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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 March 31, 2021
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 classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0001 Par ValuePLNTNew 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 April 30, 2021 there were 83,222,428 shares of the Registrant’s Class A Common Stock, par value $0.0001 per share, outstanding and 3,363,075 shares of the Registrant’s Class B Common Stock, par value $0.0001 per share, outstanding.



PLANET FITNESS, INC.
TABLE OF CONTENTS
  
    Page
   
   
  
  
  
  
   
  
  
  
  
  
  
  
   
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;
the impact of the novel coronavirus disease (“COVID-19”) and actions taken in response; 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 business and results of operations have been and are expected to continue to be materially impacted by the ongoing COVID-19 pandemic, and could be impacted by similar events in the future;
•    our success depends substantially on the value of our brand, which could be materially and adversely affected by the high level of competition in the health and fitness industry, our ability to anticipate and satisfy consumer preferences, shifting views of health and fitness and our ability to obtain and retain high-profile strategic partnership arrangements;
•    our and our franchisees’ stores may be unable to attract and retain members, which would materially and adversely affect our business, results of operations and financial condition;
•    our intellectual property rights, including trademarks, trade names, copyrights and trade dress, may be infringed, misappropriated or challenged by others;
•    we and our franchisees rely heavily on information systems, including the use of email marketing and social media, and any material failure, interruption or weakness may prevent us from effectively operating our business, damage our reputation or subject us to potential fines or other penalties;
•    if we fail to properly maintain the confidentiality and integrity of our data, including member credit card, debit card, bank account information and other personally identifiable information, our reputation and business could be materially and adversely affected;
•    the occurrence of cyber incidents, or a deficiency in cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of confidential information, and/or damage to our employee and business relationships and reputation, all of which could harm our brand and our business;
•    if we fail to successfully implement our growth strategy, which includes new store development by existing and new franchisees, our ability to increase our revenues and operating profits could be adversely affected;
•    our planned growth and changes in the industry could place strains on our management, employees, information systems and internal controls, which may adversely impact our business;
•    if we cannot retain our key employees and hire additional highly qualified employees, we may not be able to successfully manage our businesses and pursue our strategic objectives;
•    economic, political and other risks associated with our international operations could adversely affect our profitability and international growth prospect;
•    our financial results are affected by the operating and financial results of, our relationships with and actions taken by our franchisees;
•    we are subject to a variety of additional risks associated with our franchisees, such as potential franchisee bankruptcies, franchisee changes in control, franchisee turnover rising costs related to construction of new stores and maintenance of existing stores, which could adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition;
3


•    we and our franchisees could be subject to claims related to health and safety risks to members that arise while at both our corporate-owned and franchise stores;
•    our business is subject to various laws and regulations including, among others, those governing indoor tanning, electronic funds transfer, ACH, credit card, debit card and digital payment options, and changes in such laws and regulations, failure to comply with existing or future laws and regulations or failure to adjust to consumer sentiment regarding these matters, could harm our reputation and adversely affect our business;
•    we are subject to risks associated with leasing property subject to long-term non-cancelable leases;
•    if we and our franchisees are unable to identify and secure suitable sites for new franchise stores, our revenue growth rate and profits may be negatively impacted;
•    opening new stores in close proximity may negatively impact our existing stores’ revenues and profitability;
•    our franchisees may incur rising costs related to construction of new stores and maintenance of existing stores, which could adversely affect the attractiveness of our franchise model, and in turn our business, results of operations and financial condition;
•    our dependence on a limited number of suppliers for equipment and certain products and services could result in disruptions to our business and could adversely affect our revenues and gross profit; 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, 2020 filed with the Securities and Exchange Commission.
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.
4

Table of Contents
PART I-FINANCIAL INFORMATION
1. Financial Statements
Planet Fitness, Inc. and subsidiaries
Condensed consolidated balance sheets
(Unaudited)
(Amounts in thousands, except per share amounts) 
 March 31,December 31,
 20212020
Assets  
Current assets:  
Cash and cash equivalents
$445,606 $439,478 
Restricted cash
58,327 76,322 
Accounts receivable, net of allowance for bad debts of $6 and $7 at March 31, 2021 and December 31, 2020, respectively
7,024 16,447 
Inventory
468 473 
Deferred expenses – national advertising fund
13,721  
Prepaid expenses
12,804 11,881 
Other receivables
13,053 16,754 
Income tax receivables5,191 5,461 
Total current assets556,194 566,816 
Property and equipment, net of accumulated depreciation of $117,871 and $107,720 at March 31, 2021 and December 31, 2020, respectively
161,731 160,677 
Investments25,000  
Right-of-use assets, net161,574 164,252 
Intangible assets, net212,916 217,075 
Goodwill227,821 227,821 
Deferred income taxes517,867 511,200 
Other assets, net1,881 1,896 
Total assets$1,864,984 $1,849,737 
Liabilities and stockholders’ deficit
Current liabilities:
Current maturities of long-term debt
$17,500 $17,500 
Accounts payable
14,561 19,388 
Accrued expenses
25,145 22,042 
Equipment deposits
174 795 
Deferred revenue, current
35,909 26,691 
Other current liabilities
21,900 25,479 
Total current liabilities115,189 111,895 
Long-term debt, net of current maturities1,673,622 1,676,426 
Borrowings under Variable Funding Notes75,000 75,000 
Lease liabilities, net of current portion166,350 167,910 
Deferred revenue, net of current portion32,203 32,587 
Deferred tax liabilities821 881 
Payable pursuant to tax benefit arrangements, net of current portion496,143 488,200 
Other liabilities2,334 2,511 
Total noncurrent liabilities2,446,473 2,443,515 
Commitments and contingencies (Note 12)
Stockholders’ equity (deficit):
Class A common stock, $.0001 par value - 300,000 authorized, 83,202 and 82,821 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
8 8 
Class B common stock, $.0001 par value - 100,000 authorized, 3,363 and 3,722 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively
1 1 
Accumulated other comprehensive income38 27 
Additional paid in capital
48,275 45,673 
Accumulated deficit
(745,997)(751,578)
Total stockholders’ deficit attributable to Planet Fitness Inc.(697,675)(705,869)
Non-controlling interests
997 196 
Total stockholders’ deficit(696,678)(705,673)
Total liabilities and stockholders’ deficit$1,864,984 $1,849,737 
 See accompanying notes to condensed consolidated financial statements
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Table of Contents
Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of operations
(Unaudited)
(Amounts in thousands, except per share amounts)
 
 For the three months ended
March 31,
 20212020
Revenue:  
Franchise$52,180 $48,910 
Commission income272 390 
National advertising fund revenue11,609 9,229 
Corporate-owned stores37,877 40,516 
Equipment9,939 28,186 
Total revenue111,877 127,231 
Operating costs and expenses:
Cost of revenue7,985 21,846 
Store operations25,907 26,157 
Selling, general and administrative22,490 16,953 
National advertising fund expense12,753 15,205 
Depreciation and amortization15,474 12,792 
Other (gain) loss(2,138)11 
Total operating costs and expenses82,471 92,964 
Income from operations29,406 34,267 
Other expense, net:
Interest income217 1,927 
Interest expense(20,244)(20,240)
Other income (expense)165 (687)
Total other expense, net(19,862)(19,000)
Income before income taxes9,544 15,267 
Provision for income taxes3,354 4,884 
Net income6,190 10,383 
Less net income attributable to non-controlling interests609 1,776 
Net income attributable to Planet Fitness, Inc.$5,581 $8,607 
Net income per share of Class A common stock:
Basic$0.07 $0.11 
Diluted$0.07 $0.11 
Weighted-average shares of Class A common stock outstanding:
Basic83,084 79,098 
Diluted83,707 79,723 
 
See accompanying notes to condensed consolidated financial statements.
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Table of Contents
Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of comprehensive income
(Unaudited)
(Amounts in thousands)
 
 For the three months ended
March 31,
 20212020
Net income including non-controlling interests$6,190 $10,383 
Other comprehensive income (loss), net:
Foreign currency translation adjustments11 (609)
Total other comprehensive income (loss), net11 (609)
Total comprehensive income including non-controlling interests6,201 9,774 
Less: total comprehensive income attributable to non-controlling interests609 1,776 
Total comprehensive income attributable to Planet Fitness, Inc.$5,592 $7,998 
 
