TSI Revenue Down in Fourth Quarter, Up in 2012

(Photo by Stuart Goldman)

Even though executives from Town Sports International (TSI), New York, focused their earnings call with analysts today on fourth quarter 2012 and year-end 2012 results, the main topic of discussion was the company's Fitcorp acquisition agreement announced last week. So, too, was the impact of Hurricane Sandy last fall.

TSI entered into an agreement to acquire Fitcorp, Boston, and its five commercial clubs and four managed clubs. In a separate announcement last week, TSI also entered into an agreement to acquire West End Sports Club in New York City. Terms of both agreements were not disclosed.

Total revenue in fourth quarter 2012 was $114.2 million, down $1.6 million (1.4 percent) from revenue in fourth quarter 2011. For full-year 2012, TSI generated close to $479 million, an increase of slightly more than $12 million (2.6 percent) from the $466.9 million TSI generated in 2011.

TSI CEO Bob Giardina said on the call the company hit the $100 million mark in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the first time since 2008.

"We are firmly focused on driving personal training and other ancillary revenues and are very excited about the response to new programs like our signature classes, small group training classes and UXF," Giardina said. "We also plan to expand our club base, and see opportunities for both acquisitions and new locations in 2013."

The Fitcorp and West End Sports Club acquisition agreements are moves in that direction. Two analysts on the call asked Giardina about the Fitcorp deal, and Giardina said he preferred to give more details once the deal is finalized in late March or early April. However, Giardina did say he admired Fitcorp as a competitor of Boston Sports Clubs for a number of years, and he also touted the experience the Fitcorp team will bring to TSI in terms of corporate wellness.

"There's a lot more to that deal than just what we were buying," Giardina said.

When asked about the dues prices of Fitcorp members, Giardina said they were on par with the average dues for members at TSI.

The company had a net loss of $453,000 in fourth quarter 2012 compared to net income of $3.3 million in fourth quarter 2011. Fourth quarter 2012 revenues were negatively impacted by Hurricane Sandy, the company said. At the height of the storm in late October, 131 of TSI's 160 clubs were closed, and 16 clubs remained closed for more than a week. Two clubs still remain closed: New York Sports Club Water Street and New York Sports Club Long Beach, Giardina said on the call.

TSI's total member count decreased by 12,000 to 510,000 in fourth quarter 2012 and decreased by 13,000 for the full-year 2012.

TSI expects revenue for first quarter 2013 to be between $119 million and $120 million compared to $122.9 million for first quarter 2012. Net income for first quarter 2013 is expected to be between $3.5 million and $4 million.

"We're focused on sticking to our strategy relating to the four markets," said Giardina, referring to New York, Boston, Philadelphia and Washington, DC. "We may be slowing down on the business side, but there may be more opportunities on the acquisitions side."

TSI's stock price on the NASDAQ Stock Market closed Tuesday at $10.89. 

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