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Planet Fitness, Inc. - Quarter Report: 2022 March (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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 May 1, 2022 there were 84,925,763 shares of the Registrant’s Class A Common Stock, par value $0.0001 per share, outstanding and 6,145,722 shares of the Registrant’s Class B Common Stock, par value $0.0001 per share, outstanding.



PLANET FITNESS, INC.
TABLE OF CONTENTS
  
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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 may in the future 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 prospects.
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.
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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, digital payment options auto-renewal contracts, and consumer protection more generally, 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.
We may be unable to successfully realize the anticipated benefits of the Sunshine Acquisition (as defined herein).
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, 2021 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.
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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, 2022December 31, 2021
Assets  
Current assets:  
Cash and cash equivalents
$471,176 $545,909 
Restricted cash
65,492 58,032 
Accounts receivable, net of allowance for bad debts of $0 and $0 as of March 31, 2022
   and December 31, 2021, respectively
12,886 27,257 
Inventory
1,745 1,155 
Restricted assets – national advertising fund
22,569 — 
Prepaid expenses
18,476 12,869 
Other receivables
19,622 13,519 
Income tax receivables3,669 3,673 
Total current assets615,635 662,414 
Property and equipment, net of accumulated depreciation of $169,432 and $152,296 as of
   March 31, 2022 and December 31, 2021, respectively
332,935 173,687 
Investments, net of allowance for expected credit losses of $15,352 and $17,462
   as of March 31, 2022 and December 31, 2021, respectively
21,083 18,760 
Right-of-use assets, net353,536 190,330 
Intangible assets, net475,419 200,937 
Goodwill696,299 228,569 
Deferred income taxes493,834 539,264 
Other assets, net3,661 2,022 
Total assets$2,992,402 $2,015,983 
Liabilities and stockholders’ deficit
Current liabilities:
Current maturities of long-term debt
$20,750 $17,500 
Borrowings under Variable Funding Notes75,000 — 
Accounts payable
24,147 27,892 
Accrued expenses
63,784 51,714 
Equipment deposits
12,966 6,036 
Deferred revenue, current
64,178 28,351 
Payable pursuant to tax benefit arrangements, current
20,302 20,302 
Other current liabilities
44,876 24,815 
Total current liabilities326,003 176,610 
Long-term debt, net of current maturities1,989,533 1,665,273 
Borrowings under Variable Funding Notes— 75,000 
Lease liabilities, net of current portion346,695 197,682 
Deferred revenue, net of current portion32,607 33,428 
Deferred tax liabilities910 — 
Payable pursuant to tax benefit arrangements, net of current portion504,016 507,805 
Other liabilities3,576 3,030 
Total noncurrent liabilities2,877,337 2,482,218 
Commitments and contingencies (Note 13)
Stockholders’ equity (deficit):
Class A common stock, $.0001 par value - 300,000 authorized, 84,907 and 83,804 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
Class B common stock, $.0001 par value - 100,000 authorized, 6,146 and 3,056 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
Accumulated other comprehensive income97 12 
Additional paid in capital
479,535 63,428 
Accumulated deficit
(692,340)(708,804)
Total stockholders’ deficit attributable to Planet Fitness Inc.(212,699)(645,355)
Non-controlling interests
1,761 2,510 
Total stockholders’ deficit(210,938)(642,845)
Total liabilities and stockholders’ deficit$2,992,402 $2,015,983 
 See accompanying notes to condensed consolidated financial statements
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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,
 20222021
Revenue:  
Franchise$65,614 $52,180 
Commission income503 272 
National advertising fund revenue13,967 11,609 
Corporate-owned stores76,157 37,877 
Equipment30,435 9,939 
Total revenue186,676 111,877 
Operating costs and expenses:
Cost of revenue22,361 7,985 
Store operations47,535 25,907 
Selling, general and administrative30,826 22,490 
National advertising fund expense14,547 12,753 
Depreciation and amortization25,683 15,474 
Other (gains) losses, net(2,933)(2,138)
Total operating costs and expenses138,019 82,471 
Income from operations48,657 29,406 
Other expense, net:
Interest income209 217 
Interest expense(22,631)(20,244)
Other income4,090 165 
Total other expense, net(18,332)(19,862)
Income before income taxes30,325 9,544 
Equity earnings (losses) of unconsolidated entities, net of tax(238)— 
Provision for income taxes11,711 3,354 
Net income18,376 6,190 
Less net income attributable to non-controlling interests1,912 609 
Net income attributable to Planet Fitness, Inc.$16,464 $5,581 
Net income per share of Class A common stock:
Basic$0.20 $0.07 
Diluted$0.19 $0.07 
Weighted-average shares of Class A common stock outstanding:
Basic84,166 83,084 
Diluted84,635 83,707 
 
See accompanying notes to condensed consolidated financial statements.
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Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of comprehensive income
(Unaudited)
(Amounts in thousands)
 
 For the three months ended
March 31,
 20222021
Net income including non-controlling interests$18,376 $6,190 
Other comprehensive income, net:
Foreign currency translation adjustments85 11 
Total other comprehensive income, net85 11 
Total comprehensive income including non-controlling interests18,461 6,201 
Less: total comprehensive income attributable to non-controlling interests1,912 609 
Total comprehensive income attributable to Planet Fitness, Inc.$16,549 $5,592 
 
See accompanying notes to condensed consolidated financial statements.
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Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of cash flows
(Unaudited)
(Amounts in thousands)
 For the three months ended March 31,
 20222021
Cash flows from operating activities:  
Net income$18,376 $6,190 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization25,683 15,474 
Amortization of deferred financing costs1,369 1,571 
Amortization of asset retirement obligations17 (21)
Dividends accrued on investment(451)— 
Deferred tax expense10,940 2,737 
Loss on extinguishment of debt1,583 — 
Equity loss of unconsolidated entities, net of tax238 — 
Gain on adjustment of allowance for credit losses on held-to-maturity investment(2,110)— 
Gain on re-measurement of tax benefit arrangement(3,788)(348)
Loss on reacquired franchise rights1,160 — 
Equity-based compensation2,850 1,439 
Other(53)11 
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable14,415 9,428 
Inventory(589)
Other assets and other current assets(5,522)3,708 
Restricted assets - national advertising fund(22,569)(13,721)
Accounts payable and accrued expenses(7,284)(7,677)
Other liabilities and other current liabilities1,035 (3,876)
Income taxes625 295 
Equipment deposits6,869 (621)
Deferred revenue15,306 8,802 
Leases and deferred rent(90)126 
Net cash provided by operating activities58,010 23,523 
Cash flows from investing activities:
Additions to property and equipment(23,872)(6,359)
Acquisition of franchises, net of cash acquired(425,834)— 
Investments— (25,000)
Net cash used in investing activities(449,706)(31,359)
Cash flows from financing activities:
Principal payments on capital lease obligations(52)(53)
Proceeds from issuance of long-term debt900,000 — 
Proceeds from issuance of Variable Funding Notes75,000 — 
Repayment of long-term debt(634,250)(4,375)
Payment of deferred financing and other debt-related costs(16,191)— 
Proceeds from issuance of Class A common stock525 344 
Distributions to Continuing LLC Members(815)— 
Net cash provided by (used in) financing activities324,217 (4,084)
Effects of exchange rate changes on cash and cash equivalents206 53 
Net decrease in cash, cash equivalents and restricted cash(67,273)(11,867)
Cash, cash equivalents and restricted cash, beginning of period603,941 515,800 
Cash, cash equivalents and restricted cash, end of period$536,668 $503,933 
Supplemental cash flow information:
Net cash paid for income taxes$130 $322 
Cash paid for interest$16,874 $18,794 
Non-cash investing activities:
Non-cash additions to property and equipment$4,470 $7,419 
Fair value of common stock issued as consideration for acquisition$393,730 $— 
 See accompanying notes to condensed consolidated financial statements.
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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 income
Additional paid-
in capital
Accumulated
deficit
Non-controlling
interests
Total (deficit)
equity
 SharesAmountSharesAmount
Balance at December 31, 202183,804 $3,056 $$12 $63,428 $(708,804)$2,510 $(642,845)
Net income— — — — — — 16,464 1,912 18,376 
Equity-based compensation expense
— — — — — 2,850 — — 2,850 
Exchanges of Class B common stock
548 — (548)— — (197)— 197 — 
Exercise of stock options, vesting of restricted share units and ESPP share purchase
38 — — — — 374 — — 374 
Issuance of common stock for acquisition517 — 3,638 — — 395,545 — (1,815)393,730 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock
— — — — — 17,535 — — 17,535 
Non-cash adjustments to VIEs
— — — — — — — (228)(228)
Distributions paid to members of Pla-Fit Holdings
— — — — — — — (815)(815)
Other comprehensive income— — — — 85 — — — 85 
Balance at March 31, 202284,907 $6,146 $$97 $479,535 $(692,340)$1,761 $(210,938)
 
