Town Sports International Holdings, Inc. (“TSI” or the “Company”) (NASDAQ: CLUB), a leading owner and operator of health clubs located primarily in major cities from Washington, DC north through New England, operating under the brand names “New York Sports Clubs,” “Boston Sports Clubs,” “Washington Sports Clubs” and “Philadelphia Sports Clubs,” announced its results for the second quarter ended June 30, 2012.
Second Quarter Overview:
- Membership attrition averaged 3.2% per month in both Q2 2012 and Q2 2011.
- Total member count decreased 4,000 to 529,000 in Q2 2012.
- Revenue increased 3.3% in Q2 2012 compared to Q2 2011.
- Comparable club revenue increased 2.1% in Q2 2012 compared to an increase of 1.5% in Q2 2011.
- Ancillary club revenue increased 6.0% in Q2 2012 compared to Q2 2011.
- Diluted earnings per share were $0.23 in Q2 2012 compared to diluted loss per share of ($0.02) in Q2 2011, which included a ($0.16) per share charge, net of taxes, related to the Company’s refinancing of its debt and a ($0.02) per share discrete income tax charge.
- EBITDA was $26.8 million in Q2 2012, an increase of $2.5 million, or 10.4%, when compared to Adjusted EBITDA of $24.3 million in Q2 2011 (Refer to the reconciliation that follows).
Robert Giardina, Chief Executive Officer of TSI, commented: “We are pleased to have once again driven improvements in our EBITDA and net income in the second quarter. The low attrition rate this quarter reflects the continued strength of our brands and operations. While our second quarter ancillary revenue growth was not as strong as we had anticipated, we continue to see this as a meaningful opportunity for the company and remain confident in our EBITDA and net debt reduction goals for 2012.”
Quarter Ended June 30, 2012 Financial Results:
|Revenue (in thousands):|
|Quarter Ended June 30,|
|Revenue||% Revenue||Revenue||% Revenue||% Variance|
|Personal training revenue||17,625||14.4||%||16,708||14.1||%||5.5||%|
|Other ancillary club revenue||7,549||6.2||%||7,041||6.0||%||7.2||%|
|Ancillary club revenue||25,174||20.6||%||23,749||20.1||%||6.0||%|
|Fees and other revenue||1,437||1.2||%||1,100||0.9||%||30.6||%|
Total revenue for Q2 2012 increased $4.0 million, or 3.3%, compared to Q2 2011. Revenue at clubs operated for over 12 months (“comparable club revenue”) increased 2.1% in Q2 2012 compared to Q2 2011. Memberships in our comparable clubs increased 1.5% with ancillary club revenue, initiation fees and other revenue increasing 2.2%. These increases were partially offset by a 1.6% decrease in the price of our dues and fees.
|Quarter Ended June 30,|
|Expense % of Revenue||
|Payroll and related||37.0||%||38.1||%||0.4||%|
|General and administrative||5.0||%||5.2||%||0.6||%|
|Depreciation and amortization||10.2||%||11.1||%||(5.8)||%|
- Revenue for Q3 2012 is expected to be between $119.0 million and $120.0 million versus $116.1 million for Q3 2011. As percentages of revenue, we expect Q3 2012 payroll and related expenses to be approximately 37.8% and club operating expenses to approximate 37.8%. We expect general and administrative expenses to approximate $6.8 million, depreciation and amortization to approximate $12.5 million and net interest expense to approximate $5.6 million.
- We expect net income for Q3 2012 to be between $2.5 million and $3.0 million, and diluted earnings per share to be in the range of $0.10 per share to $0.13 per share, assuming a 39% effective tax rate and 24.0 million weighted average fully diluted shares outstanding.
- We estimate that EBITDA will approximate $23.0 million in Q3 2012.