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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 2, 2022 there were 83,415,699 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
  
2


Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “envision,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “ongoing,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. Examples of forward-looking statements include, among others, statements we make regarding:
future financial position;
business strategy;
budgets, projected costs and plans;
future industry growth;
financing sources;
potential return of capital initiatives;
the impact of litigation, government inquiries and investigations;
the impact of the novel coronavirus disease (“COVID-19”) and actions taken in response; and
all other statements regarding our intent, plans, beliefs or expectations or those of our directors or officers.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, risks and uncertainties associated with the following:
•    Our business and results of operations have been and 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.
3


We and our franchisees could be subject to claims related to health and safety risks to members that arise while at both our corporate-owned and franchise stores.
Our business is subject to various laws and regulations including, among others, those governing indoor tanning, electronic funds transfer, ACH, credit card, debit card, 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.
4

PART I-FINANCIAL INFORMATION
1. Financial Statements
Planet Fitness, Inc. and subsidiaries
Condensed consolidated balance sheets
(Unaudited)
(Amounts in thousands, except per share amounts) 
 September 30, 2022December 31, 2021
Assets  
Current assets:  
Cash and cash equivalents
$404,463 $545,909 
Restricted cash
62,714 58,032 
Accounts receivable, net of allowance for bad debts of $0 and $0 as of September 30, 2022
   and December 31, 2021, respectively
34,475 27,257 
Inventory
4,224 1,155 
Restricted assets – national advertising fund
1,773  
Prepaid expenses
13,922 12,869 
Other receivables
14,015 13,519 
Income tax receivables4,885 3,673 
Total current assets540,471 662,414 
Property and equipment, net of accumulated depreciation of $204,581 and $152,296 as of
   September 30, 2022 and December 31, 2021, respectively
332,840 173,687 
Investments, net of allowance for expected credit losses of $15,890 and $17,462
   as of September 30, 2022 and December 31, 2021, respectively
21,389 18,760 
Right-of-use assets, net348,246 190,330 
Intangible assets, net427,675 200,937 
Goodwill700,207 228,569 
Deferred income taxes471,495 539,264 
Other assets, net3,933 2,022 
Total assets$2,846,256 $2,015,983 
Liabilities and stockholders’ deficit
Current liabilities:
Current maturities of long-term debt
$20,750 $17,500 
Accounts payable
22,218 27,892 
Accrued expenses
54,302 51,714 
Equipment deposits
32,020 6,036 
Deferred revenue, current
56,159 28,351 
Payable pursuant to tax benefit arrangements, current
31,482 20,302 
Other current liabilities
41,208 24,815 
Total current liabilities258,139 176,610 
Long-term debt, net of current maturities1,982,158 1,665,273 
Borrowings under Variable Funding Notes 75,000 
Lease liabilities, net of current portion341,961 197,682 
Deferred revenue, net of current portion32,793 33,428 
Deferred tax liabilities965  
Payable pursuant to tax benefit arrangements, net of current portion474,032 507,805 
Other liabilities4,314 3,030 
Total noncurrent liabilities2,836,223 2,482,218 
Commitments and contingencies (Note 14)
Stockholders’ equity (deficit):
Class A common stock, $.0001 par value - 300,000 authorized, 83,414 and 83,804 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
8 8 
Class B common stock, $.0001 par value - 100,000 authorized, 6,146 and 3,056 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
1 1 
Accumulated other comprehensive income(626)12 
Additional paid in capital
534,365 63,428 
Accumulated deficit
(737,399)(708,804)
Total stockholders’ deficit attributable to Planet Fitness Inc.(203,651)(645,355)
Non-controlling interests
(44,455)2,510 
Total stockholders’ deficit(248,106)(642,845)
Total liabilities and stockholders’ deficit$2,846,256 $2,015,983 
 See accompanying notes to condensed consolidated financial statements
5

Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of operations
(Unaudited)
(Amounts in thousands, except per share amounts)
 