 Class A
common stock
Class B
common stock
Accumulated
other
comprehensive income
Additional paid-
in capital
Accumulated
deficit
Non-controlling
interests
Total (deficit)
equity
 SharesAmountSharesAmount
Balance at December 31, 202082,821 $3,722 $$27 $45,673 $(751,578)$196 $(705,673)
Net income— — — — — — 5,581 609 6,190 
Equity-based compensation expense
— — — — — 1,439 — 1,439 
Exchanges of Class B common stock
359 — (359)— — (415)— 415 — 
Exercise of stock options, vesting of restricted share units and ESPP share purchase
22 — — — — 414 — — 414 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock
— — — — — 1,164 — — 1,164 
Non-cash adjustments to VIEs
— — — — — — — (223)(223)
Other comprehensive income— — — — 11 — — — 11 
Balance at March 31, 202183,202 $3,363 $$38 $48,275 $(745,997)$997 $(696,678)

See accompanying notes to condensed consolidated financial statements.
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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)


(1) Business Organization
Planet Fitness, Inc. (the “Company”), through its subsidiaries, is a franchisor and operator of fitness centers, with more than 16.2 million members and 2,291 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, 2022.
In March 2020, the Company proactively closed all of its stores system wide in response to COVID-19 in order to promote the health and safety of its members, team members and their communities. As of March 31, 2022, there were no store closures related to COVID-19.
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, 2022, Planet Fitness, Inc. held 100.0% of the voting interest and 93.3% 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 6.7% 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, 2022 and 2021 are unaudited. The condensed consolidated balance sheet as of December 31, 2021 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, 2021 (the “Annual Report”) filed with the SEC on March 1, 2021. The Company’s significant interim accounting policies include the proportional recognition of national advertising fund expenses within interim periods. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.
(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
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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)

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, valuation of long-lived and intangible assets acquired in a business combination, 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 7).
(c) Fair Value
ASC 820, Fair Value Measurements and Disclosures, establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The carrying value and estimated fair value of certain assets and liabilities as of March 31, 2022 and December 31, 2021 were as follows:
March 31, 2022December 31, 2021
Carrying value
Estimated fair value(1)
Carrying value
Estimated fair value(1)
Liabilities
Long-term debt(1)
$2,040,750 $1,943,457 $1,700,000 $1,725,021 
Variable Funding Notes(1)
$75,000 $75,000 $75,000 $75,000 
(1) 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) Recent accounting pronouncements
The FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, in October, 2021. The guidance improves the accounting for acquired revenue contracts with customers in a business combination by requiring contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC Topic 606, Revenue from Contracts with Customers, as if the acquirer had originated the contracts. This guidance will be effective for fiscal years beginning after December 15, 2022, including interim periods within that year, with early adoption permitted. The Company early adopted this guidance as of January 1, 2022, for all acquisitions subsequent to the adoption date.

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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)

(3) Investments
Investments - Debt securities
As of March 31, 2022, the Company’s debt security investments consist of redeemable preferred shares that are accounted for as held-to-maturity debt securities. The Company’s investments are measured at amortized cost within Investments in the condensed consolidated balance sheets. The Company reviews its held-to-maturity securities for expected credit losses under ASC Topic 326, Credit Impairment, on an ongoing basis.
During the three months ended March 31, 2022, the Company’s review of the investee’s operations and financial position indicated that an adjustment to its allowance for expected credit losses was necessary. The Company utilized a probability-of-default (“PD”) and loss-given-default (“LGD”) methodology to calculate the allowance for expected credit losses. The Company derived its estimate using historical lifetime loss information for assets with similar risk characteristics, adjusted for management’s expectations. Adjustments for management’s expectations were based on the investees recent financial results, current financial position, and forward-looking financial forecasts. Based upon its analysis, the Company recorded a gain on the adjustment of its allowance for credit losses of $2,110 within other (gains) losses, net on the consolidated statements of operations.
The amortized cost, including accrued dividends, of the Company’s held-to-maturity debt security investments was $26,852 and $26,401 and the allowance for expected credit losses was $15,352 and $17,462, as of March 31, 2022 and December 31, 2021, respectively. During the three months ended March 31, 2022, the Company recognized dividend income of $451 within other income on the consolidated statements of operations.
As of March 31, 2022, all of the Company’s held-to-maturity investments had a contractual maturity in 2026.
A roll forward of the Company’s allowance for expected credit losses on held-to-maturity investments is as follows:
Three months ended March 31, 2022
Beginning allowance for expected credit losses$17,462 
Gain on adjustment in allowance for expected credit losses(2,110)
Write-offs, net of recoveries— 
Ending allowance for expected credit losses$15,352 
Equity method investments
On April 9, 2021, the Company acquired a 21% ownership in Planet Fitness Australia Holdings, the Company’s franchisee and store operator in Australia, which is deemed to be a related party, for $10,000, which is accounted for under the equity method. For the three months ended March 31, 2022, the Company’s proportionate share of the earnings in accordance with the equity method was a loss of $238, recorded within equity earnings of unconsolidated entities on the condensed consolidated statement of operations. The adjusted carrying value of the equity method investment was $9,582 and $9,820 as of March 31, 2022 and December 31, 2021, 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)

(4) Acquisition
Sunshine Fitness Acquisition
On February 10, 2022, the Company and Pla-Fit Holdings (together with the Company, the “Buyers”), acquired 100% of the equity interests (“Sunshine Acquisition”) of Sunshine Fitness Growth Holdings, LLC, a Delaware limited liability company and Planet Fitness franchisee (“Sunshine Fitness”). The Company acquired 114 stores in Alabama, Florida, Georgia, North Carolina, and South Carolina from Sunshine Fitness. The preliminary purchase price of the acquisition was approximately $825,670 consisting of approximately $431,939 in cash consideration and approximately $393,730 of equity consideration, including 517,348 shares of Class A Common Stock, par value $0.0001, of the Company and 3,637,678 membership units of Pla-Fit Holdings, LLC, together with shares of Class B Common Stock, par value $0.0001, of the Company, valued based on the closing trading price of the Company’s Class A common stock on the acquisition date. As a result of the transaction, the Company incurred a loss on unfavorable reacquired franchise rights of $1,160, which has been reflected in other (gains) losses, net in the condensed consolidated statement of operations. The loss reduced the net purchase price to $824,509. In connection with the acquisition, the Company recorded a gain of $2,059 related to the settlement of preexisting contracts with Sunshine Fitness within other (gains) losses, net on the condensed consolidated statement of operations. The acquired stores are included in the corporate-owned stores segment.
The preliminary allocation of the estimated purchase consideration was allocated as follows:
Amount
Cash and cash equivalents$6,105 
Other current assets4,930 
Property and equipment152,548 
Right of use assets165,847 
Other long term assets1,613 
Intangible assets283,000 
Goodwill467,730 
Deferred income taxes, net(52,942)
Deferred revenue(19,638)
Other current liabilities(15,134)
Lease liabilities(168,783)
Other long term liabilities(767)
$824,509 
The fair values assigned to tangible and intangible assets acquired and liabilities assumed are preliminary based on management’s estimates and assumptions, which include Level 3 unobservable inputs, and are determined using generally accepted valuation techniques. These estimates may be subject to change as additional information is received and certain tax matters are finalized. The excess of purchase consideration over the fair value of other assets acquired and liabilities assumed was recorded as goodwill. The resulting goodwill is primarily attributable to increased expansion for market opportunities, the expansion of store membership and synergies from the integration of the stores into the broader corporate-owned store portfolio. Approximately $163,000 of the preliminary goodwill recorded is expected to be amortizable and deductible for tax purposes, the majority of which is deductible over 15 years.
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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 for the components of identifiable intangible assets acquired in the Sunshine Acquisition and their preliminary estimated useful lives as of the date of the acquisition:
Fair valueUseful life
Reacquired franchise rights (1)
256,340 11.9
Customer relationships (2)
25,220 8.0
Reacquired area development rights (3)
1,440 5.0
Total intangible assets subject to amortization283,000 
(1) Reacquired franchise rights represent the fair value of the reacquired franchise agreements using the income approach, specifically, the multi-period excess earnings method.
(2) Customer relationships represent the fair value of the existing contractual customer relationships using the income approach, specifically, the multi-period excess earnings method.
(3) Reacquired area development rights represent the fair value of the undeveloped area development agreement rights using the cost approach.
The fair value of the identified intangible assets subject to amortization will be amortized over the assets’ preliminary estimated useful lives based on the pattern in which the economic benefits are expected to be received.
The primary areas that remain preliminary relate to the fair values of certain tangible and intangible assets acquired, income and non-income-based taxes and residual goodwill. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date.

