Fourth Quarter 2007 Highlights
- Total revenue increased 13 percent
- Health management segment revenue grew 33 percent
- Revenue mix shifted to 44 percent health management and 56 percent
fitness management from 38 percent health management and 62 percent fitness
management in Q4 2006
- Secured six health management commitments and generated 24 new health
management requests for proposal (RFPs), compared to four commitments and
15 RFPs in Q4 2006
- Added one fitness management commitment and generated six new fitness
management RFPs, compared to five commitments and nine RFPs in Q4 2006
2007 Full-Year Highlights
- Total revenue increased 10 percent
- Health management segment revenue grew 29 percent
- Made additional strategic investments in infrastructure, technology and
staffing
- Received an annual record of 141 RFPs, surpassing 2006 RFP levels by 74
percent
MINNEAPOLIS, March 5 /PRNewswire-FirstCall/ -- Health Fitness
Corporation (OTC Bulletin Board: HFIT), a leading provider of integrated
employee health and productivity management solutions, today announced
financial results for the fourth quarter and full year ended December 31,
2007.
For the fourth quarter, revenue increased 12.5 percent to $19.2
million, from $17.1 million for the same period in 2006. Gross profit
during the quarter was $5.2 million, compared to $4.6 million during the
year-ago period.
Operating income totaled $0.40 million for the quarter compared to
$0.61 million for the same period in 2006. Net earnings applicable to
common shareholders totaled $0.21 million versus $0.46 million in the
prior-year period. Net earnings per diluted share totaled to $0.01 for the
quarter compared to net earnings per diluted share of $0.02 for the same
period last year.
"The 2007 fourth quarter capped an important transition year for our
company and we are pleased with our progress. We witnessed solid revenue
expansion -- especially in our health management segment -- ongoing
recovery in sequential revenue levels in our fitness management segment,
and significant growth in our new-business pipeline," said Gregg Lehman,
Ph.D., president and chief executive officer. "Health care costs are one of
the largest expenses facing employers today and we are committed to
delivering solutions that help corporate America contain these costs
through a 21st century health benefit design. To that end, we made
additional strategic investments during the quarter in our infrastructure,
our technology platform and our talent, which we believe are vital to
capitalizing on this trend. We carry significant momentum into 2008 and are
poised to expand revenue and margin levels this year and beyond."
Operating expenses as a percent of revenue were 25.1 percent, versus
23.3 percent for the same period last year. This increase is primarily due
to higher salary and other operating expenses related to workforce
additions, which were planned investments the company made to better manage
current and forecasted future business growth.
Fourth Quarter Commitments and RFPs
During the quarter, the company secured six new health management
commitments and one new fitness management commitment compared to four
health management and five fitness management commitments in the fourth
quarter of 2006. Additionally, during the quarter, the company received 24
new RFPs for health management services and six new RFPs for fitness
management services, compared to 15 health management and nine fitness
management RFPs during the fourth quarter of 2006. The potential annualized
revenue that may be realized from Q4 2007 health and fitness management
commitments is $1.3 million and $0.2 million, respectively. This total of
$1.5 million will be offset by a potential annualized revenue loss of $2.1
million from fitness and health management contract cancellations. Of this
potential annualized revenue loss of $2.1 million, $1.8 million represents
fitness management contracts and $0.3 million represents health management
contracts.
2007 Full-Year Results
For the year ended December 31, 2007, revenue increased 10 percent to
$70.0 million, from $63.6 million during 2006. Gross profit increased 11
percent to $19.6 million from $17.6 million in 2006. Gross profit during
2006 includes a $0.3 million benefit related to a refund of workers'
compensation premiums for the 2005 plan year.
Operating income was $1.9 million during 2007, compared to $3.7 million
during 2006, reflecting higher expense levels due to key growth
investments. Net earnings applicable to common shareholders totaled $0.9
million compared with $1.4 million in 2006. Net earnings per diluted share
totaled $0.04 compared to $0.03 for the same period last year.
For 2007, the company received a total of 40 customer commitments. Of
this total, health management commitments totaled 33 and fitness management
commitments totaled seven. In addition, the company received a total of 141
RFPs. Of this total, health management RFPs totaled 107 and fitness
management RFPs totaled 34.
Lehman concluded, "As forecasted, we invested for future growth during
2007. We implemented strategies that we expect will translate into a
stronger platform of health and fitness management offerings going forward.
We believe that the current level of RFP activity, when combined with our
revenue backlog, positions us for growth acceleration in 2008. We believe
we will be increasingly successful at leveraging our base of fitness
management customers for commitments in our health management platform-a
top strategic priority. This sets the stage for 2008, where we will be
focused on leveraging our past investments to grow revenue and expand
margins."
On February 4, 2008, the company announced two strategic hires in line
with its goal to further improve operating efficiencies and bolster the
clinical basis for its health management platform. John Griffin has joined
HealthFitness as chief operations officer. Griffin oversees the company's
operations, information technology and account services functions. Griffin
brings more than 20 years' experience in executive leadership of health
management and health information technology organizations. And Jim
Reynolds, M.D., has joined the company as chief medical officer. Reynolds
oversees all clinical aspects of programs and services, including
establishment of best-practice standards and use of evidence-based
guidelines. He comes to
HealthFitness with an accomplished track record in employer-focused
health management strategy development, program design and implementation.
Balance Sheet
The company ended 2007 with $1.9 million in cash, nearly double the
cash balance at the end of 2006. Working capital at December 31, 2007,
totaled $8.5 million, a $2.7 million gain compared to December 31, 2006. At
the end of 2007, the company carried no long-term debt and stockholders'
equity totaled $26.5 million.
2007 Fourth Quarter Business Segment Information
Revenue and gross profit information by segment is as follows:
Fitness Management
(in thousands)
REVENUE Q4 2007 Q4 2006
Staffing Services $9,903 $9,889
Program and Consulting Services 778 781
Total Fitness Mgt $10,682 $10,670
GROSS PROFIT Q4 2007 Q4 2006
Staffing Services $2,365 $2,187
Program and Consulting Services 277 269
Total Fitness Mgt $2,642 $2,457
During the 2007 fourth quarter, fitness management segment revenue was
relatively flat compared to the same period last year. Within the fitness
management segment, revenue levels for staffing services and program and
consulting services were also relatively unchanged on a year-over-year
basis.
Gross margin for the fitness management segment rose 170 basis points,
to 24.7 percent from 23.0 percent during the prior-year period. This is due
to slight gross margin increases in both staffing services and program and
consulting services resulting from more favorable pricing structures on
recent new-business contracts.
Health Management
(in thousands)
REVENUE Q4 2007 Q4 2006
Staffing Services $4,202 $3,601
Program and Consulting Services 4,352 2,825
Total Health Mgt $8,554 $6,426
GROSS PROFIT Q4 2007 Q4 2006
Staffing Services $1,016 $747
Program and Consulting Services 1,533 1,384
Total Health Mgt $2,549 $2,131
During the 2007 fourth quarter, health management segment revenue grew
33.1 percent compared with the same period in 2006. Of this revenue growth,
staffing services revenue grew 16.7 percent and program and consulting
services revenue grew 54.1 percent compared to the 2006 fourth quarter. The
gain in program and consulting services was primarily driven by an increase
in biometric screening and health coaching services, in addition to eHealth
platform sales and customizations, all of which is attributable to new 2007
contracts.
Gross margin for the health management segment decreased 340 basis
points to 29.8 percent, from 33.2 percent for the prior-year period. This
stems from lower gross margins for program and consulting services, which
were 35.2 percent, versus 49.0 percent last year, offset by a gross margin
increase in staffing services, which was 24.2 percent compared to 20.7
percent last year. Gross margin in program and consulting services was
constrained by a seasonally higher mix of less-profitable services, most
notably flu shots, and the addition during the quarter of full-time
screening and health-coaching personnel tied to future revenue streams.