 For the three months ended
September 30,
For the nine months ended
September 30,
 2022202120222021
Revenue:  
Franchise$65,975 $61,481 $199,506 $173,419 
Commission income193 39 737 381 
National advertising fund revenue14,578 13,863 43,130 38,493 
Corporate-owned stores101,330 43,899 278,940 122,355 
Equipment62,310 34,973 133,191 68,735 
Total revenue244,386 154,255 655,504 403,383 
Operating costs and expenses:
Cost of revenue48,531 27,097 103,436 53,579 
Store operations57,892 27,751 161,789 82,088 
Selling, general and administrative27,148 22,969 86,176 67,248 
National advertising fund expense17,009 15,586 50,445 41,868 
Depreciation and amortization32,572 16,248 90,427 46,758 
Other (gains) losses, net(700)57 (2,452)(2,363)
Total operating costs and expenses182,452 109,708 489,821 289,178 
Income from operations61,934 44,547 165,683 114,205 
Other expense, net:
Interest income1,561 233 2,244 645 
Interest expense(21,917)(20,350)(66,527)(60,719)
Other income4,762 677 9,000 695 
Total other expense, net(15,594)(19,440)(55,283)(59,379)
Income before income taxes46,340 25,107 110,400 54,826 
Equity losses of unconsolidated entities, net of tax(2) (334) 
Provision for income taxes15,661 6,475 35,942 14,988 
Net income30,677 18,632 74,124 39,838 
Less net income attributable to non-controlling interests3,764 1,189 8,405 2,804 
Net income attributable to Planet Fitness, Inc.$26,913 $17,443 65,719 $37,034 
Net income per share of Class A common stock:
Basic$0.32 $0.21 $0.78 $0.45 
Diluted$0.32 $0.21 $0.78 $0.44 
Weighted-average shares of Class A common stock outstanding:
Basic84,156 83,274 84,377 83,194 
Diluted84,547 83,879 84,798 83,808 
 
See accompanying notes to condensed consolidated financial statements.
6

Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of comprehensive income
(Unaudited)
(Amounts in thousands)
 
 For the three months ended
September 30,
For the nine months ended
September 30,
 2022202120222021
Net income including non-controlling interests$30,677 $18,632 $74,124 $39,838 
Other comprehensive income, net:
Foreign currency translation adjustments(516)(44)(638)(15)
Total other comprehensive loss, net(516)(44)(638)(15)
Total comprehensive income including non-controlling interests30,161 18,588 73,486 39,823 
Less: total comprehensive income attributable to non-controlling interests3,764 1,189 8,405 2,804 
Total comprehensive income attributable to Planet Fitness, Inc.$26,397 $17,399 $65,081 $37,019 
 