See accompanying notes to condensed consolidated financial statements.
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Table of Contents
Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of cash flows
(Unaudited)
(Amounts in thousands)
 For the three months ended March 31,
 20212020
Cash flows from operating activities:  
Net income$6,190 $10,383 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization15,474 12,792 
Amortization of deferred financing costs1,571 1,587 
Amortization of asset retirement obligations(21)7 
Deferred tax expense2,737 4,126 
Gain on re-measurement of tax benefit arrangement(348)(502)
Provision for bad debts (33)
Equity-based compensation1,439 947 
Other11 993 
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable9,428 21,409 
Inventory6 (1,943)
Other assets and other current assets3,708 (250)
National advertising fund(13,721)(10,363)
Accounts payable and accrued expenses(7,677)6,381 
Other liabilities and other current liabilities(3,876)(249)
Income taxes295 (1,315)
Equipment deposits(621)2,386 
Deferred revenue8,802 25,992 
Leases and deferred rent126 774 
Net cash provided by operating activities23,523 73,122 
Cash flows from investing activities:
Additions to property and equipment(6,359)(9,110)
Proceeds from sale of property and equipment 135 
Investments(25,000) 
Net cash used in investing activities(31,359)(8,975)
Cash flows from financing activities:
Principal payments on capital lease obligations(53)(41)
Proceeds from borrowings under Variable Funding Notes 75,000 
Repayment of long-term debt(4,375)(4,375)
Proceeds from issuance of Class A common stock344 491 
Dividend equivalent payments (57)
Distributions to Continuing LLC Members (1,600)
Net cash (used in) provided by financing activities(4,084)69,418 
Effects of exchange rate changes on cash and cash equivalents53 (1,640)
Net (decrease) increase in cash, cash equivalents and restricted cash(11,867)131,925 
Cash, cash equivalents and restricted cash, beginning of period515,800 478,795 
Cash, cash equivalents and restricted cash, end of period$503,933 $610,720 
Supplemental cash flow information:
Net cash paid for income taxes$322 $2,071 
Cash paid for interest$18,794 $18,768 
Non-cash investing activities:
Non-cash additions to property and equipment$7,419 $2,319 
 See accompanying notes to condensed consolidated financial statements.
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Table of Contents
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
 SharesAmountSharesAmount
Balance at December 31, 202082,821 $8 3,722 $1 $27 $45,673 $(751,578)$196 $(705,673)
Net income— — — — — — 5,581 609 6,190 
Equity-based compensation expense
— — — — — 1,439 — — 1,439 
Exchanges of Class B common stock
359 — (359)— — (415)— 415 — 
Exercise of stock options, vesting of restricted share units and ESPP share purchase
22 — — — — 414 — — 414 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock
— — — — — 1,164 — — 1,164 
Non-cash adjustments to VIEs
— — — — — — — (223)(223)
Other comprehensive income— — — — 11 — — — 11 
Balance at March 31, 202183,202 $8 3,363 $1 $38 $48,275 $(745,997)$997 $(696,678)
 
 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
 SharesAmountSharesAmount
Balance at December 31, 201978,525 $8 8,562 $1 $303 $29,820 $(736,587)$(1,299)$(707,754)
Net income
— — — — — — 8,607 1,776 10,383 
Equity-based compensation expense
— — — — — 947 — — 947 
Exchanges of Class B common stock
2,061 — (2,061)— — (956)— 956 — 
Exercise of stock options, vesting of restricted share units and ESPP share purchase
9 — — — — 459 — — 459 
Repurchase and retirement of Class A common stock
(667)— — — — — — — — 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock
— — — — — 6,190 — — 6,190 
Non-cash adjustments to VIEs
— — — — — — — (219)(219)
Distributions paid to members of Pla-Fit Holdings
— — — — — — — (1,600)(1,600)
Forfeiture of dividend equivalents— — — — — — 34 — 34 
Other comprehensive income
— — — — (609)— — — (609)
Balance at March 31, 202079,928 $8 6,501 $1 $(306)$36,460 $(727,946)$(386)$(692,169)


See accompanying notes to condensed consolidated financial statements.
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Table of Contents
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 2,146 owned and franchised locations (referred to as stores) in 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia as of March 31, 2021.
In March 2020, the Company proactively closed all of its stores system wide in response to the novel coronavirus disease (“COVID-19”) pandemic in order to promote the health and safety of its members, team members and their communities. As of March 31, 2021, 2,110 stores had reopened, of which 2,009 were franchisee-owned stores and 101 were corporate-owned stores.
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 March 31, 2021, Planet Fitness, Inc. held 100.0% of the voting interest and 96.1% 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 3.9% 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 months ended March 31, 2021 and 2020 are unaudited. The condensed consolidated balance sheet as of December 31, 2020 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, 2020 (the “Annual Report”) filed with the SEC on March 1, 2021. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.
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Table of Contents
Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

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 typically collects 2% of gross monthly membership dues annually from franchisees, in accordance with the provisions of the franchise agreements, and uses the amounts received to support our national marketing campaigns, its 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 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 6).
(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.
 
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

The carrying value and estimated fair value of certain assets and liabilities as of March 31, 2021 and December 31, 2020 were as follows:
March 31, 2021December 31, 2020
Carrying value
Estimated fair value(1)
Carrying value
Estimated fair value(1)
Assets
Investments - held-to-maturity(1)
$25,000 $25,000 $ $ 
Liabilities
Long-term debt(2)
$1,713,125 $1,714,779 $1,717,500 $1,699,749 
Variable Funding Notes(2)
$75,000 $75,000 $75,000 $75,000 
(1) The estimated fair value of the security is determined using unobservable inputs including assumptions by the investee's management including quantitative information such as valuations in recently completed or proposed financings. These inputs are classified as Level 3.
(2) The Company’s Variable Funding Notes are a variable rate loan and the fair value of this loan approximates book value based on the borrowing rates currently available for variable rate loans obtained from third party lending institutions. The estimated fair value of our fixed rate 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) Investments
At March 31, 2021, we held preferred shares in certain privately held entities, accounted for under ASC Topic 320, Investments—Debt Securities, which are included in Investments in our condensed consolidated balance sheets. As of March 31, 2021, our investments consist of held-to-maturity preferred shares that we have the positive intent and ability to hold to maturity, and which are measured at amortized cost. We review our held-to-maturity securities for estimated credit losses under ASC Topic 326, Credit Impairment, noting we did not recognize significant credit losses and the ending allowance for credit losses was immaterial.
The amortized cost of our held-to-maturity debt security investments was $25,000 and $0 at March 31, 2021 and December 31, 2020, respectively. There were no unrealized gains or losses for our held-to-maturity debt security investments as of March 31, 2021.
As of March 31, 2021, all of the Company’s held-to-maturity debt security investments had a contractual maturity in 2026.
(e) Recent accounting pronouncements
The FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, in December 2019. The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This guidance is effective for fiscal years beginning after December 15, 2020. The Company adopted the standard beginning January 1, 2021 with no material impact to its financial statements.
(3) Variable Interest Entities
The carrying values of VIEs included in the consolidated financial statements as of March 31, 2021 and December 31, 2020 are as follows: 
 March 31, 2021December 31, 2020
 AssetsLiabilitiesAssetsLiabilities
PF Melville$2,483 $ $2,523 $ 
MMR2,072  2,099  
Total$4,555 $ $4,622 $ 
 
The Company also has variable interests in certain franchisees mainly through the guarantee of lease agreements up to a maximum period of ten years with earlier expiration dates possible if certain conditions are met. The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $7,349 and $7,842 as of March 31, 2021 and December 31, 2020, respectively.
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Table of Contents
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 estimated fair value of the guarantees, which is not material.
(4) Goodwill and Intangible Assets
A summary of goodwill and intangible assets at March 31, 2021 and December 31, 2020 is as follows: 
March 31, 2021Weighted
average
amortization
period (years)
Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships11.0$174,033 $(128,105)$45,928 
Reacquired franchise rights8.037,660 (17,272)20,388 
 211,693 (145,377)66,316 
Indefinite-lived intangible:
Trade and brand namesN/A146,600 — 146,600 
Total intangible assets$358,293 $(145,377)$212,916 
Goodwill$227,821 $ $227,821 
 
December 31, 2020Weighted
average
amortization
period (years)
Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships11.0$174,033 $(124,907)$49,126 
Reacquired franchise rights8.037,660 (16,311)21,349 
 211,693 (141,218)70,475 
Indefinite-lived intangible:
Trade and brand namesN/A146,600 — 146,600 
Total intangible assets $358,293 $(141,218)$217,075 
Goodwill $227,821 $ $227,821 
 The Company determined that no impairment charges were required during any periods presented.
Amortization expense related to the intangible assets totaled $4,159 and $4,223 for the three months ended March 31, 2021 and 2020, respectively. The anticipated annual amortization expense related to intangible assets to be recognized in future years as of March 31, 2021 is as follows:
 Amount
Remainder of 2021$12,477 
202216,728 
202316,558 
202414,067 
20253,066 
Thereafter3,420 
Total$66,316 
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Table of Contents
Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

(5) Long-Term Debt
Long-term debt as of March 31, 2021 and December 31, 2020 consists of the following: 
 March 31, 2021December 31, 2020
2018-1 Class A-2-I notes$560,625 $562,063 
2018-1 Class A-2-II notes609,375 610,938 
2019-1 Class A-2 notes543,125 544,500 
Borrowings under Variable Funding Notes75,000 75,000 
Total debt, excluding deferred financing costs1,788,125 1,792,501 
Deferred financing costs, net of accumulated amortization(22,003)(23,575)
Total debt1,766,122 1,768,926 
Current portion of long-term debt17,500 17,500 
Long-term debt and borrowings under Variable Funding Notes, net of current portion$1,748,622 $1,751,426 
Future annual principal payments of long-term debt as of March 31, 2021 are as follows: 
 Amount
Remainder of 2021$13,124 
2022568,063 
202386,750 
202411,750 
2025591,438 
Thereafter517,000 
Total$1,788,125 
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 “2018 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 “2018 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 “2018 Class A-2-II Notes” and, together with the 2018 Class A-2-I Notes, the “2018 Notes”) with an initial principal amount of $625,000. In connection with the issuance of the 2018 Notes, the Master Issuer also entered into a revolving financing facility that allows for the incurrence of up to $75,000 in revolving loans and/or letters of credit under the Master Issuer’s Series 2018-1 Variable Funding Senior Notes, Class A-1 (the “Variable Funding Notes”). The Company fully drew down on the Variable Funding Notes on March 20, 2020. Outstanding amounts under the Variable Funding Notes bear interest at a variable rate, which is 2.20% as of March 31, 2021. On December 3, 2019 the Master Issuer issued Series 2019-1 3.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2019 Notes” and, together with the 2018 Notes, the “Notes”) with an initial principal amount of $550,000. The 2019 Notes were issued under the 2018 Indenture and a related supplemental indenture dated December 3, 2019 (together, the “Indenture”). Together the Notes and Variable Funding Notes will be referred to as the “Securitized Senior Notes”.
The 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 Securitized Senior Notes and that have pledged substantially all of their assets to secure the Securitized Senior Notes.
Interest and principal payments on the Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the 2018 Notes is in September 2048, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2018 Class A-2-I Notes will be repaid in September 2022 and the 2018 Class A-2-II Notes will be repaid in September 2025. The legal final maturity date of the 2019 Notes is in December 2049, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2019 Notes will be repaid in December 2029 (together, the “Anticipated Repayment
14

Table of Contents
Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

Dates”). If the Master Issuer has not repaid or refinanced the Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture.

As noted above, the Company borrowed the full $75,000 in Variable Funding Notes on March 20, 2020. The Variable Funding Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate (or “LIBOR”) 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 Notes. As of March 31, 2021, the applicable borrowing rate is 2.20%. 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 extension options. Following the anticipated repayment date (and any extensions thereof) additional interest will accrue on the Variable Funding Notes equal to 5.0% per year. The Company does not anticipate the expected discontinuation of LIBOR to have a material impact on its financial statements.

In connection with the issuance of the 2018 Notes and 2019 Notes, the Company incurred debt issuance costs of $27,133 and $10,577, respectively. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Notes utilizing the effective interest rate method.
The Securitized 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 Securitized 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 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Securitized Senior Notes are in stated ways defective or ineffective, (iv) a cap on non-securitized indebtedness of $50,000 (provided that the Company may incur non-securitized indebtedness in excess of such amount, subject to the leverage ratio cap described below, under certain conditions, including if the relevant lenders execute a non-disturbance agreement that acknowledges the bankruptcy-remote status of the Master Issuer and its subsidiaries and of their respective assets), (v) a leverage ratio cap incurrence test on the Company of 7.0x (calculated without regard for any indebtedness subject to the $50,000 cap) and (vi) covenants relating to recordkeeping, access to information and similar matters.
Pursuant to a parent company support agreement, the Company has agreed to cause its subsidiary to perform each of its obligations (including any indemnity obligations) and duties under the Management Agreement and under the contribution agreements entered into in connection with the securitized financing facility, in each case as and when due. To the extent that such subsidiary has not performed any such obligation or duty within the prescribed time frame after such obligation or duty was required to be performed, the Company has agreed to either (i) perform such obligation or duty or (ii) cause such obligations or duties to be performed on the Company’s behalf.
The Securitized 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 Notes on the applicable scheduled Anticipated Repayment Dates. The Securitized 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 Securitized 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 Securitized Senior Notes. As of March 31, 2021, the Company had restricted cash held by the Trustee of $42,319. 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.
(6) 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
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

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 ROU 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. 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.
LeasesClassificationMarch 31, 2021December 31, 2020
Assets
Operating lease ROU assetsRight of use asset, net$161,574 $164,252 
Finance lease assetsProperty and equipment, net of accumulated depreciation260 306 
Total lease assets$161,834 $164,558 
Liabilities
Current:
OperatingOther current liabilities$19,727 $19,544 
Noncurrent:
OperatingLease liabilities, net of current portion166,350 167,910 
FinancingOther liabilities277 327 
Total lease liabilities$186,354 $187,781 
Weighted-average remaining lease term (years) - operating leases8.58.7
Weighted-average discount rate - operating leases5.1 %5.1 %

During the three months ended March 31, 2021 and 2020, the components of lease cost were as follows:
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

Three months ended March 31,
20212020
Operating lease cost$6,693 $6,392 
Variable lease cost2,374 2,372 
Total lease cost$9,067 $8,764 

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 March 31,
20212020
Cash paid for lease liabilities$6,577 $5,798 
Operating lease ROU assets obtained in exchange for operating lease liabilities$4,627 $ 

As of March 31, 2021, maturities of lease liabilities were as follows:
Amount
Remainder of 2021$21,349 
202228,981 
202328,555 
202427,180 
202526,565 
Thereafter99,399 
Total lease payments$232,029 
Less: imputed interest45,675 
Present value of lease liabilities$186,354 

As of March 31, 2021, operating lease payments exclude approximately $198 of legally binding minimum lease payments for leases signed but not yet commenced.
(7) Revenue recognition
Contract Liabilities
Contract liabilities consist primarily 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, and NAF revenue billed in advance of satisfaction of the Company’s performance obligation. 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, 2020 and March 31, 2021.
Contract liabilities
Balance at December 31, 2020$59,278 
Revenue recognized that was included in the contract liability at the beginning of the year(13,473)
Increase, excluding amounts recognized as revenue during the period22,307 
Balance at March 31, 2021$68,112 
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

