Town Sports International Holdings, Inc. Reports Fourth Quarter and Full-Year 2016 Results
Posted: February 16, 2017 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 fourth quarter and year-ended December 31, 2016.
Fourth Quarter Results
- Total member count decreased 1,000 to 544,000 during Q4 2016 compared to an increase of 9,000 in Q4 2015.
- Membership monthly attrition averaged 3.5% per month in Q4 2016 compared to 3.4% per month in Q4 2015.
- Q4 2016 net loss was $259,000, or $0.01 loss per share, compared to Q4 2015 net income of $87.0 million, or $3.47 diluted earnings per share. Net income for Q4 2015 included a gain on the previously completed sale of the East 86th Street property of $77.1 million ($73.6 million was non-cash), gain on extinguishment of debt of $17.9 million and gain related to a lease termination of $3.0 million.
- Adjusted EBITDA was $12.3 million in Q4 2016, an increase of 23.7% compared to Adjusted EBITDA of $10.0 million in Q4 2015.
Full Year Results
- Total member count increased 3,000 to 544,000 during 2016 compared to an increase of 64,000 in 2015. (2015 member count increase was associated with the roll out of the lower pricing model).
- Membership monthly attrition averaged 3.7% per month in 2016 compared to 3.9% per month in 2015.
- 2016 net income was $8.0 million, or $0.31 diluted earnings per share, compared to 2015 net income of $21.2 million, or $0.84 diluted earnings per share. Net income for 2016 included a gain on extinguishment of debt of $37.9 million and a non-cash fixed asset impairment charge of $742,000. Net income for 2015 included a gain on the previously completed sale of the East 86th Street property of $77.1 million ($73.6 million was non-cash), gain on extinguishment of debt of $17.9 million, gain related to a lease termination of $3.0 million, non-cash goodwill impairment charge of $31.6 million and non-cash fixed asset impairment charge of $14.6 million.
- Adjusted EBITDA was $40.9 million in 2016, an increase of 41.7% compared to Adjusted EBITDA of $28.8 million in 2015.
Patrick Walsh, Chairman and Chief Executive Officer of TSI, commented: “2016 was an extraordinary year for our Company. I want to thank the 7,500 plus TSI team members that delivered exceptional results this past year. During the fourth quarter, Adjusted EBITDA increased 23.7% from the prior year to $12.3 million. The Company’s profitability continued to improve throughout the year with the fourth quarter’s Adjusted EBITDA margin increasing to 12.8%. The Company’s improvement in profitability is a material achievement given the margin pressure from declining revenues. The annual Chairman’s letter will be released on February 27, 2017 and posted on the Company’s website and will provide further commentary on the business.”
Total revenue for Q4 2016 was $96.1 million compared to $100.8 million for Q4 2015. Revenue decreased approximately $3.2 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 $836,000 increase in revenue from clubs opened in the last 24 months.
Total operating expenses for Q4 2016 was $94.7 million compared to $24.6 million for Q4 2015. Q4 2015 included a gain on the previously completed sale of the East 86th Street property of $77.1 million ($73.6 million was non-cash) and a $3.0 million net gain related to the termination of a lease for a planned club opening that was not yet effective. Excluding these charges, operating expenses decreased $10.1 million primarily reflecting the results of our cost-savings initiatives and club closures; in particular, overhead and club level savings as well as General and administrative expenses.
Total cash and total debt as of December 31, 2016 was $45.6 million and $202.0 million, respectively, and total cash and total debt as of December 31, 2015 was $76.2 million and $275.4 million, respectively. 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 canceled upon settlement.
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.