Revenues and income before taxes of Sunshine Fitness included in the Company’s consolidated statement of operations from the acquisition date of February 10, 2022 to March 31, 2022 are as follows:
Total revenues$28,696 
Income before taxes$7,329 

The following pro forma financial information summarizes the combined results of operations for the Company and Sunshine Fitness, as though the companies were combined as of the beginning of 2021. The pro forma financial information was as follows:
For the three months ended March 31,
20222021
Total revenues$207,126 $148,661 
Income before taxes$15,414 $9,638 
Net income$7,163 $6,260 
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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)

(5) Goodwill and Intangible Assets
A summary of goodwill and intangible assets at March 31, 2022 and December 31, 2021 is as follows: 
March 31, 2022Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships$199,253 $(141,429)$57,824 
Reacquired franchise rights295,938 (24,943)270,995 
 495,191 (166,372)328,819 
Indefinite-lived intangible:
Trade and brand names146,600 — 146,600 
Total intangible assets$641,791 $(166,372)$475,419 
Goodwill$696,299 $— $696,299 
 
December 31, 2021Gross
carrying
amount
Accumulated
amortization
Net carrying
Amount
Customer relationships$174,033 $(137,699)$36,334 
Reacquired franchise rights38,158 (20,155)18,003 
 212,191 (157,854)54,337 
Indefinite-lived intangible:
Trade and brand names146,600 — 146,600 
Total intangible assets$358,791 $(157,854)$200,937 
Goodwill$228,569 $— $228,569 
A roll forward of goodwill between December 31, 2021 and March 31, 2022 is as follows:
FranchiseCorporate-owned storesEquipmentTotal
As of December 31, 2021
$16,938 $118,965 $92,666 $228,569 
Acquisition of franchisee-owned stores— 467,730 — 467,730 
As of March 31, 2022
$16,938 $586,695 $92,666 $696,299 
The Company determined that no impairment charges were required during any periods presented.
Amortization expense related to the intangible assets totaled $8,528 and $4,159 for the three months ended March 31, 2022 and 2021, respectively. The anticipated annual amortization expense related to intangible assets to be recognized in future years as of March 31, 2022 is as follows:
 Amount
Remainder of 2022$31,992 
202350,924 
202449,791 
202538,484 
202633,660 
Thereafter123,968 
Total$328,819 
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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)

(6) Long-Term Debt
Long-term debt as of March 31, 2022 and December 31, 2021 consists of the following: 
 March 31, 2022December 31, 2021
2018-1 Class A-2-I notes$— $556,312 
2018-1 Class A-2-II notes603,125 604,688 
2019-1 Class A-2 notes537,625 539,000 
2022-1 Class A-2-I notes425,000 — 
2022-1 Class A-2-II notes475,000 — 
Borrowings under Variable Funding Notes75,000 75,000 
Total debt, excluding deferred financing costs2,115,750 1,775,000 
Deferred financing costs, net of accumulated amortization(30,467)(17,227)
Total debt2,085,283 1,757,773 
Current portion of long-term debt20,750 17,500 
Current portion of borrowings under Variable Funding Notes75,000 — 
Long-term debt and borrowings under Variable Funding Notes, net of current portion$1,989,533 $1,740,273 
Future annual principal payments of long-term debt as of March 31, 2022 are as follows: 
 Amount
Remainder of 2022$15,563 
202320,750 
202420,750 
2025600,438 
2026494,312 
Thereafter963,937 
Total$2,115,750 
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 “2018 Variable Funding Notes”). The Company fully drew down on the Variable Funding Notes on March 20, 2020. On December 3, 2019 the Master Issuer issued Series 2019-1 3.858% Fixed Rate Senior Secured Notes, Class A-2 (the “2019 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 “2019 Indenture”). On February 10, 2022, the Company completed a prepayment in full of its 2018-1 Class A-2-I Notes and an issuance of Series 2022-1 3.251% Fixed Rate Senior Secured Notes, Class A-2-I with an initial principal amount of $425,000 and Series 2022-1 4.008% Fixed Rate Senior Secured Notes, Class A-2-II with an initial principal amount of $475,000 (the “2022 Notes” and, together with the 2018 Notes and 2019 Notes, the “Notes”), and also entered into a new revolving financing facility that allows for the issuance of up to $75,000 in Variable Funding Notes (“2022 Variable Funding Notes”) and certain letters of credit (the issuance of such notes, the “Series 2022-I Issuance”). The 2022 Notes were issued under the 2018 Indenture and a related supplemental indenture dated February 10, 2022 (together, with the 2019 Indenture, the “Indenture”). Together, the Notes, 2018 Variable Funding Notes and 2022 Variable Funding Notes will be referred to as the “Securitized Senior Notes”. On February 10, 2022, the Company borrowed the full amount of the $75,000 2022 Variable Funding Notes and used such proceeds to repay the outstanding principal amount (together with all accrued and unpaid interest thereon) of the 2018 Variable Funding Notes in full.
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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 Notes were issued in securitization transactions 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 Class A-2-II 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-II Notes will be repaid in or prior to 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 or prior to December 2029. The legal final maturity date of the 2022 Notes is in February 2052, but it is anticipated that, unless earlier prepaid to the extent permitted under the Indenture, the 2022 Class A-2-I Notes will be repaid in or prior to December 2026 and the 2022 Class A-2-II Notes will be repaid in or prior to December 2031 (together, the “Anticipated Repayment 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 2022 Variable Funding Notes on February 10, 2022. The 2022 Variable Funding Notes accrue interest at a variable interest rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the secured overnight financing rate (or “SOFR”) 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 2022 Variable Funding Notes. As of March 31, 2022, the applicable borrowing rate is 2.45%. There is a commitment fee on the unused portion of the 2022 Variable Funding Notes of 0.5% based on utilization. It is anticipated that the principal and interest on the 2022 Variable Funding Notes will be repaid in full in or prior to December 2026, subject to two additional one-year extension options. Following the anticipated repayment date (and any extensions thereof) additional interest will accrue on the 2022 Variable Funding Notes equal to 5.0% per year.