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 March 31, 2021. 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 2021$34,044 
20224,718 
20233,637 
20243,377 
20253,025 
Thereafter19,311 
Total$68,112 
(8) Related Party Transactions
Activity with entities considered to be related parties is summarized below: 
 For the three months ended
March 31,
 20212020
Franchise revenue$553 $500 
Equipment revenue 93 
Total revenue from related parties$553 $593 
Additionally, the Company had deferred franchise agreement and area development agreement revenue from related parties of $173 and $182 as of March 31, 2021 and December 31, 2020, respectively.
The Company had payables to related parties pursuant to tax benefit arrangements of $74,347 and $71,416, as of March 31, 2021 and December 31, 2020, respectively (see Note 11).
The Company provides administrative services to the NAF and typically 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 $499 and $569 for the three months ended March 31, 2021 and 2020, respectively.
In the three months ended March 31, 2021 and 2020, the Company incurred approximately $0 and $49, respectively, which is included within selling, general and administrative expense on the consolidated statements of operations, for corporate travel to a third-party company which is affiliated with our Chief Executive Officer.
In May 2020, the Company provided a short-term loan of approximately $8,950 to its third party payment processor related to amounts drafted by franchisee-owned stores in March that were not collected as part of the typical monthly process as a result of the impact of COVID-19. The third party payment processor has begun its repayment of this loan and the Company expects repayment will occur over several months. As of March 31, 2021, approximately $1,797 of the loan balance is outstanding and is included within other receivables on the balance sheet.
(9) Stockholders’ 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 three months ended March 31, 2021, certain existing holders of Holdings Units exercised their exchange rights and exchanged 358,979 Holdings Units for 358,979 newly-issued shares of Class A common stock. Simultaneously, and in
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

connection with these exchanges, 358,979 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 358,979 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.
As a result of the above transactions, as of March 31, 2021:
Holders of our Class A common stock owned 83,202,252 shares of our Class A common stock, representing 96.1% of the voting power in the Company and, through the Company, 83,202,252 Holdings Units representing 96.1% of the economic interest in Pla-Fit Holdings; and
the Continuing LLC Owners collectively owned 3,363,075 Holdings Units, representing 3.9% of the economic interest in Pla-Fit Holdings, and 3,363,075 shares of our Class B common stock, representing 3.9% of the voting power in the Company.
Share repurchase program
2019 share repurchase program
On November 5, 2019, our board of directors approved a share repurchase program of up to $500,000.
On December 4, 2019, the Company entered into a $300,000 accelerated share repurchase agreement (the “2019 ASR Agreement”) with JPMorgan Chase Bank, N.A. (“JPMC”). Pursuant to the terms of the 2019 ASR Agreement, on December 5, 2019, the Company paid JPMC $300,000 upfront in cash and received 3,289,924 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 March 2, 2020. At final settlement, JPMC delivered 666,961 additional shares of the Company’s Class A common stock, based on a weighted average cost per share of $75.82 over the term of the 2019 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.
On March 18, 2020, the Company announced the suspension of its 2019 share repurchase program. If the 2019 share repurchase program is reinstated, the timing of purchases and amount of stock repurchased will be subject to the Company’s discretion and will depend on market and business conditions, the Company’s general working capital needs, stock price, applicable legal requirements and other factors. Our ability to repurchase shares at any particular time is also subject to the terms of the Indenture governing the Securitized Senior Notes. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing. The Company may reinstate or terminate the program at any time.
Preferred stock
The Company had 50,000,000 shares of preferred stock authorized and none issued or outstanding for the three months ended March 31, 2021 and 2020.
(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.
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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
March 31,
 20212020
Numerator  
Net income$6,190 $10,383 
Less: net income attributable to non-controlling interests609 1,776 
Net income attributable to Planet Fitness, Inc.$5,581 $8,607 
Denominator
Weighted-average shares of Class A common stock outstanding - basic83,084,096 79,098,468 
Effect of dilutive securities:
Stock options563,928 574,286 
Restricted stock units59,190 50,614 
Weighted-average shares of Class A common stock outstanding - diluted83,707,214 79,723,368 
Earnings per share of Class A common stock - basic$0.07 $0.11 
Earnings per share of Class A common stock - diluted$0.07 $0.11 
Weighted average shares of Class B common stock of 3,471,842 and 7,777,435 for the three months ended March 31, 2021 and 2020, 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 44,258 and 114,342 for the three months ended March 31, 2021 and 2020, 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 0 and 2,827 for the three months ended March 31, 2021 and 2020, 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 35.1% and 32.0% for the three months ended March 31, 2021 and 2020, respectively. The effective tax rate for the three months ended March 31, 2021 and 2020 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 interests. The Company was also subject to taxes in foreign jurisdictions.
Net deferred tax assets of $517,046 and $510,319 as of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020, the total liability related to uncertain tax positions was $420. The Company recognizes interest accrued and penalties, if applicable, related to unrecognized tax benefits in income tax expense. Interest and penalties for the three months ended March 31, 2021 and 2020 were not material.
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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 three months ended March 31, 2021, 358,979 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 $258 during the three months ended March 31, 2021. As a result of these exchanges, during the three months ended March 31, 2021, we also recognized deferred tax assets in the amount of $9,714, and corresponding tax benefit arrangement liabilities of $8,292, 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 March 31, 2021 and December 31, 2020, the Company had a liability of $496,143 and $488,200, respectively, related to its projected obligations under the tax benefit arrangements. Projected future payments under the tax benefit arrangements are as follows:
 Amount
Remainder of 2021$ 
20229,738 
202332,359 
202438,296 
202547,389 
Thereafter368,361 
Total$496,143 
(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 September 3, 2020, the Company and other defendants, including an officer of the Company who is a related party, received a final amendment to the joint and several judgment against them in a civil action brought by a former employee. As of March 31, 2021, the Company has estimated its obligation related to this matter to be approximately $2,063, 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 $2,063 in other receivables on the Company’s condensed consolidated balance sheet, for which it has determined to record a full reserve as a result of potential uncertainty around collectability. Due to the joint and several nature of the judgment, the Company has determined that the amount of estimated obligation recorded constitutes a related party transaction. The Company has incurred, and may incur in the future, legal costs on behalf of the defendants in the case, which include a related party. These costs have not been and are not expected to be material in the future.
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

Mexico Acquisition
On March 19, 2020, a franchisee in Mexico exercised a put option that requires the Company to acquire their franchisee-owned stores in Mexico. The transaction has not closed as of March 31, 2021 as the parties are in dispute over the final terms of the transaction and related matters. The Company analyzed the contract and estimates that the purchase price will approximate fair value of the acquired assets.
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.  
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, Panama, Mexico and Australia, including revenues and expenses from the NAF. The Corporate-owned stores segment includes operations with respect to all corporate-owned stores throughout the United States and Canada. The Equipment segment primarily 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 months ended March 31, 2021 and 2020. 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
March 31,
 20212020
Revenue  
Franchise segment revenue - U.S.$63,344 $57,342 
Franchise segment revenue - International717 1,187 
Franchise segment total64,061 58,529 
Corporate-owned stores - U.S.37,800 39,566 
Corporate-owned stores - International77 950 
Corporate-owned stores total37,877 40,516 
Equipment segment - U.S.9,939 27,695 
Equipment segment - International 491 
Equipment segment total9,939 28,186 
Total revenue$111,877 $127,231 
Franchise segment revenue includes franchise revenue, NAF revenue, and commission income.
Franchise revenue includes revenue generated from placement services of $779 and $2,013 for the three months ended March 31, 2021 and 2020, respectively.
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Planet Fitness, Inc. and subsidiaries
Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

 Three months ended
March 31,
 20212020
Segment EBITDA  
Franchise$41,180 $36,746 
Corporate-owned stores10,691 12,007 
Equipment1,830 6,367 
Corporate and other(8,656)(8,748)
Total Segment EBITDA$45,045 $46,372 
 
The following table reconciles total Segment EBITDA to income before taxes:
 Three months ended
March 31,
 20212020
Total Segment EBITDA$45,045 $46,372 
Less:
Depreciation and amortization15,474 12,792 
Other income (expense)165 (687)
Income from operations29,406 34,267 
Interest income217 1,927 
Interest expense(20,244)(20,240)
Other income (expense)165 (687)
Income before income taxes$9,544 $15,267 
The following table summarizes the Company’s assets by reportable segment: 
 March 31, 2021December 31, 2020
Franchise$188,028 $174,812 
Corporate-owned stores479,177 468,628 
Equipment161,475 171,201 
Unallocated1,036,304 1,035,096 
Total consolidated assets$1,864,984 $1,849,737 
The table above includes $774 and $828 of long-lived assets located in the Company’s international corporate-owned stores as of March 31, 2021 and December 31, 2020, respectively. All other assets are located in the U.S.
The following table summarizes the Company’s goodwill by reportable segment: 
 March 31, 2021December 31, 2020
Franchise$16,938 $16,938 
Corporate-owned stores118,217 118,217 
Equipment92,666 92,666 
Consolidated goodwill$227,821 $227,821 

