Town Sports International Holdings, Inc. Reports First Quarter 2016 Results
Posted: May 4, 2016 in Chains
Town Sports International
NEW YORK, N.Y. – Town Sports International Holdings, Inc. (NASDAQ: CLUB) reported financial results for its first quarter ended March 31, 2016.
First Quarter Highlights:
- Total member count increased 12,000 to 553,000 during Q1 2016 compared to an increase of 21,000 in Q1 2015 (Q1 2015 member count increase was associated with the roll out of the lower pricing model).
- Membership monthly attrition averaged 3.5% per month in Q1 2016 compared to 3.7% per month in Q1 2015.
- Adjusted EBITDA was $7.9 million in Q1 2016, an increase of 16.0% compared to Q1 2015 (refer to the reconciliation at the end of this earnings release).
- Net loss was $6.9 million, or $0.28 loss per share, for Q1 2016 compared with net loss of $12.8 million, or $0.52 loss per share for Q1 2015. Net loss for Q1 2015 included non-cash fixed asset impairment charges of $1.1 million and a separation accrual related to our former Executive Chairman of $1.3 million. These charges did not have any tax effect due to the impact of the Company’s tax valuation allowance in Q1 2015.
- Between March 30, 2016 and April 27, 2016, TSI Holdings entered into transactions to purchase $71.1 million principal amount of debt outstanding in two transactions under the 2013 Senior Credit Facility for $29.8 million, or 42% of face value. The transaction for $8.7 million of the debt settled on April 21, 2016 and the remaining transaction for $62.4 million of the debt is expected to settle in May 2016. All of the purchased debt has been or will be, upon settlement, transferred to Town Sports International, LLC and cancelled. These transactions will create taxable cancellation of debt income in Q2 2016.
Patrick Walsh, Executive Chairman of TSI, commented: “We continue to strengthen the Company’s balance sheet. Since current management took over, we have engaged in transactions to retire $100.9 million of debt for $40.7 million, or 40% of face value. Management remains focused on restoring Town Sports International to profitability by concentrating on our existing clubs and member base. Through calculated strategic actions we have made progress on this front and reported improved year over year results. We will continue to refine our promotional activity and marketing spend in order to improve our sales productivity.”
Total revenue for Q1 2016 was $101.3 million compared to $111.4 million for Q1 2015. The revenue decrease was primarily due to a decline in membership dues. The effect of new members enrolling at lower monthly dues combined with members cancelling who were paying higher monthly dues was only partially offset by an increase in membership.
Total operating expenses for Q1 2016 was $105.1 million compared to $119.4 million for Q1 2015. The operating expenses decrease primarily reflects the results of our cost savings initiatives, in particular, overhead and club level savings as well as savings in General and administrative expenses.
Total cash as of March 31, 2016 was $87.8 million and total debt was $274.7 million, for net debt of $187.0 million. This was a decrease of 6.1% compared to net debt of $199.2 million as of December 31, 2015. Approximately $30.3 million of the Company’s cash balance was held at the holding company at March 31, 2016. The Company’s purchase of $62.4 million principal amount of debt that is scheduled to settle in May 2016 will use substantially all of the remaining cash at the holding company.
Forward-Looking Statements:
This release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding future financial results and performance, potential sales revenue, potential club closures, results of cost savings initiatives, and other statements that are predictive in nature or depend upon or refer to events or conditions, or that include words such as “outlook”, “believes”, “expects”, “potential”, “continues”, “may”, “will”, “should”, “seeks”, “approximately”, “predicts”, “intends”, “plans”, “estimates”, “anticipates”, “target”, “could” or the negative version of these words or other comparable words. These statements are subject to various risks and uncertainties, many of which are outside the Company’s control, including, among others, the level of market demand for the Company’s services, economic conditions affecting the Company’s business, the success of our pricing strategy, the geographic concentration of the Company’s clubs, competitive pressure, the ability to achieve reductions in operating costs and to continue to integrate acquisitions, outsourcing of certain aspects of our business, environmental matters, the application of Federal and state tax laws and regulations, any security and privacy breaches involving customer data, the levels and terms of the Company’s indebtedness, and other specific factors discussed herein and in other releases and public filings made by the Company (including the Company’s reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission). The Company believes that all forward-looking statements are based on reasonable assumptions when made; however, the Company cautions that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that, accordingly, one should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made, and the Company undertakes no obligation to update these statements in light of subsequent events or developments. Actual results may differ materially from anticipated results or outcomes discussed in any forward-looking statement.
