Equity-based compensation

2013 Equity Incentive Plan

In 2013, the Company’s Board of Directors adopted the 2013 Equity Incentive Plan (the “2013 Plan”). Under the 2013 Plan, the Company granted awards in the form of Class M Units to certain employees and directors of the Company and its subsidiaries. The Class M Units received distributions (other than tax distributions) only upon a liquidity event, as defined, that exceeded a threshold equivalent to the fair value of the Company, as determined by the Company’s Board of Directors, at the grant date. Eighty percent of the awards vest over five years of continuous employment or service while the other twenty percent only vest in the event of an initial public offering of the Company’s common stock or that of its parent or one of its subsidiaries, subject to the holder of the Class M Units remaining employed or providing services on the date of such initial public offering. All awards include a repurchase option at the election of the Company for the vested portion upon termination of employment or service, and have a ten year contractual term. These awards are accounted for as equity at their fair value as of the grant date. In connection with the IPO and related recapitalization transactions, all of the outstanding Class M Units were converted into Holdings Units and shares of Class B common stock of Planet Fitness, Inc. in accordance with the terms of the awards. The Company’s IPO constituted a qualifying event under the terms of the awards and as a result 4,238,338 Holdings Units and corresponding shares of Class B common stock were issued to the existing Class M Unit holders with a weighted-average grant date fair value of $1.52 per share. The Company recorded $21, $152 and $784 of compensation expense in the years ended December 31, 2018, 2017 and 2016, respectively, related to these awards.

The fair value of each award was estimated on the date of grant using a Monte Carlo simulation model.

During the year ended December 31, 2016, the Company modified the vesting terms of 22,527 outstanding Holdings Units such that those units were fully vested immediately. In connection with the modification, the Company recorded $337 of compensation expense in the year ended December 31, 2016.

A summary of unvested Holdings Unit activity is presented below:



	Holdings Units		Weighted average grant date fair value		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Unvested outstanding at January 1, 2018	270,221		$	1.52
Units granted	—		—
Units forfeited	(8,990	)	$	1.52
Units vested	(247,746	)	$	1.52
Unvested outstanding at December 31, 2018	13,485		$	1.52	0.9	$	723

The amount of total unrecognized compensation cost related to all awards under this plan was $3 as of December 31, 2018, which is expected to be recognized over a weighted-average period of 0.9 years.

2015 Omnibus Incentive Plan

Stock Options

In August 2015, the Company adopted the 2015 Omnibus Incentive Plan (the "2015 Plan") under which the Company may grant options and other equity-based awards to purchase up to 7,896,800 shares to employees, directors and officers. Generally, stock options awarded vest annually, on a tranche by tranche basis, over a period of four years with a maximum contractual term of 10 years.

The fair value of stock option awards granted were determined on the grant date using the Black-Scholes valuation model based on the following assumptions:



	Year ended December 31,
	2018		2017
Expected term (years) (1)	6.25 -6.5		6.25
Expected volatility (2)	29.1% - 29.3%		28.6% - 32.9%
Risk-free interest rate (3)	2.61% - 2.88%		1.86% - 2.10%
Dividend yield (4)	—	%	—	%


(1)	Expected term represents the estimated period of time until an award is exercised and was determined using the simplified method.


(2)	Expected volatility is based on the historical volatility of a selected peer group over a period equivalent to the expected term.


(3)	The risk-free rate is an interpolation of yields on U.S. Treasury securities with maturities equivalent to the expected term.


(4)	Based on an assumed a dividend yield of zero at the time of grant.

A summary of stock option activity for the year ended December 31, 2018:



	Stock Options		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Outstanding at January 1, 2018	918,206		$	19.59
Granted	224,141		$	38.83
Exercised	(67,349	)	$	18.04
Forfeited	(60,793	)	$	25.02
Outstanding at December 31, 2018	1,014,205		$	23.62	8.0	$	30,427
Vested or expected to vest at December 31, 2018	1,014,205		$	23.62	8.0	$	30,427
Exercisable at December 31, 2018	256,970		$	19.04	7.3	$	8,887

The weighted-average grant date fair value of stock options granted during the year ended December 31, 2018 was $13.49. During the years ended December 31, 2018 and 2017, $3,316 and $2,195, respectively, was recorded to selling, general and administrative expense related to these stock options. As of December 31, 2018, total unrecognized compensation expense related to unvested stock options, was $3,228, which is expected to be recognized over a weighted-average period of 2.0 years.

Restricted stock units

During the year ended December 31, 2018, the Company granted 94,177 restricted Class A stock units (“RSUs”) under the 2015 Plan. RSUs granted to members of the Board of Directors vest on the first anniversary of the grant date, provided that the recipient continues to serve on the Board of Directors through the vesting dates. RSUs are also granted to certain employees of the Company and generally vest annually, on a tranche by tranche basis, over a period of four years. RSU awards are valued using the intrinsic value method.



	Restricted stock units		Weighted average fair value		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Unvested outstanding at January 1, 2018	16,218		$	23.26
Granted	94,177		$	39.71
Vested	(24,053	)	$	28.85
Forfeited	(4,546	)	$	36.42
Unvested outstanding at December 31, 2018	81,796		$	39.82	2.1	$	4,386

The weighted-average grant date fair value of RSUs granted during the year ended December 31, 2018 was $39.71. During the years ended December 31, 2018 and 2017, $1,637 and $184, respectively, was recorded to selling, general and administrative expense related to these RSUs. As of December 31, 2018, total unrecognized compensation expense related to unvested RSUs was $2,155, which is expected to be recognized over a weighted-average period of 2.1 years.

Employee stock purchase plan

The 2018 Employee Stock Purchase Plan (the "ESPP"), as adopted by the Board of Directors in March 2018, allows eligible employees to purchase shares of the Company’s Class A common stock at a discount through payroll deductions of up to 10% of their eligible compensation, subject to any plan limitations. The ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s Class A common stock on the first trading day of the offering period or on the last day of the offering period. As of December 31, 2018, a total of 1,000,000 shares of common stock were authorized and available for the issuance of equity awards under the ESPP. The first purchase of Class A common stock under the plan will occur in January, 2019. During the year ended December 31, 2018, $129 was recorded to expense related to the ESPP.