Town Sports International Holdings Inc. (TSI), New York, reported a year-over-year revenue decline of 5.9 percent to $100.9 million in the second quarter, according to financials released Thursday.
The company attributed the revenue decrease to club closures in 2015 and the first half of 2016, a decrease in initiation and processing fees, and a decline in personal training products sales volume, TSI said. Total members across TSI clubs decreased 2,000 to 551,000 during the second quarter, which compares to an increase of 20,000 in the second quarter of 2015. The increase in the second quarter 2015 was associated with the roll out of TSI's lower-priced model.
TSI membership revenue year-over-year in the second quarter declined 5.9 percent to $76.9 million, and personal training revenue declined 8.5 percent to $17.7 million.
Despite the revenue decline and the membership decline, TSI's net income grew and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) grew. Net income was $20.7 million in the second quarter compared with a net loss of $31.1 million in the second quarter 2015. Adjusted EBITDA was $9.6 million in the second quarter, marking an increase of 74.8 percent compared to adjusted EBITDA of $5.5 million in the second quarter of 2015.
"We were particularly pleased with our adjusted EBITDA and margin growth of 75 percent and 87 percent respectively, during the quarter," TSI Chairman Patrick Walsh said in a statement. "In less than one year, management has increased adjusted EBITDA margins by 442 basis points. These results are a testament to the hard work and dedication of our current team of more than 7,000 employees supporting our effort to improve the company's operational efficiency. Our primary focus now is to strengthen our membership base and increase revenue."
Total operating expenses for the second quarter declined 31.6 percent to $102.4 million compared to $149.7 million in the second quarter 2015. The decline in operating expenses reflected the results of cost savings initiatives, in particular, overhead and club-level savings as well as savings in general and administrative expenses, TSI said in the release.
Payroll and related expenses declined 17.3 percent to $38.2 million, club operating expenses declined 7.9 percent to $46.8 million, and general and administrative expenses declined 18.6 percent to $6.5 million.
TSI closed two clubs in the second quarter – both New York Sports Clubs – but it did not announce the locations of the closures in the earnings release. The company had 151 clubs as of June 30: 102 New York Sports, 27 Boston Sports Clubs; 12 Washington Sports Clubs (one of which is partly owned), five Philadelphia Sports Clubs and three clubs in Switzerland. TSI owns two BFX Studio locations and had one partly owned club that operated under a different brand name in Washington, DC.
Many publicly traded companies on the New York Stock Exchange and NASDAQ hold conference calls with financial analysts when quarterly earnings are released. However, TSI said in the first quarter that it would not hold conference calls to discuss its quarterly results until further notice. TSI year-over-year first quarter revenue declined 9 percent to $101.3 million.