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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 months ended March 31, 2021 and 2020:
 For the three months ended
March 31,
 20212020
Franchisee-owned stores:  
Stores operated at beginning of period2,021 1,903 
New stores opened22 38 
Stores debranded, sold or consolidated(1)
 (1)
Stores operated at end of period(2)
2,043 1,940 
Corporate-owned stores:
Stores operated at beginning of period103 98 
New stores opened 1 
Stores acquired from franchisees  
Stores operated at end of period(2)
103 99 
Total stores:
Stores operated at beginning of period2,124 2,001 
New stores opened22 39 
Stores acquired, debranded, sold or consolidated(1)
 (1)
Stores operated at end of period(2)
2,146 2,039 
 (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. The Company retains 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.
(2)    The “stores operated” include stores that have closed temporarily related to the COVID-19 pandemic. All stores were closed in March 2020 in response to COVID-19, and as of March 31, 2021 2,110 were re-opened and operating, of which 2,009 were franchisee-owned stores and 101 were corporate-owned stores.
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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 March 31, 2021, we had more than 14.1 million members and 2,146 stores in all 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia. Of our 2,146 stores, 2,043 are franchised and 103 are corporate-owned. As of March 31, 2021, we had commitments to open more than 1,000 new stores under existing ADAs.
COVID-19 Impact
On March 11, 2020, the World Health Organization declared a global pandemic related to the COVID-19 outbreak. The pandemic has caused unprecedented economic volatility and uncertainty, which has negatively impacted our recent operating results. In response to the COVID-19 pandemic, we proactively closed all of our stores system wide in March 2020. Our stores began reopening in early May 2020 as local guidelines allowed, and as of March 31, 2021, 2,110 of our stores were open and operating, of which 2,009 were franchisee-owned stores and 101 were corporate-owned stores. As COVID-19 continues to impact areas in which our stores operate, certain of our stores have had to re-close, and additional stores may have to re-close, pursuant to local guidelines. As previously announced, members have not and will not be charged membership dues while our stores are closed and are credited for any membership dues paid for periods when our stores were closed. We have experienced and continue to expect to experience decreased new store development and remodels, as well as decreased replacement equipment sales for 2021 as a result of the COVID-19 pandemic.
We continue to reopen stores as local authorities issue guidelines authorizing the reopening of fitness centers and we determine it is safe to do so. As stores reopened we have recognized franchise revenue and corporate-owned store revenue associated with any membership dues collected prior to store closures. We continue to defer revenue for stores that have not yet reopened. We may have to defer further revenue in the future for stores that are required to re-close.
The duration of the COVID-19 pandemic and the extent of its impact on our business cannot be reasonably estimated at this time. We anticipate that the COVID-19 pandemic will continue to negatively impact our operating results in future periods. As a result of COVID-19 we have experienced to date, and may continue to experience, a decrease in our net membership base. We are not providing guidance at this time due to continued uncertainty around the duration and impact of COVID-19.
We have taken a number of actions to efficiently manage the business, as well as increase liquidity and financial flexibility in order to mitigate the impact of the COVID-19 pandemic on our business. Although we expect the COVID-19 pandemic to continue to negatively impact the Company’s operations and cash flows, based on management’s current expectations and currently available information, the Company believes current cash and cash from operations will be sufficient to meet its operating cash requirements, planned capital expenditures and interest and principal payments for at least the next twelve months.
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, Panama, Mexico and Australia, 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 primarily 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
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unaffiliated customers and do not include intersegment transactions. The tables below summarize the financial information for our segments for the three months ended March 31, 2021 and March 31, 2020. “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
March 31,
(in thousands)20212020
Revenue  
Franchise segment$64,061 $58,529 
Corporate-owned stores segment37,877 40,516 
Equipment segment9,939 28,186 
Total revenue$111,877 $127,231 
Segment EBITDA  
Franchise$41,180 $36,746 
Corporate-owned stores10,691 12,007 
Equipment1,830 6,367 
Corporate and other(8,656)(8,748)
Total Segment EBITDA(1)
$45,045 $46,372 

(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 (loss) income, the most directly comparable U.S. GAAP measure.

A reconciliation of income from operations to Segment EBITDA is set forth below: 
(in thousands)FranchiseCorporate-owned
stores
EquipmentCorporate and
other
Total
Three months ended March 31, 2021     
Income (loss) from operations$39,285 $1,380 $637 $(11,896)$29,406 
Depreciation and amortization1,895 9,266 1,261 3,052 15,474 
Other income (expense)— 45 (68)188 165 
Segment EBITDA(1)
$41,180 $10,691 $1,830 $(8,656)$45,045 
Three months ended March 31, 2020
Income (loss) from operations$34,824 $5,679 $5,105 $(11,341)$34,267 
Depreciation and amortization1,927 7,322 1,262 2,281 12,792 
Other (expense) income(5)(994)— 312 (687)
Segment EBITDA(1)
$36,746 $12,007 $6,367 $(8,748)$46,372 

(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, system-wide sales, 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.
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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.
The following table shows the change in our corporate-owned and franchisee-owned store base for the three months ended March 31, 2021 and 2020: 
 Three months ended March 31,
 20212020
Franchisee-owned stores:  
Stores operated at beginning of period2,021 1,903 
New stores opened22 38 
Stores debranded, sold or consolidated(1)
— (1)
Stores operated at end of period(2)
2,043 1,940 
Corporate-owned stores:
Stores operated at beginning of period103 98 
New stores opened— 
Stores operated at end of period(2)
103 99 
Total stores:
Stores operated at beginning of period2,124 2,001 
New stores opened22 39 
Stores acquired, debranded, sold or consolidated(1)
— (1)
Stores operated at end of period(2)
2,146 2,039 

(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.
(2)The “stores operated” includes stores that have closed temporarily related to the COVID-19 pandemic. All stores were closed in March 2020 in response to COVID-19, and as of March 31, 2021, 2,110 were re-opened and operating, of which 2,009 were franchisee-owned stores and 101 were corporate-owned stores.
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 and pricing of PF Black Card and standard memberships in any period;
growth in total net memberships per store;
consumer recognition of our brand and our ability to respond to changing consumer preferences;
overall economic trends, particularly those related to consumer spending;
our ability 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.
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Consistent with common industry practice, we present same store sales as compared to the same period in the prior year and which is calculated for a given period by including only sales from stores that had sales in the comparable months of both years. 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.
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. As a result of the COVID-19 pandemic, membership levels in the current year period were below the levels they were at during the three months ended March 31, 2020, which negatively impacted same store sales in the three months ended March 31, 2021.
The following table shows our same store sales for the three months ended March 31, 2021 and 2020:
 Three months ended March 31,
 20212020
Same store sales data  
Same store sales growth:  
Franchisee-owned stores(14.7)%10.0 %
Corporate-owned stores(18.2)%7.3 %
Total stores(14.9)%9.8 %
Number of stores in same store sales base:
Franchisee-owned stores1,605 1,579 
Corporate-owned stores83 67 
Total stores1,688 1,662 

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 17th 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 $765 million and $916 million, during the three months ended March 31, 2021 and 2020, 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
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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.
A reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below for the three months ended March 31, 2021 and 2020:
 Three months ended March 31,
 20212020
(in thousands)  
Net income$6,190 $10,383 
Interest income(217)(1,927)
Interest expense20,244 20,240 
Provision for income taxes3,354 4,884 
Depreciation and amortization15,474 12,792 
EBITDA$45,045 $46,372 
Purchase accounting adjustments-revenue(1)
69 68 
Purchase accounting adjustments-rent(2)
117 141 
Pre-opening costs(3)
365 361 
Insurance recovery(4)
(2,175)— 
Tax benefit arrangement remeasurement(5)
(348)(502)
Other(6)
635 93 
Adjusted EBITDA$43,708 $46,533 
 
