Town Sports International Holdings Inc. (TSI), Jupiter, Florida, reported an 8.8 percent increase in first quarter 2019 revenue ($116.6 million), according to financial earnings released on April 25.
The company's operating expenses increased 12.1 percent to $115.3 million during the quarter. Its adjusted EBITDA also decreased from $13.7 million to $11.3 million.
CEO Patrick Walsh addressed the company's financial inconsistencies in his recent chairman's letter, in which he said TSI must establish annual same store revenue growth of at least 2 percent in order to maintain its operating margins.
“The company failed to leverage the growth in revenue due to cost pressures from labor and occupancy costs which resulted in negligible flow-through of 7 percent,” Walsh said of TSI's performance in 2018. “The company continues to face challenges from labor costs due to mandated minimum wage and salary increases in our core markets. These cost pressures are expected to continue through 2021 at a minimum. It is important that our shareholders and investors understand the cost pressures [TSI] faces in the years ahead.”
In the letter, Walsh also sought to ease concerns about TSI's fluctuating stock prices, emphasizing that he is focused on building a great company for the long term. In the last year, TSI’s stock value (NYSE: CLUB) has swung by more $11 per share—$14.75 on July 5, 2018, and $3.49 per share on April 29, 2019.
Walsh also revealed that TSI is developing a Palm Beach Sports Clubs line in South Florida—a continuation of its signature New York Sports Clubs—after acquiring several formerly branded Gold's Gym facilites in the area.
In July 2017, TSI announced it would no longer host conference calls to discuss quarterly results.
TSI ranked No. 7 on Club Industry’s Top 100 Health Clubs of 2018 list, reporting $403 million in 2017 revenue.