In connection with the issuance of the 2018 Notes, 2019 Notes, and 2022 Notes the Company incurred debt issuance costs of $27,133, $10,577, and $16,191 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. As a result of the repayment of the 2018 Class A-2-I Notes prior to the Anticipated Repayment Date, the Company recorded a loss on early extinguishment of debt of $1,583 within interest expense on the Consolidated statements of operations, consisting of the write-off of remaining unamortized deferred financing costs related to the issuance of the 2018 Class A-2-I Notes.
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
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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)

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, 2022, the Company had restricted cash held by the Trustee of $49,484. 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.
(7) Leases
LeasesClassificationMarch 31, 2022December 31, 2021
Assets
Operating lease ROU assetsRight of use asset, net$353,536 $190,330 
Finance lease assetsProperty and equipment, net of accumulated depreciation411 222 
Total lease assets$353,947 $190,552 
Liabilities
Current:
OperatingOther current liabilities$42,151 $22,523 
Noncurrent:
OperatingLease liabilities, net of current portion346,695 197,682 
FinancingOther liabilities419 230 
Total lease liabilities$389,265 $220,435 
Weighted-average remaining lease term (years) - operating leases8.58.7
Weighted-average discount rate - operating leases4.5 %5.0 %

During the three months ended March 31, 2022 and 2021, the components of lease cost were as follows:
Three months ended March 31,
20222021
Operating lease cost$11,595 $6,693 
Variable lease cost4,614 2,374 
Total lease cost$16,209 $9,067 

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

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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)

Supplemental disclosures of cash flow information related to leases were as follows:
Three months ended March 31,
20222021
Cash paid for lease liabilities$10,536 $6,577 
Operating lease ROU assets obtained in exchange for operating lease liabilities, excluding the Sunshine Acquisition5,997 4,627 
Preliminary Sunshine Acquisition operating lease ROU assets obtained in exchange for operating lease liabilities165,847 — 

As of March 31, 2022, maturities of lease liabilities were as follows:
Amount
Remainder of 2022$43,353 
202359,507 
202460,002 
202558,872 
202654,358 
Thereafter195,899 
Total lease payments$471,991 
Less: imputed interest82,726 
Present value of lease liabilities$389,265 

As of March 31, 2022, operating lease payments exclude approximately $13,205 of legally binding minimum lease payments for leases signed but not yet commenced.
(8) 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 national advertising fund (“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, 2021 and March 31, 2022:
Contract liabilities
Balance at December 31, 2021$61,779 
Revenue recognized that was included in the contract liability at the beginning of the year(14,535)
Other gain on settlement of preexisting contracts in connection with the Sunshine Acquisition(2,059)
Deferred revenue acquired in the Sunshine Acquisition19,638 
Increase, excluding amounts recognized or acquired in the Sunshine Acquisition during the period31,962 
Balance at March 31, 2022$96,785 
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, 2022. 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.
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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)

Contract liabilities to be recognized in:Amount
Remainder of 2022$60,610 
20238,010 
20243,789 
20253,395 
20262,995 
Thereafter17,986 
Total$96,785 
Equipment deposits received in advance of delivery as of March 31, 2022 and December 31, 2021 were $12,966 and $6,036, respectively, and are expected to be recognized as revenue in the next twelve months.
(9) Related Party Transactions
Activity with entities considered to be related parties is summarized below: 
 For the three months ended
March 31,
 20222021
Franchise revenue$264 $761 
Equipment revenue11 — 
Total revenue from related parties$275 $761 
Additionally, the Company had deferred franchise agreement and area development agreement revenue from related parties of $153 and $164 as of March 31, 2022 and December 31, 2021, respectively.
The Company had payables to related parties pursuant to tax benefit arrangements of $83,989 and $84,595, as of March 31, 2022 and December 31, 2021, respectively (see Note 12).
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 $684 and $499 for the three months ended March 31, 2022 and 2021, respectively.
For the three months ended March 31, 2022 and 2021, the Company incurred approximately $106 and $0, respectively, for corporate travel to a third-party company which is affiliated with our Chief Executive Officer, which is included within selling, general and administrative expense on the consolidated statements of operations.
In April 2021, the Company made an equity method investment in a franchisee. See Note 3.
(10) 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, 2022, in connection with the Sunshine Acquisition, the Company issued 517,348 shares of Class A Common Stock and 3,637,678 membership units of Pla-Fit Holdings, LLC, together with shares of Class B Common Stock. See Note 4.
During the three months ended March 31, 2022, certain existing holders of Holdings Units exercised their exchange rights and exchanged 548,175 Holdings Units for 548,175 newly-issued shares of Class A common stock. Simultaneously, and in connection with these exchanges, 548,175 shares of Class B common stock were surrendered by the holders of Holdings Units
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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)

that exercised their exchange rights and canceled. Additionally, in connection with these exchanges, Planet Fitness, Inc. received 548,175 Holdings Units, increasing its total ownership interest in Pla-Fit Holdings.
As a result of the above transactions, as of March 31, 2022:
Holders of our Class A common stock owned 84,906,980 shares of our Class A common stock, representing 93.3% of the voting power in the Company and, through the Company, 84,906,980 Holdings Units representing 93.3% of the economic interest in Pla-Fit Holdings; and
the Continuing LLC Owners collectively owned 6,145,722 Holdings Units, representing 6.7% of the economic interest in Pla-Fit Holdings, and 6,145,722 shares of our Class B common stock, representing 6.7% of the voting power in the Company.
Preferred stock
The Company had 50,000,000 shares of preferred stock authorized and none issued or outstanding as of March 31, 2022 and December 31, 2021.
(11) Earnings Per Share
Basic earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Planet Fitness, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.
Shares of the Company’s Class B common stock do not share in the earnings or losses attributable to Planet Fitness, Inc. and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has not been presented. Shares of the Company’s Class B common stock are, however, considered potentially dilutive shares of Class A common stock because shares of Class B common stock, together with the related Holdings Units, are exchangeable into shares of Class A common stock on a one-for-one basis.
The following table sets forth reconciliations used to compute basic and diluted earnings per share of Class A common stock:  
 Three months ended
March 31,
 20222021
Numerator  
Net income$18,376 $6,190 
Less: net income attributable to non-controlling interests1,912 609 
Net income attributable to Planet Fitness, Inc.$16,464 $5,581 
Denominator
Weighted-average shares of Class A common stock outstanding - basic84,166,027 83,084,096 
Effect of dilutive securities:
Stock options386,486 563,928 
Restricted stock units82,670 59,190 
Weighted-average shares of Class A common stock outstanding - diluted84,635,183 83,707,214 
Earnings per share of Class A common stock - basic$0.20 $0.07 
Earnings per share of Class A common stock - diluted$0.19 $0.07 
Weighted average shares of Class B common stock of 5,016,837 and 3,471,842 for the three months ended March 31, 2022 and 2021, 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 198,203 and 44,258 for the three months ended March 31, 2022 and 2021, 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 43,969 and 0 for the three months ended March 31, 2022 and 2021,
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Notes to Condensed Consolidated financial statements
(Unaudited)
(Amounts in thousands, except share and per share amounts)

respectively, were evaluated under the treasury stock method for potential dilutive effects and were determined to be anti-dilutive.
(12) 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 38.6% and 35.1% for the three months ended March 31, 2022 and 2021, respectively. The effective tax rate for the three months ended March 31, 2022 differed from the U.S. federal statutory rate of 21% primarily due to the remeasurement of deferred taxes as a result of a change in the deferred state rate, partially offset by income attributable to non-controlling interests. The Company was also subject to taxes in foreign jurisdictions.
Net deferred tax assets of $492,924 and $539,264 as of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, the total liability related to uncertain tax positions was $420. The Company recognizes accrued interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense. Interest and penalties for the three months ended March 31, 2022 and 2021 were not material.
Tax benefit arrangements
The Company’s acquisition of Holdings Units in connection with the IPO and future and certain past exchanges of Holdings Units for shares of the Company’s Class A common stock (or cash at the option of the Company) are expected to produce and have produced favorable tax attributes. In connection with the IPO, the Company entered into two tax receivable agreements. Under the first of those agreements, the Company generally is required to pay to certain existing and previous equity owners of Pla-Fit Holdings (the “TRA Holders”) 85% of the applicable tax savings, if any, in U.S. federal and state income tax that the Company is deemed to realize as a result of certain tax attributes of their Holdings Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the exchanges of their Holdings Units for shares of Class A common stock and (ii) tax benefits attributable to payments made under the tax receivable agreement (including imputed interest). Under the second tax receivable agreement, the Company generally is required to pay to TSG AIV II-A L.P and TSG PF Co-Investors A L.P. (the “Direct TSG Investors”) 85% of the amount of tax savings, if any, that the Company is deemed to realize as a result of the tax attributes of the Holdings Units held in respect of the Direct TSG Investors’ interest in the Company, which resulted from the Direct TSG Investors’ purchase of interests in Pla-Fit Holdings in 2012, and certain other tax benefits. Under both agreements, the Company generally retains the benefit of the remaining 15% of the applicable tax savings.
As of March 31, 2022 and December 31, 2021, the Company had a liability of $524,318 and $528,107, respectively, related to its projected obligations under the tax benefit arrangements. During the three months ended March 31, 2022, the Company reduced its tax benefit arrangement liability and recognized a gain of $3,788 on the remeasurement of our tax benefit arrangements due to changes in our deferred state rate. Projected future payments under the tax benefit arrangements are as follows:
 Amount
Remainder of 2022$20,302 
202334,406 
202445,028 
202554,967 
202655,299 
Thereafter314,316 
Total$524,318 
During the three months ended March 31, 2022, 548,175 Holdings Units were exchanged 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. As a result of the change in Planet
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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)