(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 $49 and $41 in the three months ended March 31, 2021 and 2020, 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 $68 and $100 in the three months ended March 31, 2021 and 2020, 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 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.
(4)Represents a probable insurance recovery of previously recognized expenses related to the settlement of legal claims.
(5)Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(6)Represents certain other charges and gains that we do not believe reflect our underlying business performance.
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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 March 31,
(in thousands, except per share amounts)20212020
Net income$6,190 $10,383 
Provision for income taxes, as reported3,354 4,884 
Purchase accounting adjustments-revenue(1)
69 68 
Purchase accounting adjustments-rent(2)
117 141 
Pre-opening costs(3)
365 361 
Insurance recovery(4)
(2,175)— 
Tax benefit arrangement remeasurement(5)
(348)(502)
Other(6)
635 93 
Purchase accounting amortization(7)
4,159 4,213 
Adjusted income before income taxes$12,366 $19,641 
Adjusted income tax expense(8)
3,289 5,264 
Adjusted net income$9,077 $14,377 
Adjusted net income per share, diluted$0.10 $0.16 
Adjusted weighted-average shares outstanding(9)
87,179 87,501 
 
(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 $49 and $41 in the three months ended March 31, 2021 and 2020, 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 $68 and $100 in the three months ended March 31, 2021 and 2020, 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 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.
(4)Represents a probable insurance recovery of previously recognized expenses related to the settlement of legal claims.
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(5)Represents gains and losses related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(6)Represents certain other charges and gains that we do not believe reflect our underlying business performance.
(7)Includes $3,096 and $3,096 of amortization of intangible assets, for the three months ended March 31, 2021 and 2020, recorded in connection with the 2012 Acquisition, and $1,063 and $1,117 of amortization of intangible assets for the three months ended March 31, 2021 and 2020, 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.
(8)Represents corporate income taxes at an assumed effective tax rate of 26.6% and 26.8% for the three months ended March 31, 2021 and 2020, respectively, applied to adjusted income before income taxes.
(9)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 months ended March 31, 2021 and 2020:
 For the three months ended
March 31, 2021
For the three months ended
March 31, 2020
(in thousands, except per share amounts)Net IncomeWeighted Average SharesNet income per share, dilutedNet incomeWeighted Average SharesNet income per share, diluted
Net income attributable to Planet Fitness, Inc.(1)
$5,581 83,707 $0.07 $8,607 79,723 $0.11 
Assumed exchange of shares(2)
609 3,472 1,776 7,778 
Net income6,190 10,383 
Adjustments to arrive at adjusted
   income before income taxes
(3)
6,176 9,258 
Adjusted income before income taxes12,366  19,641 
Adjusted income tax expense(4)
3,289 5,264 
Adjusted net income$9,077 87,179 $0.10 $14,377 87,501 $0.16 
(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 26.8% for the three months ended March 31, 2021 and 2020, 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 months ended March 31, 2021 and 2020:
 Three months ended March 31,
 20212020
Revenue:  
Franchise revenue46.6 %38.4 %
Commission income0.2 %0.3 %
National advertising fund revenue10.4 %7.3 %
Franchise segment57.2 %46.0 %
Corporate-owned stores33.9 %31.8 %
Equipment8.9 %22.2 %
Total revenue100.0 %100.0 %
Operating costs and expenses:
Cost of revenue7.1 %17.2 %
Store operations23.2 %20.6 %
Selling, general and administrative20.1 %13.3 %
National advertising fund expense11.4 %12.0 %
Depreciation and amortization13.8 %10.1 %
Other (gain) loss(1.9)%— %
Total operating costs and expenses73.7 %73.2 %
Income from operations26.3 %26.8 %
Other income (expense), net:
Interest income0.2 %1.5 %
Interest expense(18.1)%(15.9)%
Other income (expense)0.1 %(0.5)%
Total other expense, net(17.8)%(14.9)%
Income before income taxes8.5 %11.9 %
Provision for income taxes3.0 %3.8 %
Net income5.5 %8.1 %
Less net income attributable to non-controlling interests0.5 %1.4 %
Net income attributable to Planet Fitness, Inc.5.0 %6.7 %

