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 third quarter ended September 30, 2013.
Third Quarter Overview:
- Total member count decreased 5,000 members, to 507,000 members at the end of Q3 2013 versus a decrease of 7,000 members in Q3 2012.
- Membership attrition averaged 3.7% per month in both Q3 2013 and Q3 2012.
- Revenue decreased 2.1% in Q3 2013 compared to Q3 2012.
- Comparable club revenue decreased 1.7% in Q3 2013 compared to an increase of 1.0% in Q3 2012.
- Ancillary club revenue decreased 4.0% in Q3 2013 compared to Q3 2012.
- Personal training revenue increased 5.0% in Q3 2013 compared to Q3 2012 and represented 14.0% of total revenue in Q3 2013 as compared to 13.1% in Q3 2012.
- Net income decreased 17.8% in Q3 2013 to $2.6 million compared to $3.2 million in Q3 2012. Diluted earnings per share were $0.10 in Q3 2013 compared to diluted earnings per share of $0.13 in Q3 2012. Q3 2013 and Q3 2012 results included the following items:
- Q3 2013 results were favorably impacted by a $0.01 per diluted share net gain comprised of a $694,000 insurance recovery related to our property damage claims primarily in connection with Hurricane Sandy partially offset by a fixed asset impairment charge of $439,000 related to one underperforming club.
- Q3 2012 results included a net loss of $(0.02) per diluted share comprised of $(0.06) per share refinancing related charges, partially offset by a $0.03 per share benefit from additional fees and other revenue realized in connection with a termination of a long-term marketing arrangement with a third party advertiser and a $0.01 per share discrete tax benefit.
- Adjusted EBITDA was $21.7 million in Q3 2013, a decrease of $3.0 million, or 12.2%, when compared to Adjusted EBITDA of $24.7 million in Q3 2012 (Refer to the reconciliation below).
Robert Giardina, Chief Executive Officer of TSI, commented: “Our third quarter bottom-line results were in line with our expectations. We were disappointed we did not meet our revenue expectations for the quarter and we believe the steps we are taking on the pricing and personal training membership fronts will begin to benefit us as we head into 2014. Strategically, we are focused on leveraging the investments we have made in our clubs into pricing power for the core business while adding offerings for current and new members to continue to improve the overall fitness experience. We are excited about the possibility of refinancing our debt at lower borrowing costs while extending our term and expanding on our ability to return value to shareholders.”
Third Quarter Ended September 30, 2013 Financial Results:
|Revenue (in thousands):|
Quarter Ended September 30,
|% Revenue||Revenue||% Revenue||% Variance|
|Personal training revenue||16,402||14.0||%||15,623||13.1||%||5.0||%|
|Other ancillary club revenue||6,350||5.4||%||8,067||6.7||%||(21.3)||%|
|Ancillary club revenue||22,752||19.4||%||23,690||19.8||%||(4.0)||%|
|Fees and other revenue||1,403||1.2||%||2,247||1.9||%||(37.6)||%|
Total revenue for Q3 2013 decreased $2.6 million, or 2.1% compared to Q3 2012, which included a benefit from an acceleration of in-club advertising revenue which added approximately $1.2 million to Q3 2012 revenue. Revenue at clubs operated for over 12 months (“comparable club revenue”) decreased 1.7% in Q3 2013. Memberships at our comparable clubs were down 3.0% which was partially offset by a 1.1% increase in the price of our dues and fees and a 0.2% increase in the combined effect of ancillary club revenue, initiation fees and other revenue.
|Quarter Ended September 30,|
|Expense % of Revenue||Variance|
|Payroll and related||37.1||%||36.5||%||(0.5)||%|
|General and administrative||6.2||%||4.7||%||28.4||%|
|Depreciation and amortization||10.7||%||10.2||%||3.3||%|
|Insurance recovery related to damaged property||(0.6)||%||-||%||N/A||%|
|Impairment of fixed assets||0.4||%||0.2||%||83.7||%|
- Revenue for Q4 2013 is expected to be between $115.0 million and $116.0 million versus $114.2 million for Q4 2012. As percentages of revenue, we expect Q4 2013 payroll and related expenses to be approximately 37.0% and club operating expenses to approximate 39.0%. We expect general and administrative expenses to approximate $7.0 million, depreciation and amortization to approximate $12.5 million and net interest expense to approximate $5.5 million.
- We expect net income for Q4 2013 to be between $2.0 million and $2.5 million, and diluted earnings per share to be in the range of $0.08 per share to $0.10 per share, assuming a 39% effective tax rate and approximately 24.7 million weighted average fully diluted shares outstanding.
- We estimate that EBITDA will approximate $21.5 million in Q4 2013.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts