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TSI Revenue Tops $118 million in Third Quarter

NEW YORK -- Town Sports International Holdings Inc. (TSI) had an 8.7 percent increase in revenue in the third quarter 2007 compared to the third quarter of last year, the company announced on Nov. 1. Third quarter 2007 revenue was $118.9 million compared to $109.4 million in third quarter 2006.

Alex Alimanestianu, chief executive officer of TSI, said in a call with investors and analysts on Nov. 1 that although membership increased 6.9 percent, the company’s mature clubs had experienced slightly lower than expected membership sales in the third quarter. The numbers picked up in October, however. He was unable to explain the sluggish sales and refuted a question that implied the company’s clustering strategy might be causing new clubs to cannibalize members from more mature clubs. He said that the company researches locations to ensure cannibalization does not occur and that membership actually increases at mature clubs that are near newer facilities.

The company expects total revenue for 2007 to be in the range of $473 million to $475 million, representing 9 percent to 10 percent growth over 2006, Alimanestianu says. Net income is expected to be between $12.5 million and $13.3 million for 2007, compared to $4.6 million in 2006.

“We remain excited about the many opportunities ahead of us,” says Alimanestianu, who took over the CEO role on Nov. 1 for Bob Giardina, who departed for personal and health reasons. Alimanestianu indicated that the company will continue with its clustering strategy and will expand into the Hartford, CT, and Providence, RI, markets over the next 12 months.

“Our new clubs are performing very well,” he says. “We also continue to see opportunities in corporate sales, which leverages our clustering model, as well as personal training and the overall ancillary revenue business, which continues to be strong.”

Alimanestianu adds that in the future, the company will benefit from economies of scale, from greater leadership in core markets, and from the maturation of TSI’s accelerated club openings in 2007.

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