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The following table sets forth a comparison of our condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020:
 Three months ended March 31,
 20212020
(in thousands)  
Revenue:  
Franchise revenue$52,180 $48,910 
Commission income272 390 
National advertising fund revenue11,609 9,229 
Franchise segment64,061 58,529 
Corporate-owned stores37,877 40,516 
Equipment9,939 28,186 
Total revenue111,877 127,231 
Operating costs and expenses:
Cost of revenue7,985 21,846 
Store operations25,907 26,157 
Selling, general and administrative22,490 16,953 
National advertising fund expense12,753 15,205 
Depreciation and amortization15,474 12,792 
Other (gain) loss(2,138)11 
Total operating costs and expenses82,471 92,964 
Income from operations29,406 34,267 
Other income (expense), net:
Interest income217 1,927 
Interest expense(20,244)(20,240)
Other income (expense)165 (687)
Total other expense, net(19,862)(19,000)
Income before income taxes9,544 15,267 
Provision for income taxes3,354 4,884 
Net income6,190 10,383 
Less net income attributable to non-controlling interests609 1,776 
Net income attributable to Planet Fitness, Inc.$5,581 $8,607 
Comparison of the three months ended March 31, 2021 and three months ended March 31, 2020
Revenue
Total revenues were $111.9 million in the three months ended March 31, 2021, compared to $127.2 million in the three months ended March 31, 2020, a decrease of $15.4 million, or 12.1%.
Franchise segment revenue was $64.1 million in the three months ended March 31, 2021, compared to $58.5 million in the three months ended March 31, 2020, an increase of $5.5 million, or 9.5%.
Franchise revenue was $52.2 million in the three months ended March 31, 2021 compared to $48.9 million in the three months ended March 31, 2020, an increase of $3.3 million or 6.7%. Included in franchise revenue is royalty revenue of $46.6 million, franchise and other fees of $4.8 million, and placement revenue of $0.8 million for the three months ended March 31, 2021, compared to royalty revenue of $40.6 million, franchise and other fees of $6.2 million, and placement revenue of $2.0 million for the three months ended March 31, 2020. The $6.0 million increase in franchise royalty revenue was the result of $8.1 million of lower royalty revenue collections in the three months ended March 31, 2021 primarily due to lower membership levels as a result of COVID-19, offset by a deferral of $14.1 million of royalty revenue in the three months ended March 31, 2020 that was collected but not recognized because of temporary store closures as a result of COVID-19. The increase in royalty revenue was partially offset by lower placement revenue and franchise and other fees in the three months ended March 31, 2021 as compared to the prior year period.
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Commission income, which is included in our franchise segment, was $0.3 million in the three months ended March 31, 2021 compared to $0.4 million in the three months ended March 31, 2020.
National advertising fund revenue was $11.6 million in the three months ended March 31, 2021, compared to $9.2 million in the three months ended March 31, 2020. The $2.4 million increase in national advertising fund revenue was the result of $2.2 million of lower national advertising fund revenue collections in the three months ended March 31, 2021 primarily due to lower membership levels as a result of COVID-19, offset by a deferral of $4.6 million of national advertising fund revenue in the three months ended March 31, 2020 that was collected but not recognized as a result of temporary store closures as a result of COVID-19.
Revenue from our corporate-owned stores segment was $37.9 million in the three months ended March 31, 2021, compared to $40.5 million in the three months ended March 31, 2020, a decrease of $2.6 million, or 6.5%. The decrease was primarily due to reduced membership levels and temporary store closures related to COVID-19, partially offset by the opening of five new corporate-owned stores since January 1, 2020 and $5.9 million of deferred revenue that was collected but not recognized in the three months ended March 31, 2020 as a result of COVID-19 store closures.
Equipment segment revenue was $9.9 million in the three months ended March 31, 2021, compared to $28.2 million in the three months ended March 31, 2020, a decrease of $18.2 million, or 64.7%. The decrease was driven by lower equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of providing all franchisees with a 12-month extension for all new store development obligations and an 18-month extension on re-equipment investment obligations, both as a result of COVID-19.
Cost of revenue
Cost of revenue was $8.0 million in the three months ended March 31, 2021 compared to $21.8 million in the three months ended March 31, 2020, a decrease of $13.9 million, or 63.4%. Cost of revenue, which primarily relates to our equipment segment, decreased as a result of lower equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of providing all franchisees with a 12-month extension for all new store development obligations and an 18-month extension on re-equipment obligations, both as a result of COVID-19.
Store operations
Store operation expenses, which relate to our corporate-owned stores segment, were $25.9 million in the three months ended March 31, 2021 compared to $26.2 million in the three months ended March 31, 2020, a decrease of $0.3 million, or 1.0%. The decrease was primarily attributable to lower operating and payroll expenses as a result of COVID-19 related closures, partially offset by higher expenses as a result of the opening of five new corporate-owned stores since January 1, 2020.
Selling, general and administrative
Selling, general and administrative expenses were $22.5 million in the three months ended March 31, 2021 compared to $17.0 million in the three months ended March 31, 2020, an increase of $5.5 million, or 32.7%. The $5.5 million increase was primarily driven by higher incentive and stock-based compensation, local marketing support for our California re-openings, and expenses associated with our mobile app during the three months ended March 31, 2021 compared to the prior year quarter.
National advertising fund expense
National advertising fund expense was $12.8 million in the three months ended March 31, 2021 compared to $15.2 million in the three months ended March 31, 2020, due to lower advertising and marketing expenses as a result of lower membership levels due to the COVID-19 pandemic.
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 $15.5 million in the three months ended March 31, 2021 compared to $12.8 million in the three months ended March 31, 2020, an increase of $2.7 million, or 21.0%. The increase was primarily attributable to the opening of corporate-owned stores since January 1, 2020 and depreciation of new information systems assets.
Other (gain) loss
Other (gain) loss was a gain of $2.1 in the three months ended March 31, 2021 compared to zero in the three months ended March 31, 2020. In the three months ended March 31, 2021, this includes a gain of $2.2 million from a probable insurance recovery related to the settlement of legal claims.
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Interest income
Interest income was $0.2 million in the three months ended March 31, 2021, compared to $1.9 million in the three months ended March 31, 2020, primarily as a result of lower interest rates in the three months ended March 31, 2021 compared to the three months ended March 31, 2020.
Interest expense
Interest expense primarily consists of interest on long-term debt as well as the amortization of deferred financing costs.  
Interest expense was $20.2 million in both the three months ended March 31, 2021 and March 31, 2020.
Other income (expense)
Other income was $0.2 million in the three months ended March 31, 2021 compared to expense of $0.7 million in the three months ended March 31, 2020.
Provision for income taxes
Provision for income taxes was $3.4 million in the three months ended March 31, 2021, compared to $4.9 million in the three months ended March 31, 2020, a decrease of $1.5 million. The decrease in the provision for income taxes was primarily attributable to lower income before taxes in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.
Segment results
Franchise
Segment EBITDA for the franchise segment was $41.2 million in the three months ended March 31, 2021 compared to $36.7 million in the three months ended March 31, 2020, an increase of $4.4 million, or 12.1%. The franchise segment EBITDA increase in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020 was primarily due to a $6.0 million increase in franchise royalty revenue as the result of $8.1 million of lower royalty revenue collections in the three months ended March 31, 2021 primarily due to lower membership levels as a result of COVID-19, offset by a deferral of $14.1 million of royalty revenue in the three months ended March 31, 2020 that was collected but not recognized because of temporary store closures as a result of COVID-19. The increase in royalty revenue was partially offset by lower placement revenue and franchise and other fees in the three months ended March 31, 2021 as compared to the prior year period. Depreciation and amortization was $1.9 million in both the three months ended March 31, 2021 and the three months ended March 31, 2020.
Corporate-owned stores
Segment EBITDA for the corporate-owned stores segment was $10.7 million in the three months ended March 31, 2021 compared to $12.0 million in the three months ended March 31, 2020, a decrease of $1.3 million, or 11.0%. The corporate-owned store segment EBITDA decrease was primarily a result of reduced membership levels and temporary store closures related to COVID-19, partially offset by the opening of five new corporate-owned stores since January 1, 2020 and $5.9 million of referred revenue that was collected but not recognized in the three months ended March 31, 2020 as a result of COVID-19 store closures. Depreciation and amortization was $9.3 million and $7.3 million for the three months ended March 31, 2021 and 2020, respectively. The increase in depreciation and amortization was primarily attributable to the stores opened since January 1, 2020.
Equipment
Segment EBITDA for the equipment segment was $1.8 million in the three months ended March 31, 2021 compared to $6.4 million in the three months ended March 31, 2020, a decrease of $4.5 million, or 71.3%. The decrease was driven by lower equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily as a result of providing all franchisees with a 12-month extension for all new store development obligations and an 18-month extension on re-equipment obligations, both as a result of COVID-19. Depreciation and amortization was $1.3 million for both the three months ended March 31, 2021 and 2020.
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Liquidity and capital resources
As of March 31, 2021, we had $445.6 million of cash and cash equivalents.
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, we believe that with the available cash balance, the cash generated from our operations, and amounts we have drawn under our Variable Funding Notes 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 continue to experience a reduction in sales and profits as a result of the COVID-19 pandemic. 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 that our business will generate sufficient cash flows from operations or otherwise to enable us to service our indebtedness, including our Securitized Senior Notes, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance our indebtedness will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control, including potential future impacts related to the COVID-19 pandemic.
The following table presents summary cash flow information for the three months ended March 31, 2021 and 2020:
 
 Three months ended March 31,
(in thousands)
20212020
Net cash (used in) provided by:  
Operating activities$23,523 $73,122 
Investing activities(31,359)(8,975)
Financing activities(4,084)69,418 
Effect of foreign exchange rates on cash53 (1,640)
Net (decrease) increase in cash$(11,867)$131,925 
Operating activities
For the three months ended March 31, 2021, net cash provided by operating activities was $23.5 million compared to $73.1 million in the three months ended March 31, 2020, a decrease of $49.6 million. Of the decrease, $3.2 million is due to lower net income after adjustments to reconcile net income to net cash provided by operating activities in the three months ended March 31, 2021 as compared to the three months ended March 31, 2020, and $46.4 million is due to unfavorable changes in working capital primarily from accounts receivable and equipment deposits due to lower equipment sales as a result of COVID-19 new store development and re-equipment extensions, accounts payable and accrued expenses due to timing of payments in the prior year as a result of COVID-19 shutdowns, and deferred revenue as a result of deferrals as of March 31, 2020 in connection with COVID-19 store closures.
Investing activities
Cash flow used in investing activities related to the following capital expenditures for the three months ended March 31, 2021 and 2020: 
 Three months ended March 31,
(in thousands)
20212020
New corporate-owned stores and corporate-owned stores not yet opened$921 $2,412 
Existing corporate-owned stores3,006 3,147 
Information systems2,432 3,457 
Corporate and all other— 143 
Total capital expenditures$6,359 $9,159 
 