Fitness, Inc.’s ownership percentage of Pla-Fit Holdings, we recorded an increase to our net deferred tax assets of $1,365 during the three months ended March 31, 2022. As a result of these exchanges, during the three months ended March 31, 2022, we also recognized deferred tax assets in the amount of $16,170 as a result of the increase in tax basis. These exchanges were not made by TRA holders and did not result in an increase in the tax benefit arrangement liability. The offset to the entries recorded in connection with exchanges was to additional paid in capital within stockholders’ deficit.
(13) 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, 2022, the Company has estimated its obligation related to this matter to be approximately $2,225, 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 $2,225 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.
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, 2022 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.
(14) 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 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, 2022 and 2021. 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.
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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,
 20222021
Revenue  
Franchise segment revenue - U.S.$78,434 $63,344 
Franchise segment revenue - International1,650 717 
Franchise segment total80,084 64,061 
Corporate-owned stores - U.S.75,401 37,800 
Corporate-owned stores - International756 77 
Corporate-owned stores total76,157 37,877 
Equipment segment - U.S.29,790 9,939 
Equipment segment - International645 — 
Equipment segment total30,435 9,939 
Total revenue$186,676 $111,877 
Franchise segment revenue includes franchise revenue, NAF revenue, and commission income.
Franchise revenue includes revenue generated from placement services of $2,339 and $779 for the three months ended March 31, 2022 and 2021, respectively.
 Three months ended
March 31,
 20222021
Segment EBITDA  
Franchise$60,106 $41,180 
Corporate-owned stores23,364 10,691 
Equipment8,653 1,830 
Corporate and other(13,931)(8,656)
Total Segment EBITDA$78,192 $45,045 
 
The following table reconciles total Segment EBITDA to income before taxes:
 Three months ended
March 31,
 20222021
Total Segment EBITDA$78,192 $45,045 
Less:
Depreciation and amortization25,683 15,474 
Other income4,090 165 
Equity earnings (losses) of unconsolidated entities, net of tax(238)— 
Income from operations48,657 29,406 
Interest income209 217 
Interest expense(22,631)(20,244)
Other income4,090 165 
Income before income taxes$30,325 $9,544 
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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 summarizes the Company’s assets by reportable segment: 
 March 31, 2022December 31, 2021
Franchise$199,525 $172,822 
Corporate-owned stores1,617,591 516,714 
Equipment182,701 193,983 
Unallocated992,585 1,132,464 
Total consolidated assets$2,992,402 $2,015,983 
The table above includes $1,170 and $1,203 of long-lived assets located in the Company’s international corporate-owned stores as of March 31, 2022 and December 31, 2021, respectively. All other assets are located in the U.S.
The following table summarizes the Company’s goodwill by reportable segment: 
 March 31, 2022December 31, 2021
Franchise$16,938 $16,938 
Corporate-owned stores586,695 118,965 
Equipment92,666 92,666 
Consolidated goodwill$696,299 $228,569 

(15) 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, 2022 and 2021:
 For the three months ended
March 31,
 20222021
Franchisee-owned stores:  
Stores operated at beginning of period2,142 2,021 
New stores opened34 22 
Stores debranded, sold or consolidated(1)
(114)— 
Stores operated at end of period2,062 2,043 
Corporate-owned stores:
Stores operated at beginning of period112 103 
New stores opened— 
Stores acquired from franchisees114 — 
Stores operated at end of period229 103 
Total stores:
Stores operated at beginning of period2,254 2,124 
New stores opened37 22 
Stores acquired, debranded, sold or consolidated(1)
— — 
Stores operated at end of period2,291 2,146 
 (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.)

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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)

(16) Subsequent events
On May 9, 2022, the Company repaid in full its $75,000 of borrowings under the 2022 Variable Funding Notes using cash on hand.
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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 in the United States. 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, 2022, we had more than 16.2 million members and 2,291 stores in all 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia. Of our 2,291 stores, 2,062 are franchised and 229 are corporate-owned, including 114 stores acquired in the Sunshine Acquisition. As of March 31, 2022, we had commitments to open more than 1,000 new stores under existing ADAs.
Our segments
We operate and manage our business in three business segments: Franchise, Corporate-owned stores and Equipment. Our Franchise segment includes operations related to our franchising business in the United States, Puerto Rico, Canada, 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 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, 2022 and March 31, 2021. “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)20222021
Revenue  
Franchise segment$80,084 $64,061 
Corporate-owned stores segment76,157 37,877 
Equipment segment30,435 9,939 
Total revenue$186,676 $111,877 
Segment EBITDA  
Franchise$60,106 $41,180 
Corporate-owned stores23,364 10,691 
Equipment8,653 1,830 
Corporate and other(13,931)(8,656)
Total Segment EBITDA(1)
$78,192 $45,045 

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

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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, 2022     
Income (loss) from operations$58,251 $4,907 $7,392 $(21,893)$48,657 
Depreciation and amortization1,855 18,427 1,261 4,140 25,683 
Other income— 30 — 3,822 3,852 
Segment EBITDA(1)
$60,106 $23,364 $8,653 $(13,931)$78,192 
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 (expense) income— 45 (68)188 165 
Segment EBITDA(1)
$41,180 $10,691 $1,830 $(8,656)$45,045 

(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 (loss), 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.
Number of new store openings
The number of new store openings reflects stores opened during a particular reporting period for both corporate-owned and franchisee-owned stores. Opening new stores is an important part of our growth strategy and we expect the majority of our future new stores will be franchisee-owned. Before we obtain the certificate of occupancy or report any revenue for new corporate-owned stores, we incur pre-opening costs, such as rent expense, labor expense and other operating expenses. Some of our stores open with an initial start-up period of higher than normal marketing and operating expenses, particularly as a percentage of monthly revenue. New stores may not be profitable and their revenue may not follow historical patterns.
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The following table shows the change in our corporate-owned and franchisee-owned store base for the three months ended March 31, 2022 and 2021: 
 Three months ended March 31,
 20222021
Franchisee-owned stores:  
Stores operated at beginning of period2,142 2,021 
New stores opened34 22 
Stores debranded, sold or consolidated(1)
(114)— 
Stores operated at end of period2,062 2,043 
Corporate-owned stores:
Stores operated at beginning of period112 103 
New stores opened— 
Stores acquired from franchisees114 — 
Stores operated at end of period229 103 
Total stores:
Stores operated at beginning of period2,254 2,124 
New stores opened37 22 
Stores acquired, debranded, sold or consolidated(1)
— — 
Stores operated at end of period2,291 2,146 

(1)The term “debrand” refers to a franchisee-owned store whose right to use the Planet Fitness brand and marks has been terminated in accordance with the franchise agreement. We retain the right to prevent debranded stores from continuing to operate as fitness centers. The term “consolidated” refers to the combination of a franchisee’s store with another store located in close proximity with our prior approval. This often coincides with an enlargement, re-equipment and/or refurbishment of the remaining store.
Same store sales
Same store sales refers to year-over-year sales comparisons for the same store sales base of both corporate-owned and franchisee-owned stores. We define the same store sales base to include those stores that have been open and for which monthly membership dues have been billed for longer than 12 months. We measure same store sales based solely upon monthly dues billed to members of our corporate-owned and franchisee-owned stores.
Several factors affect our same store sales in any given period, including the following:
the number of stores that have been in operation for more than 12 months;
the percentage mix 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.
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.
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The following table shows our same store sales for the three months ended March 31, 2022 and 2021:
 Three months ended March 31,
 20222021
Same store sales data  
Same store sales growth:  
Franchisee-owned stores15.8 %(14.7)%
Corporate-owned stores17.0 %(18.2)%
Total stores15.9 %(14.9)%
Number of stores in same store sales base:
Franchisee-owned stores1,828 1,605 
Corporate-owned stores99 83 
Total stores2,032 1,688 

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 $961 million and $765 million, during the three months ended March 31, 2022 and 2021, respectively.

