$	14,323
Operating assets obtained in exchange for operating lease liabilities	$	16,173	$	19,154

Maturities of Operating Lease Liabilities

As of September 30, 2019, maturities of lease liabilities were as follows:

	Amount
Remainder of 2019	$	5,019
2020	21,491
2021	22,055
2022	21,751
2023	20,594
Thereafter	89,594
Total lease payments	$	180,504
Less: imputed interest	38,031
Present value of lease liabilities	$	142,473

Previous Accounting Guidance For Future Commitments Under Noncancelable Operating Leases

As of December 31, 2018, under the previous accounting guidance for leases, approximate annual future commitments under noncancelable operating leases were as follows:

	Amount
2019	15,911
2020	15,219
2021	13,454
2022	12,561
2023	11,133
Thereafter	45,324
Total	113,602

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Commitments and contingencies - Additional Information (Details) - Pending Litigation - Civil Action Brought By Former Employee - USD ($) $ in Thousands	Sep. 30, 2019	May 03, 2019
Loss Contingencies [Line Items]
Damages sought	$ 4,272	$ 6,185
Estimate of possible loss	1,237
Loss contingency, receivable	1,237
Receivables due from related parties	$ 412

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Earnings Per Share - Additional Information (Detail) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Stock Options
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Anti-dilutive securities excluded from the calculation of earnings per share	76,455	36,342	50,063	114,628
Restricted Stock Units
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Anti-dilutive securities excluded from the calculation of earnings per share	713	0	1,688	11,245
Holdings Units
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Shares exchanged for Class A common stock			1
Class B Common Stock
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Shares exchanged for Class A common stock			1
Class B Common Stock | Equity Unit Purchase Agreements
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Anti-dilutive securities excluded from the calculation of earnings per share	8,579,094	10,004,682	8,798,695	10,550,857

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Leases Leases - Maturities of Lease Liabilities (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
Remainder of 2019	$ 5,019
2020	21,491
2021	22,055
2022	21,751
2023	20,594
Thereafter	89,594
Total lease payments	180,504
Less: imputed interest	38,031
Present value of lease liabilities	$ 142,473