Town Sports International Holdings, Inc. Reports Third Quarter 2016 Results; Announces New Look and Experience of its Brand
Posted: October 26, 2016 in Chains
Town Sports International
NEW YORK, N.Y. – Town Sports International Holdings, Inc. (“TSI” or the “Company”) (NASDAQ:CLUB) reported financial results for its third quarter ended September 30, 2016.
Third Quarter Results
- Total member count decreased 6,000 to 545,000 during Q3 2016 compared to an increase of 14,000 in Q3 2015 (Q3 2015 member count increase was associated with the roll out of the lower pricing model).
- Membership monthly attrition averaged 4.2% per month in Q3 2016 compared to 4.4% per month in Q3 2015.
- Q3 2016 net loss was $5.5 million, or $0.21 loss per share, compared with Q3 2015 net loss of $22.0 million, or $0.89 loss per share. Net loss for Q3 2016 and Q3 2015 included non-cash fixed asset impairment charges of $742,000 and $12.4 million, respectively. The fixed asset impairment charges did not have any tax effect due to the impact of the Company’s tax valuation allowance in Q3 2016 and Q3 2015.
- Adjusted EBITDA was $11.0 million in Q3 2016, an increase of 68.5% compared to Adjusted EBITDA of $6.6 million in Q3 2015.
Patrick Walsh, Chairman and Chief Executive Officer of TSI, commented: “The turnaround in Town Sports’ operations has led to a material improvement in the Company’s profitability. During the third quarter, Adjusted EBITDA increased 68.5% from the prior year to $11 million. We continue to focus on improving the member experience through club remodels which include new, state of the art equipment, specialized programming and an updated visual aesthetic. In addition, we recently launched new digital tools which include an enhanced and more user-friendly web site and TSI’s first ever mobile member app, which will allow members to personalize their club experience.”
Total revenue for Q3 2016 was $98.5 million compared to $103.8 million for Q3 2015. Revenue decreased approximately $3.8 million at closed club locations and approximately $2.3 million at our clubs operating longer than 24 months. These decreases were partially offset by an $831,000 increase in revenue from clubs opened in the last 24 months.
Total operating expenses for Q3 2016 was $101.2 million compared to $123.5 million for Q3 2015. The 2016 and 2015 period included fixed asset impairment charges of $742,000 and $12.4 million, respectively. Excluding these charges, operating expenses decreased $10.6 million primarily reflecting the results of our cost-savings initiatives and club closures in 2015 and 2016; in particular, overhead and club level savings as well as savings in General and administrative expenses.
Total cash and total debt as of September 30, 2016 was $48.3 million and $202.5 million, respectively, and total cash and total debt as of December 31, 2015 was $76.2 million and $275.4 million, respectively, resulting in a decrease in total debt of 26.5%. The decrease in both total cash and total debt was primarily due to the purchases of long-term debt. In Q2 2016, TSI Holdings purchased a total of $71.1 million principal amount of debt outstanding under the 2013 Senior Credit Facility for $29.8 million, or an average of 42% of face value. The purchased debt was transferred to Town Sports International, LLC and cancelled upon settlement.
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.
NEW YORK, N.Y. – Town Sports International (TSI), operators of New York, Boston, Washington, D.C. and Philadelphia Sports Clubs, announced the launch of a new experience for members both in the gym, with club makeovers and new programming, and online with a new digital site and app that allows members to personalize how they work out.
Since 1973, Town Sports International, Inc. has been the leading innovator and operator within the health and fitness realm with a network of approximately 150 health and fitness clubs. The company has experienced rapid growth since the late 1990s, becoming one of the largest health club chains in the United States with more than 500,000 members, and plans to keep that momentum alive with the help of this exciting rebrand.