Non-GAAP financial measures
We refer to EBITDA and Adjusted EBITDA as we use these measures to evaluate our operating performance and we believe these measures provide useful information to investors in evaluating our performance. EBITDA and Adjusted EBITDA as presented in this Quarterly Report on Form 10-Q are supplemental measures of our performance that are neither required by, nor presented in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA should not be considered as substitutes for U.S. GAAP metrics such as net income or any other performance measures derived in accordance with U.S. GAAP. Also, in the future we may incur expenses or charges such as those used to calculate Adjusted EBITDA. Our presentation of EBITDA and Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. We have also disclosed Segment EBITDA as an important financial metric utilized by the Company to evaluate performance and allocate resources to segments in accordance with ASC 280, Segment Reporting. As part of such disclosure in “Our Segments” within Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company has provided a reconciliation from income from operations to Total Segment EBITDA, which is equal to the Non-GAAP financial metric EBITDA.
We define EBITDA as net income before interest, taxes, depreciation and amortization. We believe that EBITDA, which eliminates the impact of certain expenses that we do not believe reflect our underlying business performance, provides useful information to investors to assess the performance of our segments as well as the business as a whole. Our board of directors also uses EBITDA as a key metric to assess the performance of management. We define Adjusted EBITDA as net income before interest, taxes, depreciation and amortization, adjusted for the impact of certain additional non-cash and other items that we do not consider in our evaluation of ongoing performance of the Company’s core operations. These items include certain purchase accounting adjustments, stock offering-related costs, and certain other charges and gains. We believe that Adjusted EBITDA is an appropriate measure of operating performance in addition to EBITDA because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.
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A reconciliation of net income to EBITDA and Adjusted EBITDA is set forth below for the three months ended March 31, 2022 and 2021:
 Three months ended March 31,
 20222021
(in thousands)  
Net income$18,376 $6,190 
Interest income(209)(217)
Interest expense(1)
22,631 20,244 
Provision for income taxes11,711 3,354 
Depreciation and amortization25,683 15,474 
EBITDA$78,192 $45,045 
Purchase accounting adjustments-revenue(2)
58 69 
Purchase accounting adjustments-rent(3)
109 117 
Loss on reacquired franchise rights(4)
1,160 — 
Gain on settlement of preexisting contract with acquiree(5)
(2,059)— 
Transaction fees(6)
4,423 — 
Gain on adjustment of allowance for credit losses on held-to-maturity investments(7)
(2,110)— 
Dividend income on held-to-maturity investments(8)
(451)— 
Pre-opening costs(9)
656 365 
Insurance recovery(10)
— (2,175)
Tax benefit arrangement remeasurement(11)
(3,788)(348)
Other(12)
1,153 635 
Adjusted EBITDA$77,343 $43,708 
(1)Includes a $1,583 loss on extinguishment of debt in the three months ended March 31, 2022.
(2)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 area development agreement 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.
(3)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 $45 and $49 in the three months ended March 31, 2022 and 2021, respectively, reflect the difference between the higher rent expense recorded in accordance with U.S. GAAP since the acquisition and the rent expense that would have been recorded had the 2012 Acquisition not occurred. Adjustments of $64 and $68 in the three months ended March 31, 2022 and 2021, 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.
(4)Represents the impact of a non-cash loss recorded in accordance with ASC 805 – Business Combinations related to our acquisition of franchisee-owned stores. The loss recorded under U.S. GAAP represents the difference between the fair value and the contractual terms of the reacquired franchise rights and is included in other (gains) losses, net on our consolidated statement of operations.
(5)Represents a gain on settlement of deferred revenue from existing contracts with acquired franchisee-stores recorded in accordance with ASC 805 – Business Combinations, and is included in other (gains) losses, net on our consolidated statement of operations.
(6)Represents transactions fees and expenses incurred in connection with our acquisition of franchisee-owned stores.
(7)Represents a gain on the adjustment of the allowance for credit losses on the Company’s held-to-maturity investments.
(8)Represents dividend income on held-to-maturity investments.
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(9)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.
(10)Represents an insurance recovery of previously recognized expenses related to the settlement of legal claims.
(11)Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(12)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)20222021
Net income$18,376 $6,190 
Provision for income taxes, as reported11,711 3,354 
Purchase accounting adjustments-revenue(1)
58 69 
Purchase accounting adjustments-rent(2)
109 117 
Loss on reacquired franchise rights(3)
1,160 — 
Gain on settlement of preexisting contract with acquiree(4)
(2,059)— 
Transaction fees(5)
4,423 — 
Loss on extinguishment of debt(6)
1,583 — 
Gain on adjustment of allowance for credit losses on held-to-maturity investments(7)
(2,110)— 
Dividend income on held-to-maturity investments(8)
(451)— 
Pre-opening costs(9)
656 365 
Insurance recovery(10)
— (2,175)
Tax benefit arrangement remeasurement(11)
(3,788)(348)
Other(12)
1,153 635 
Purchase accounting amortization(13)
8,518 4,159 
Adjusted income before income taxes$39,339 $12,366 
Adjusted income tax expense(14)
10,307 3,289 
Adjusted net income$29,032 $9,077 
Adjusted net income per share, diluted$0.32 $0.10 
Adjusted weighted-average shares outstanding(15)
89,652 87,179 
(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 area development agreement 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 $45 and $49 in the three months ended March 31, 2022 and 2021, 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
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$64 and $68 in the three months ended March 31, 2022 and 2021, respectively, are due to the amortization of favorable and unfavorable leases. All of the rent related purchase accounting adjustments are adjustments to rent expense which is included in store operations on our consolidated statements of operations.
(3)Represents the impact of a non-cash loss recorded in accordance with ASC 805 – Business Combinations related to our acquisition of franchisee-owned stores. The loss recorded under U.S. GAAP represents the difference between the fair value and the contractual terms of the reacquired franchise rights and is included in other (gains) losses, net on our consolidated statement of operations.
(4)Represents a gain on settlement of deferred revenue from existing contracts with acquired franchisee-stores recorded in accordance with ASC 805 – Business Combinations, and is included in other (gains) losses, net on our consolidated statement of operations.
(5)Represents transactions fees and expenses incurred in connection with our acquisition of franchisee-owned stores.
(6)Represents a loss on extinguishment of debt in the three months ended March 31, 2022.
(7)Represents a gain on the adjustment of the allowance for credit losses on the Company’s held-to-maturity investments.
(8)Represents dividend income on held-to-maturity investments.
(9)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.
(10)Represents an insurance recovery of previously recognized expenses related to the settlement of legal claims.
(11)Represents gains related to the adjustment of our tax benefit arrangements primarily due to changes in our effective tax rate.
(12)Represents certain other charges and gains that we do not believe reflect our underlying business performance.
(13)Includes $3,096 of amortization of intangible assets, for the three months ended March 31, 2022 and 2021, recorded in connection with the 2012 Acquisition, and $5,415 and $1,063 of amortization of intangible assets for the three months ended March 31, 2022 and 2021, 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.
(14)Represents corporate income taxes at an assumed effective tax rate of 26.2% for the three months ended March 31, 2022 and 26.6% for the three months ended March 31, 2021, applied to adjusted income before income taxes.
(15)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, 2022 and 2021:
 For the three months ended
March 31, 2022
For the three months ended
March 31, 2021
(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)
$16,464 84,635 $0.19 $5,581 83,707 $0.07 
Assumed exchange of shares(2)
1,912 5,017 609 3,472 
Net income18,376 6,190 
Adjustments to arrive at adjusted
   income before income taxes
(3)
20,963 6,176 
Adjusted income before income taxes39,339  12,366 
Adjusted income tax expense(4)
10,307 3,289 
Adjusted net income$29,032 89,652 $0.32 $9,077 87,179 $0.10 
(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 26.2% and 26.6% for the three months ended March 31, 2022 and 2021, 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, 2022 and 2021:
 Three months ended March 31,
 20222021
Revenue:  
Franchise revenue35.1 %46.6 %
Commission income0.3 %0.2 %
National advertising fund revenue7.5 %10.4 %
Franchise segment42.9 %57.2 %
Corporate-owned stores40.8 %33.9 %
Equipment16.3 %8.9 %
Total revenue100.0 %100.0 %
Operating costs and expenses:
Cost of revenue12.0 %7.1 %
Store operations25.5 %23.2 %
Selling, general and administrative16.5 %20.1 %
National advertising fund expense7.8 %11.4 %
Depreciation and amortization13.8 %13.8 %
Other (gains) losses, net(1.6)%(1.9)%
Total operating costs and expenses74.0 %73.7 %
Income from operations26.0 %26.3 %
Other income (expense), net:
Interest income0.1 %0.2 %
Interest expense(12.1)%(18.1)%
Other income2.2 %0.1 %
Total other expense, net(9.8)%(17.8)%
Income before income taxes16.2 %8.5 %
Equity earnings (losses) of unconsolidated entities, net of tax(0.1)%— %
Provision for income taxes6.3 %3.0 %
Net income9.8 %5.5 %
Less net income attributable to non-controlling interests1.0 %0.5 %
Net income attributable to Planet Fitness, Inc.8.8 %5.0 %