See accompanying notes to condensed consolidated financial statements.
7

Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of cash flows
(Unaudited)
(Amounts in thousands)
 For the nine months ended September 30,
 20222021
Cash flows from operating activities:  
Net income$74,124 $39,838 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization90,427 46,758 
Amortization of deferred financing costs4,129 4,753 
Write-off of deferred financing costs1,583  
Amortization of asset retirement obligations201 55 
Dividends accrued on investment(1,391)(949)
Deferred tax expense35,026 12,774 
Equity losses of unconsolidated entities, net of tax334  
Gain on adjustment of allowance for credit losses on held-to-maturity investment(1,572) 
Gain on re-measurement of tax benefit arrangement(8,381)(348)
Loss on reacquired franchise rights1,160  
Gain on sale of corporate-owned stores(1,324) 
Equity-based compensation6,942 6,267 
Other66 (37)
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable(7,477)5,321 
Inventory(3,071)(3,625)
Other assets and other current assets(567)9,618 
Restricted assets - national advertising fund(1,773)(1,162)
Accounts payable and accrued expenses(22,521)9,413 
Other liabilities and other current liabilities1,728 (3,540)
Income taxes(2,111)452 
Payable pursuant to tax benefit arrangements(14,211) 
Equipment deposits26,049 20,099 
Deferred revenue11,506 3,483 
Leases1,550 320 
Net cash provided by operating activities190,426 149,490 
Cash flows from investing activities:
Additions to property and equipment(65,138)(31,791)
Acquisition of franchises, net of cash acquired(424,940) 
Proceeds from sale of property and equipment60 19 
Proceeds from sale of corporate-owned stores20,820  
Investments (35,000)
Net cash used in investing activities(469,198)(66,772)
Cash flows from financing activities:
Principal payments on capital lease obligations(207)(146)
Proceeds from issuance of long-term debt900,000  
Proceeds from issuance of Variable Funding Notes75,000  
Repayment of long-term debt and Variable Funding Notes(719,625)(13,125)
Payment of deferred financing and other debt-related costs(15,951) 
Proceeds from issuance of Class A common stock779 916 
Repurchase and retirement of Class A common stock(94,314) 
Distributions paid to members of Pla-Fit Holdings(2,945)(670)
Net cash provided by (used in) financing activities142,737 (13,025)
Effects of exchange rate changes on cash and cash equivalents(729)(19)
Net (decrease) increase in cash, cash equivalents and restricted cash(136,764)69,674 
Cash, cash equivalents and restricted cash, beginning of period603,941 515,800 
Cash, cash equivalents and restricted cash, end of period$467,177 $585,474 
Supplemental cash flow information:
Net cash paid for income taxes$3,072 $1,683 
Cash paid for interest$60,535 $56,231 
Non-cash investing activities:
Non-cash additions to property and equipment$11,566 $5,507 
Fair value of common stock issued as consideration for acquisition$393,730 $ 
 See accompanying notes to condensed consolidated financial statements.
8

Planet Fitness, Inc. and subsidiaries
Condensed consolidated statements of changes in equity (deficit)
(Unaudited)
(Amounts in thousands)
 Class A
common stock
Class B
common stock
Accumulated
other
comprehensive income
Additional paid-
in capital
Accumulated
deficit
Non-controlling
interests
Total (deficit)
equity
 SharesAmountSharesAmount
Balance at December 31, 202183,804 $8 3,056 $1 $12 $63,428 $(708,804)$2,510 $(642,845)
Net income— — — — — — 65,719 8,405 74,124 
Equity-based compensation expense
— — — — — 6,942 — — 6,942 
Exchanges of Class B common stock and other adjustments548 — (548)— — 22,534 — (22,534) 
Repurchase and retirement of Class A common stock(1,528)— — — — 6,426 (94,314)(6,426)(94,314)
Exercise of stock options, vesting of restricted share units and ESPP share purchase
73 — — — — 998 — — 998 
Issuance of common stock for acquisition517 — 3,638 — — 416,509 — (22,779)393,730 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock and other adjustments— — — — — 17,528 — — 17,528 
Non-cash adjustments to VIEs
— — — — — — — (686)(686)
Distributions paid to members of Pla-Fit Holdings
— — — — — — — (2,945)(2,945)
Other comprehensive income— — — — (638)— — — (638)
Balance at September 30, 202283,414 $8 6,146 $1 $(626)$534,365 $(737,399)$(44,455)$(248,106)
 
 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 $8 3,722 $1 $27 $45,673 $(751,578)$196 $(705,673)
Net income— — — — — — 37,034 2,804 39,838 
Equity-based compensation expense
— — — — — 6,267 — — 6,267 
Exchanges of Class B common stock
459 — (459)— — (487)— 487  
Exercise of stock options, vesting of restricted share units and ESPP share purchase
62 — — — — 1,025 — — 1,025 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock
— — — — — 1,492 — — 1,492 
Non-cash adjustments to VIEs
— — — — — — — (669)(669)
Distributions paid to members of Pla-Fit Holdings
— — — — — — — (670)(670)
Other comprehensive income— — — — (15)— — — (15)
Balance at September 30, 202183,342 $8 3,263 $1 $12 $53,970 $(714,544)$2,148 $(658,405)







