TSI Increases Revenue, Loses Members in Third Quarter

Town Sports International (TSI), New York, announced an increase in revenue but a decrease in members during a financial call with analysts today.

TSI increased its total revenue for third quarter 2012 by 3 percent to $119.6 million compared to $116.1 million in the same period last year. The increase included a benefit from an acceleration of in-club advertising revenue, which added approximately $1.2 million to third quarter 2012 revenue. Net income grew to $3.2 million in third quarter 2012 compared to $1.9 million in third quarter 2011.

The total member count decreased 1.3 percent, or 7,000 members, to 522,000 in the third quarter. TSI CEO Bob Giardina told analysts the company missed its sales forecast for September. Giardina said the economy and an uncertain future dependent on the outcome of the upcoming presidential election played a role in a decrease in student memberships and corporate memberships.

“We were disappointed with our net member results, but were pleased to deliver on our earnings and cash flow for the quarter,” Giardina said.

Ancillary club revenue increased 3.2 percent, including a 5.2 percent increase from personal training revenue. That marked the 10th consecutive quarter of personal training revenue growth for the company.

TSI expects its revenue for fourth quarter 2012 to be between $116.5 million and $117.5 million compared to $115.8 million for fourth quarter 2011. Net income for fourth quarter 2012 is expected to be between $3 million and $3.5 million.

Although TSI will end the year without opening a club in 2012, the company expects to add three to six new clubs in 2013 and six to 12 new clubs in 2014. Expansion efforts are focused in the New York and Boston urban areas.

Giardina said growing competition from yoga, Pilates, cycling and CrossFit studios is actually helping TSI, adding many TSI members also belong to one of those studios. TSI is adding four- and eight-session-per-month memberships to new and existing members to drive revenue.

Giardina also praised New York City Mayor Michael Bloomberg on the call for his health and wellness initiatives. Bloomberg has led efforts in New York City to ban smoking in most public areas, force restaurants and vendors to post calorie counts on menus and ban the sale of large-sized sugary drinks.

TSI’s stock price closed at $11.38 today on the NASDAQ stock exchange.

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