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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, 2022 and 2021:
 Three months ended March 31,
 20222021
(in thousands)  
Revenue:  
Franchise revenue$65,614 $52,180 
Commission income503 272 
National advertising fund revenue13,967 11,609 
Franchise segment80,084 64,061 
Corporate-owned stores76,157 37,877 
Equipment30,435 9,939 
Total revenue186,676 111,877 
Operating costs and expenses:
Cost of revenue22,361 7,985 
Store operations47,535 25,907 
Selling, general and administrative30,826 22,490 
National advertising fund expense14,547 12,753 
Depreciation and amortization25,683 15,474 
Other (gains) losses, net(2,933)(2,138)
Total operating costs and expenses138,019 82,471 
Income from operations48,657 29,406 
Other income (expense), net:
Interest income209 217 
Interest expense(22,631)(20,244)
Other income4,090 165 
Total other expense, net(18,332)(19,862)
Income before income taxes30,325 9,544 
Equity earnings (losses) of unconsolidated entities, net of tax(238)— 
Provision for income taxes11,711 3,354 
Net income18,376 6,190 
Less net income attributable to non-controlling interests1,912 609 
Net income attributable to Planet Fitness, Inc.$16,464 $5,581 
Comparison of the three months ended March 31, 2022 and three months ended March 31, 2021
Revenue
Total revenues were $186.7 million in the three months ended March 31, 2022, compared to $111.9 million in the three months ended March 31, 2021, an increase of $74.8 million, or 66.9%.
Franchise segment revenue was $80.1 million in the three months ended March 31, 2022, compared to $64.1 million in the three months ended March 31, 2021, an increase of $16.0 million, or 25.0%.
Franchise revenue was $65.6 million in the three months ended March 31, 2022 compared to $52.2 million in the three months ended March 31, 2021, an increase of $13.4 million or 25.7%. Included in franchise revenue is royalty revenue of $56.5 million, franchise and other fees of $6.8 million, and placement revenue of $2.3 million for the three months ended March 31, 2022, compared to 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. Of the $9.9 million increase in royalty revenue, $5.7 million was attributable to a same store sales increase of 15.8% in franchisee-owned stores, $4.5 million was attributable to new stores opened since January 1, 2021 or stores that were not open for all of the prior year period due to COVID-related temporary closures, and $1.2 million was from higher royalties on annual fees. Partially offsetting the royalty revenue increases was a decrease of approximately $1.6 million as a result of the stores acquired in the Sunshine Acquisition becoming corporate-owned stores. The $2.0 million increase in franchise and other fees was primarily driven by higher online member join fee revenue in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.
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National advertising fund revenue was $14.0 million in the three months ended March 31, 2022, compared to $11.6 million in the three months ended March 31, 2021. The $2.4 million increase in national advertising fund revenue was primarily due to higher same store sales, new stores opened since January 1, 2021 and stores that were not open for all of the prior year period due to COVID-related temporary closures.
Revenue from our corporate-owned stores segment was $76.2 million in the three months ended March 31, 2022, compared to $37.9 million in the three months ended March 31, 2021, an increase of $38.3 million, or 101.1%. Of the increase, $28.7 million was attributable to the acquisition of 114 stores in the Sunshine Acquisition, $5.0 million was from new stores opened since January 1, 2021 and stores that were not open for all of the prior year period due to COVID-related temporary closures, and $4.6 million was from the corporate-owned store same store sales increase of 17.0%.
Equipment segment revenue was $30.4 million in the three months ended March 31, 2022, compared to $9.9 million in the three months ended March 31, 2021, an increase of $20.5 million, or 206.2%. The increase was driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. In the three months ended March 31, 2022, we had equipment sales to 33 new franchisee-owned stores compared to 18 in the prior year period.
Cost of revenue
Cost of revenue was $22.4 million in the three months ended March 31, 2022 compared to $8.0 million in the three months ended March 31, 2021, an increase of $14.4 million, or 180.0%. Cost of revenue, which primarily relates to our equipment segment, increased as a result of higher equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, as described above.
Store operations
Store operation expenses, which relate to our corporate-owned stores segment, were $47.5 million in the three months ended March 31, 2022 compared to $25.9 million in the three months ended March 31, 2021, an increase of $21.6 million, or 83.5%. The increase was primarily attributable to the acquisition of 114 stores in the Sunshine Acquisition, from new stores opened since January 1, 2021 and stores that were not open for all of the prior year period due to COVID related temporary closures.
Selling, general and administrative
Selling, general and administrative expenses were $30.8 million in the three months ended March 31, 2022 compared to $22.5 million in the three months ended March 31, 2021, an increase of $8.3 million, or 37.1%. The $8.3 million increase was primarily driven by $4.4 million of transaction fees incurred in connection with the Sunshine Acquisition, $2.1 million of higher expense from the Sunshine Acquisition, as well as higher payroll and stock-based compensation, and higher travel expense during the three months ended March 31, 2022 compared to the prior year quarter. Partially offsetting these increases was higher spend in the prior year period to support reopening efforts as a result of COVID-19.
National advertising fund expense
National advertising fund expense was $14.5 million in the three months ended March 31, 2022 compared to $12.8 million in the three months ended March 31, 2021, due to higher advertising and marketing expenditures in 2022 as compared to 2021 due to higher national advertising revenue as described above.
Depreciation and amortization
Depreciation and amortization expense consists of the depreciation of property and equipment, including leasehold and building improvements and equipment. Amortization expense consists of amortization related to our intangible assets, including customer relationships and non-compete agreements.
Depreciation and amortization expense was $25.7 million in the three months ended March 31, 2022 compared to $15.5 million in the three months ended March 31, 2021, an increase of $10.2 million, or 66.0%. The increase was primarily attributable to the acquisition of 114 stores in the Sunshine Acquisition.
Other (gains) losses, net
Other (gains) losses, net was a gain of $2.9 in the three months ended March 31, 2022 compared to a gain of $2.1 in the three months ended March 31, 2021. The primary items making up other (gains) losses, net in the three months ended March 31, 2022 were a $2.1 million gain from the reduction in the Company’s allowance for credit losses and a $2.1 million gain from the settlement of preexisting contracts in connection with the Sunshine Acquisition, partially offset by the $1.2 million loss on unfavorable reacquired franchise rights in connection with the Sunshine Acquisition. In the three months ended March 31, 2021, other (gains) losses, net primarily consisted of a $2.2 million gain 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 both the three months ended March 31, 2022 and the three months ended March 31, 2021.
Interest expense
Interest expense primarily consists of interest on long-term debt as well as the amortization of deferred financing costs.  
Interest expense was $22.6 million in the three months ended March 31, 2022 and $20.2 million in the three months ended March 31, 2021. The increase in interest expense is due to $1.6 million of loss on extinguishment of debt from the write-off of remaining deferred financing costs from the Company’s debt refinancing in addition to higher interest expense from the increased principal balance as a result of the debt refinancing completed on February 10, 2022.
Other income
Other income was $4.1 million in the three months ended March 31, 2022 compared to $0.2 million in the three months ended March 31, 2021. The primary driver of other income in the three months ended March 31, 2022 was a gain on the remeasurement of our tax benefit arrangements due to changes in our effective tax rate.
Provision for income taxes
Provision for income taxes was $11.7 million in the three months ended March 31, 2022, compared to $3.4 million in the three months ended March 31, 2021, an increase of $8.4 million. The increase in the provision for income taxes was primarily attributable to higher income before income taxes in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, and a $4.3 million increase to the provision as a result of a remeasurement of our deferred tax assets due to changes in our effective tax rate.
Segment results
Franchise
Segment EBITDA for the franchise segment was $60.1 million in the three months ended March 31, 2022 compared to $41.2 million in the three months ended March 31, 2021, an increase of $18.9 million. The franchise segment EBITDA increase in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was primarily due to the franchise revenue increases described above. Additionally, franchise selling, general and administrative expense was $2.9 million lower than the prior year period as a result of lower franchise selling, general and administrative spend to support our franchisees compared to the prior year. During the three months ended March 31, 2022, the Company also recognized a $2.1 million gain on preexisting contracts as a result of the Sunshine Acquisition, which is included in other (gains) losses, net on the condensed consolidated statement of operations. Partially offsetting these EBITDA increases, NAF expense was $1.8 million higher in the three months ended March 31, 2022. Depreciation and amortization was $1.9 million for both the three months ended March 31, 2022 and 2021.
Corporate-owned stores
Segment EBITDA for the corporate-owned stores segment was $23.4 million in the three months ended March 31, 2022 compared to $10.7 million in the three months ended March 31, 2021, an increase of $12.7 million. The increase was primarily attributable to higher corporate-owned store four-wall EBITDA, partially offset by higher corporate-owned store selling, general and administrative expense, both as a result of the Sunshine Acquisition. Depreciation and amortization was $18.4 million and $9.3 million for the three months ended March 31, 2022 and 2021, respectively. The increase in depreciation and amortization was primarily attributable to the Sunshine Acquisition.
Equipment
Segment EBITDA for the equipment segment was $8.7 million in the three months ended March 31, 2022 compared to $1.8 million in the three months ended March 31, 2021, an increase of $6.8 million. The increase was driven by higher equipment sales to new and existing franchisee-owned stores in the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Depreciation and amortization was $1.3 million for both the three months ended March 31, 2022 and 2021.
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Liquidity and capital resources
As of March 31, 2022, we had $471.2 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 2022 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 experience impacts to 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, 2022 and 2021:
 Three months ended March 31,
(in thousands)
20222021
Net cash provided by (used in):  
Operating activities$58,010 $23,523 
Investing activities(449,706)(31,359)
Financing activities324,217 (4,084)
Effect of foreign exchange rates on cash206 53 
Net decrease in cash$(67,273)$(11,867)
Operating activities
For the three months ended March 31, 2022, net cash provided by operating activities was $58.0 million compared to $23.5 million in the three months ended March 31, 2021, an increase of $34.5 million. Of the increase, $28.8 million is due to higher net income after adjustments to reconcile net income to net cash provided by operating activities in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, and $5.7 million is due to favorable changes in working capital primarily from higher accounts receivable collections, a larger increase in equipment deposits and deferred revenue partially offset by an unfavorable change in other assets and the national advertising fund.
Investing activities
For the three months ended March 31, 2022, net cash used in investing activities was $449.7 million compared to $31.4 million in the three months ended March 31, 2021, an increase of $418.3 million. The primary driver for the increase in cash used in investing activities was $425.8 million of net cash used for the Sunshine Acquisition in the three months ended March 31, 2022, and $17.5 million of higher capital expenditures in the current year period as shown in the table below.
 Three months ended March 31,
(in thousands)
20222021
New corporate-owned stores and corporate-owned stores not yet opened$5,722 $921 
Existing corporate-owned stores14,784 3,006 
Information systems3,366 2,432 
Total capital expenditures$23,872 $6,359 

Financing activities
For the three months ended March 31, 2022, net cash provided by financing activities was $324.2 million compared to net cash used in financing activities of $4.1 million in the three months ended March 31, 2021. The primary drivers of the net cash provided by financing activities in the three months ended March 31, 2022, was $324.6 million of net cash provided from long-term debt, consisting of $975 million of borrowings, $634.3 million of principal payments, and $16.2 million of deferred financing costs incurred.
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Securitized Financing Facility
Planet Fitness Master Issuer LLC (the “Master Issuer”), a limited-purpose, bankruptcy remote, wholly-owned indirect subsidiary of Pla-Fit Holdings, LLC, is the master issuer of outstanding senior secured notes under a securitized financing facility that was entered into in August 2018. In February 2022, the Master Issuer completed a refinancing transaction with respect to this facility under which the Master Issuer issued the Series 2022-1 Class A-2 Notes with initial principal amounts totaling $900 million. The net proceeds from the sale of the Series 2022-1 Class A-2 Notes were used to repay in full the Master Issuer’s outstanding Series 2018-1 Class A-2-I Notes, including the payment of transaction costs. The remaining funds were used for the Sunshine Acquisition and other general corporate purposes.
In connection with the issuance of the Series 2022-1 Class A-2 Notes, the Master Issuer also issued the Series 2022-1 Class A-1 Notes, which allow for the drawing of up to $75 million of Variable Funding Notes, including a letter of credit facility, which was used to repay the 2018-1 Class A-1 Notes, and remains fully drawn as of March 31, 2022.
Except as described above, there were no material changes to the terms of any debt obligations since December 31, 2021. The Company was in compliance with its debt covenants as of March 31, 2022. See Note 6 to the Condensed Consolidated Financial Statements contained in Item 1 herein for further information related to our long-term debt obligations.
Off-balance sheet arrangements
As of March 31, 2022, 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 $6.5 million and would require payment only upon default by the primary obligor. The estimated fair value of these guarantees as of March 31, 2022 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-II Notes and the Series 2022-1 Senior Class A-2 Notes, which are comprised of fixed interest rate notes, and the 2022 Variable Funding Notes, which allow for the incurrence of up to $75.0 million in revolving loans and/or letters of credit under the 2022 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 2022 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, 2022, 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
Given the recent rise in inflation, there have been and may continue to be increases in materials, shipping, equipment and labor costs, which could impact our profitability and that of our franchisees. 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, 2022, 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
On February 10, 2022, the Company completed its acquisition of Sunshine Fitness. The Company is currently in process of integrating Sunshine Fitness’ internal controls over financial reporting. Except for the inclusion of Sunshine Fitness, 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, 2022.
 
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)
01/01/22 - 01/31/22— $— — $200,000,000
02/01/22 - 02/28/22— — — 200,000,000 
03/01/22 - 03/31/22— — — 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 the Sunshine Acquisition, an aggregate of 517,348 shares of Class A common stock, 3,637,678 Holdings Units and 3,637,678 shares of Class B common stock were issued at the closing of the acquisition in accordance with Section 4(a)(2) of the Securities Act.

In connection with our IPO, we and the existing holders of Holdings Units entered into an exchange agreement under which they (or certain permitted transferees) have the right, from time to time and subject to the terms of the exchange agreement, to exchange their Holdings Units, together with a corresponding number of shares of Class B common stock, for shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions. As an existing holder of Holdings Units exchanges Holdings Units for shares of Class A common stock, the number of Holdings Units held by Planet Fitness, Inc. is correspondingly increased, and a corresponding number of shares of Class B common stock are canceled.
 
ITEM 3. Defaults Upon Senior Securities.
None.
 
ITEM 4. Mine Safety Disclosures.
None.
 
ITEM 5. Other Information.
None.

 
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ITEM 6. Exhibits
  Description of Exhibit Incorporated
   Herein by Reference
Exhibit     ExhibitFiled
NumberExhibit Description FormFile No.Filing DateNumberHerewith
2.1*8-K001-3753410-Feb-222.1
4.18-K001-3753410-Feb-224.1
4.2

8-K001-3753410-Feb-224.2
10.18-K001-3753410-Feb-2210.1
10.28-K001-3753410-Feb-2210.2
10.3

8-K001-3753410-Feb-2210.3
8-K001-3753426-Jan-2210.1
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31.1    X
       
31.2    X
       
32.1    X
       
32.2    X
       
101
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 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

*    Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees
to furnish supplementally to the SEC a copy of any omitted exhibits or schedules upon request.
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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 10, 2022   /s/ Thomas Fitzgerald
    Thomas Fitzgerald
    Chief Financial Officer
(On behalf of the Registrant and as Principal Financial Officer)

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