9


 Class A
common stock
Class B
common stock
Accumulated
other
comprehensive
(loss) income
Additional paid-
in capital
Accumulated
deficit
Non-controlling
interests
Total (deficit)
equity
 SharesAmountSharesAmount
Balance at June 30, 202284,230 $8 6,146 $1 $(110)$529,026 $(714,297)$(43,636)$(229,008)
Net income— — — — — — 26,913 3,764 30,677 
Equity-based compensation expense— — — — — 1,341 — — 1,341 
Repurchase and retirement of Class A common stock(831)— — — — 3,432 (50,015)(3,432)(50,015)
Exercise of stock options, vesting of restricted share units and ESPP share purchase15 — — — — 624 — — 624 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock and other adjustments— — — — — (58)— — (58)
Non-cash adjustments to VIEs— — — — — — — (229)(229)
Distributions paid to members of Pla-Fit Holdings— — — — — — — (922)(922)
Other comprehensive loss— — — — (516)— — — (516)
Balance at September 30, 202283,414 $8 6,146 $1 $(626)$534,365 $(737,399)$(44,455)$(248,106)


 Class A
common stock
Class B
common stock
Accumulated
other
comprehensive
(loss) income
Additional paid-
in capital
Accumulated
deficit
Non-controlling
interests
Total (deficit)
equity
 SharesAmountSharesAmount
Balance at June 30, 202183,225 $8 3,363 $1 $56 $50,917 $(731,987)$1,635 $(679,370)
Net income— — — — — — 17,443 1,189 18,632 
Equity-based compensation expense— — — — — 2,218 — — 2,218 
Exchanges of Class B common stock100 — (100)— — (72)— 72  
Exercise of stock options and vesting of restricted share units17 — — — — 579 — — 579 
Tax benefit arrangement liability and deferred taxes arising from exchanges of Class B common stock— — — — — 328 — — 328 
Non-cash adjustments to VIEs— — — — — — — (223)(223)
Distributions paid to members of Pla-Fit Holdings— — — — — — — (525)(525)
Other comprehensive income— — — — (44)— — — (44)
Balance at September 30, 202183,342 $8 3,263 $1 $12 $53,970 $(714,544)$2,148 $(658,405)

See accompanying notes to condensed consolidated financial statements.
10

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 16.6 million members and 2,353 owned and franchised locations (referred to as stores) in 50 states, the District of Columbia, Puerto Rico, Canada, Panama, Mexico and Australia as of September 30, 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 September 30, 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 September 30, 2022, Planet Fitness, Inc. held 100.0% of the voting interest and 93.1% of the economic interest of Pla-Fit Holdings and the holders of Holdings Units of Pla-Fit Holdings (the “Continuing LLC Owners”) held the remaining 6.9% economic interest in Pla-Fit Holdings. During the three months ended September 30, 2022 the Company reallocated amounts between non-controlling interest and additional paid in capital to appropriately reflect its economic interest in Pla-Fit Holdings.

(2) Summary of Significant Accounting Policies
(a) Basis of presentation and consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented have been reflected. All significant intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated financial statements as of and for the three and nine months ended September 30, 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.
11

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

(b) Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant areas where estimates and judgments are relied upon by management in the preparation of the consolidated financial statements include revenue recognition, valuation of equity-based compensation awards, 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, the value of the lease liability and related right-of-use asset recorded in accordance with ASC 842 (see Note 8) and the estimate of current expected credit losses.
(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 liabilities as of September 30, 2022 and December 31, 2021 were as follows:
September 30, 2022December 31, 2021
Carrying value
Estimated fair value(1)
Carrying value
Estimated fair value(1)
Liabilities
Long-term debt(1)
$2,030,375 $1,769,648 $1,700,000 $1,725,021 
Variable Funding Notes(1)