Since its inception, TSI has been committed to enhancing its members’ experience, and for the upcoming brand refresh has incorporated consumer feedback into the changes and renovations that the clubs and digital assets will undergo. The company continues to emphasize its position as a true neighborhood gym by maintaining the comradery and community focused efforts it’s known for, while introducing a more customizable and efficient experience with updated digital tools, in-depth research and personal touches that will fit into every member’s life both inside and outside the gym.
“This fall marks a new chapter in the company’s rich history and we’re excited to launch these cutting-edge offerings and programming to our members,” stated Michelle Ryan, Town Sports International’s Chief Marketing Officer. “Our goal is to bring the best out of every body and meet every customer’s fitness needs. The introduction of innovative and personalized experiences will allow us to break our current mold and appeal to a new audience while better servicing our current members.”
A Reimagined Gym Experience
Making sure members have the best experience in the gym, TSI is piloting a reimagined gym experience at select New York and Boston Sports Clubs locations, with the goal of rolling out to the broader network in the next year. This initial group of gyms will undergo renovations that encompass an updated visual aesthetic highlighting and celebrating the company’s new brand identity, as well as the addition of new state-of-the-art equipment.
At the entrance of each club will be a Welcome Zone outfitted with kiosk apps for a more streamlined member registration process, along with new furniture, modern lighting, and an open office concept. There will also be improved fitness rooms for cycling, mind and body and weightlifting, a redesigned fitness evaluation zone, and new branding and signage.
With clubs throughout the five boroughs, as well as in Long Island, Westchester, Connecticut and New Jersey, New York Sports Clubs is truly an accessible neighborhood gym. The new clubs will reflect these local ties with unique touches including large wall maps and community boards where members and employees can share local tips, events and news. There will also be localized touches throughout the gym including custom mottos for each club. Additionally, select clubs will also feature elevated lifestyle elements such as outposts of Pure Green, an organic, pressed juice brand.
For consumers who prefer a boutique gym experience, TSI will introduce FlexSystem, a small group training program in select Manhattan locations with three specialized workouts: Compete, Lift and Spin Fusion. The program will be available to members and non-members for an additional price. Each class is custom designed to combine the best of one-on-one training for a small group environment and will target different goals to burn calories, spark metabolism, build muscle and improve strength and endurance.
The first nine locations to be unveiled will be Broad Street, West 16th, East 36th, Astoria, East 91st, West 94th Street, West 62nd and West 73rd in New York and Wellesley in Boston, with a company-wide roll out to follow.
A Transformed Brand Identity
The brand ethos has undergone an evolution with an updated design aesthetic and cultural identity that conveys a customized experience that fits into every member’s life both inside and outside of the gym and within their communities. With an overarching goal to “bring the best out of every body,” the brand’s new promise is to get to know each member like no other gym in the marketplace today through digital tools and personal touches. TSI is consistently learning and listening to discover what’s most relevant for its members and building on that with customized routines and support that improves every move they make.
The new identity is led with an improved art direction that is accessible yet bold, with updated visuals throughout the clubs and digital platforms. The logo will be refreshed with brighter, warmer colors and friendlier fonts, but will honor the brand’s heritage and equity by preserving the overall essence of the original logo. The new TSI tone of voice is straightforward, familiar, optimistic, and inclusive, making every interaction memorable and meaningful.
New Digital Platforms
A more customizable and efficient experience is being created through updated digital tools, in-depth research and personal touches that will fit into every member’s life. This includes an enhanced, clearer and easier to use website and the company’s first-ever app, both launching in October.
The website will showcase the art direction of the new branding and introduce a best in class user experience (UX), featuring membership sign up, club location search, class schedules and booking, training information, custom profiles for group fitness instructors and trainers, and updated member profiles. Members will be able to customize their group fitness experience based on fitness goals and preferences through a personalized search feature on the website. With the app, members will also have access to gym check-in, class sign-up, class schedules and their own user profile including a workout log.
TSI tapped New York-based independent digital agency, Kettle, to assist in the brand rejuvenation, updated design and digital platforms.