For the three months ended March 31, 2021, net cash used in investing activities was $31.4 million compared to $9.0 million in the three months ended March 31, 2020, an increase of $22.4 million. The primary driver for the increase in cash used in investing activities was an investment in equity securities of 25.0 million in the three months ended March 31, 2021.
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Financing activities
For the three months ended March 31, 2021, net cash used for financing activities was $4.1 million compared to net cash provided by financing activities of $69.4 million in the three months ended March 31, 2020, a decrease of $73.5 million. The primary driver of the decrease was the Company’s incurrence of $75.0 million of borrowings under its Variable Funding Notes in the three months ended March 31, 2020.
Securitized Financing Facility
On August 1, 2018, the Master Issuer, a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, entered into the 2018 Indenture under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued the 2018 Class A-2-I Notes with an initial principal amount of $575 million and the 2018 Class A-2-II Notes with an initial principal amount of $625 million. In connection with the issuance of the 2018 Notes, the Master Issuer also entered into the Variable Funding Notes that allow for the incurrence of up to $75 million in revolving loans and/or letters of credit, which the Company fully drew down on March 20, 2020. On December 3, 2019 the Master Issuer issued the 2019 Notes with an initial principal amount of $550 million. The 2019 Notes were issued under the Indenture. The Securitized 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 (the “securitization entities”) that act as guarantors of the Securitized Senior Notes and that have pledged substantially all of their assets to secure the Securitized Senior Notes.
Interest and principal payments on the Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the 2018 Notes is in September 2048, but the Anticipated Repayment Dates of the 2018 Class A-2-I Notes and the 2018 Class A-2-II Notes are September 2022 and September 2025 respectively, unless earlier prepaid to the extent permitted under the Indenture. The legal final maturity date of the 2019 Notes is in December 2049, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2019 Notes will be repaid in December 2029. If the Master Issuer has not repaid or refinanced the 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 Notes. 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 extension options. 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 2018 Notes and 2019 Notes, the Company incurred debt issuance costs of $27.1 million and $10.6 million, respectively. The debt issuance costs are being amortized to “Interest expense” through the Anticipated Repayment Dates of the Notes utilizing the effective interest rate method.
The Securitized 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 Securitized 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 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Securitized Senior Notes are in stated ways defective or ineffective, (iv) a cap on non-securitized indebtedness of $50 million (provided that the Company may incur non-securitized indebtedness in excess of such amount, subject to the leverage ratio cap described below, under certain conditions, including if the relevant lenders execute a non-disturbance agreement that acknowledges the bankruptcy-remote status of the Master Issuer and its subsidiaries and of their respective assets), (v) a leverage ratio cap on the Company of 7.0x (calculated without regard for any indebtedness subject to the $50 million cap) and (vi) covenants relating to recordkeeping, access to information and similar matters.
Pursuant to a parent company support agreement, we have agreed to cause our subsidiary to perform each of its obligations (including any indemnity obligations) and duties under the Management Agreement and under the contribution agreements entered into in connection with the securitized financing facility, in each case as and when due. To the extent that our subsidiary has not performed any such obligation or duty within the prescribed time frame after such obligation or duty was required to be
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performed, we have agreed to either (i) perform such obligation or duty or (ii) cause such obligations or duties to be performed on our behalf.
The Securitized 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 Notes on the applicable scheduled Anticipated Repayment Dates. The Securitized 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 Securitized 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 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 Securitized Senior Notes. As of March 31, 2021, the Company had restricted cash held by the Trustee of $42.3 million. 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.
Off-balance sheet arrangements
As of March 31, 2021, our off-balance sheet arrangements consisted of guarantees of lease agreements for certain franchisees up to a maximum period of ten years with earlier expiration dates possible if certain conditions are met. Our maximum total obligation under these lease guarantee agreements is approximately $7.3 million and would only require payment upon default by the primary obligor. The estimated fair value of these guarantees as of March 31, 2021 was not material, and no accrual has been recorded for our potential obligation under these arrangements.
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 incurrence of up to $75.0 million in revolving loans and/or letters of credit under the Variable Funding Notes, which is fully drawn. 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. An increase in the effective interest rate applied to borrowings under the Variable Funding Notes of 100 basis points would result in a $0.8 million increase in pre-tax interest expense on an annualized basis.
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 March 31, 2021, 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 March 31, 2021, 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.
None.
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 March 31, 2021.
 
Issuer Purchases of Equity Securities
PeriodTotal Number of Shares PurchasedAverage 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)
01/01/21 - 01/31/21— $— — $200,000,000
02/01/21 - 02/28/21— — — 200,000,000 
03/01/21 - 03/31/21— — — 200,000,000 
Total— $— — 

(1)On November 5, 2019, our board of directors approved a share repurchase program of $500,000,000. Purchases may be effected through one or more open market transactions, privately negotiated transactions, transactions structured through investment banking institutions, or a combination of the foregoing. On March 18, 2020, the Company announced the suspension of its share repurchase program. The Company may reinstate or terminate the program at any time.

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.
On May 4, 2021 our board of directors approved an Executive Severance & Change in Control Policy (the “Severance & CIC Policy”) pursuant to which each senior executive of the Company in a position designated as senior vice president or above (each, an “Eligible Employee”), including each of our named executive officers, Christopher Rondeau (Chief Executive Officer), Dorvin Lively (President) Thomas Fitzgerald (Chief Financial Officer), Craig Miller (Chief Digital & Information Officer) and Jeremy Tucker (Chief Marketing Officer) (the “Named Executive Officers”), are eligible to participate to the extent they meet the requirements therein. The Severance & CIC Policy will become effective July 1, 2021 and, unless otherwise provided in therein, is intended to supersede any and all prior severance and change in control plans, policies and/or
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practices of the Company, including offer letters or employment contracts that provide for the payment and provision of severance compensation and benefits to the Named Executive Officers. The terms “Cause”, “Good Reason” and “Change in Control” referred to below are defined in the Severance & CIC Policy.
Under the Severance & CIC Policy, an Eligible Employee whose employment is terminated by the Company other than by reason of death or disability or for Cause, or who resigns for Good Reason, in either case other than upon or within 24 months after the consummation of a Change in Control shall be entitled to receive the following severance benefits, subject to certain exceptions:
(a)    (i) for the Chief Executive Officer, an amount equal to 200% of his or her then-current base salary; (ii) for the President, an amount equal to 150% of his or her then-current base salary; and (iii) for all other Eligible Employees, an amount equal to 100% of his or her then-current base salary;
(b)    (i) an amount equal to the prorated portion of the Participant’s target annual cash bonus for the calendar year in which the termination of employment occurs and (ii) if such termination of employment occurs on or after January 1, but before the payment date of the annual cash bonus for the immediately preceding year, 100% of the annual cash bonus he or she would have received had such termination occurred on or after the payment date for the annual cash bonus;
(c)    provided the Participant was eligible for and properly enrolled in a Company sponsored benefit plan, an amount equal to the Company’s monthly portion of the premium for each such enrollment multiplied by 12; and
(d)    an additional 12 months of service credit toward vesting for all unvested time-based equity awards.
An Eligible Employee whose employment is terminated by the Company other than by reason of death or disability or for Cause, or who resigns for Good Reason, in either case upon or within 24 months after the consummation of a Change in Control shall be entitled to receive the following severance benefits, subject to certain exceptions:
(a)    (i) for the Chief Executive Officer, an amount equal to 300% of his or her then-current base salary; (ii) for the President, an amount equal to 200% of his or her then-current base salary; and (iii) for all other Eligible Employees, an amount equal to 150% of his or her then-current base salary;
(b)    an amount equal to 100% of the Participant’s target annual cash bonus for the year in which the Change in Control occurs and (ii) if the termination of employment occurs on or after January 1, but before the payment date of the annual cash bonus for the immediately preceding year, 100% of the annual cash bonus he or she would have received had such termination occurred on or after the payment date for the annual cash bonus;
(c)    provided the Participant was eligible for and properly enrolled in a Company sponsored benefit plan, an amount equal to the Company’s monthly portion of the premium for each such enrollment multiplied by 12; and
(d)    full vesting of all unvested time-based equity awards and vesting of all performance-based equity awards at target.
Receipt and retention of the severance benefits provided under the Severance & CIC Policy are conditioned on the Eligible Employee signing a separation agreement that contains a release of claims in favor of us and our affiliates and on the Eligible Employee’s continued compliance with all non-competition, non-solicitation and confidentiality obligations contained in the Severance & CIC Policy and in any other agreement between us and the Eligible Employee.
Our board of directors, or the compensation committee of our board of directors, may amend or terminate the Severance & CIC Policy in its sole discretion without the consent of participants, except that the Severance & CIC Policy generally may not be amended or terminated for 24 months following a Change in Control.
The foregoing is only a summary of the Severance & CIC Policy and is qualified in its entirety by reference to the full and complete terms of the Severance & CIC Policy, a copy of which is attached to this Periodic Report on Form 10-Q as Exhibit 10.1 and is incorporated herein by reference.


 
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ITEM 6. Exhibits
  Description of Exhibit Incorporated
   Herein by Reference
Exhibit     ExhibitFiled
NumberExhibit Description FormFile No.Filing DateNumberHerewith
10.1X
31.1    X
       
31.2    X
       
32.1    X
       
32.2    X
       
101The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in' Equity (Deficit), and (vi) Notes to Consolidated Financial Statements tagged as blocks of text and including detailed tags    X
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
X

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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: May 7, 2021   /s/ Thomas Fitzgerald
    Thomas Fitzgerald
    Chief Financial Officer
(On behalf of the Registrant and as Principal Financial Officer)

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