Conference Call
Health Fitness Corporation will host a conference call today, March 5,
2008, at 2:00 p.m. Pacific (5:00 p.m. Eastern). Participating in the call
will be Gregg Lehman, Ph.D., president and chief executive officer, and Wes
Winnekins, chief financial officer. To listen to the call from the U.S.,
dial 1-877-857-6161; internationally, dial 1-719-325-4804. A replay of the
call will be available until Wednesday, March 19, 2008, 8:00 p.m. EST. To
access the replay from the U.S., dial 1-888-203-1112 and enter passcode
9254603, from outside the U.S., dial 1-719-457-0820 and enter passcode
9254603. The call will also be broadcast live over the Internet and
accessible through the Investor Relations section of the company's Website
at http://www.hfit.com, where the call will be archived for 30 days.
About Health Fitness Corporation
Health Fitness Corporation is a leading provider of integrated employee
health and productivity management solutions to Fortune 500 companies, the
health care industry and individual consumers. Serving clients for more
than 30 years, Health Fitness Corporation partners with employers to
effectively manage their health care and productivity costs by improving
individual health and well-being. Health Fitness Corporation serves more
than 300 clients globally via on-site management and remotely via Web and
telephonic services. Health Fitness Corporation provides a complete
portfolio of health and fitness management solutions including a
proprietary health risk assessment platform, screenings, EMPOWERED(TM)
Health Coaching and delivery of health improvement programs. Health Fitness
Corporation employs more than 3,000 health and fitness professionals in
national and international locations who are committed to the company's
mission of "improving the health and well-being of the people we serve."
For more information on Health Fitness Corporation, visit
http://www.hfit.com.
Forward Looking Statements
Certain statements in this release, including, without limitation,
management's belief that the Company carries significant momentum into 2008
and is poised to expand revenue and margin levels in 2008 and beyond,
management's belief that strategies implemented during 2007 will translate
into a stronger platform of health and fitness management offerings going
forward, management's belief that the current level of RFP activity, when
combined with our revenue backlog, positions us for growth acceleration in
2008, and management's belief that the Company will be increasingly
successful at leveraging its base of fitness management customers for
health management business, are forward-looking statements. In addition,
the estimated annualized revenue value of our new and lost customers is a
forward looking statement, which is based upon an estimate of the
anticipated annualized revenue to be realized or lost. Such information
should be used only as an indication of the activity we have recently
experienced in our two business segments. These estimates, when considered
together, should not be considered an indication of the total net,
incremental revenue growth we expect to generate in 2007 or in any year, as
actual net growth may differ from these estimates due to actual staffing
levels, participation rates and service duration, in addition to other
revenue we may lose in the future due to customer termination. Any
statements that are not based upon historical facts, including the outcome
of events that have not yet occurred and our expectations for future
performance, are forward-looking statements. The words "potential,"
"believe," "estimate," "expect," "intend," "may," "could," "will," "plan,"
"anticipate," and similar words and expressions are intended to identify
forward-looking statements. Such statements are based upon the current
beliefs and expectations of our management. Actual results may vary
materially from those contained in forward-looking statements based on a
number of factors including, without limitation, our inability to deliver
the health management services demanded by major corporations and other
clients, our inability to successfully cross-sell health management
services to our fitness management clients, our inability to successfully
obtain new business opportunities, our failure to have sufficient resources
to make investments, our ability to make investments and implement
strategies successfully, continued delays in obtaining new commitments and
implementing services, and other factors disclosed from time to time in our
filings with the U.S. Securities and Exchange Commission including our Form
10-K for 2006 as filed with the SEC. You should take such factors into
account when making investment decisions and are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the date on which they are made. We undertake no obligation to update any
forward-looking statements.
Financial tables follow ...
HEALTH FITNESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2007 AND 2006 (Unaudited)
Q4 2007 Q4 2006 2007 2006
REVENUE $19,235,793 $17,095,769 $69,958,051 $63,578,540
COSTS OF REVENUE 14,044,969 12,508,307 50,317,174 45,947,956
GROSS PROFIT 5,190,824 4,587,462 19,640,877 17,630,584
OPERATING EXPENSES
Salaries 2,949,641 2,357,232 10,769,048 8,544,885
Other selling,
general and
administrative 1,831,851 1,569,254 6,840,621 5,040,709
Amortization of
trademarks and
other intangible
assets 42,770 55,560 171,081 368,618
Total operating
expenses 4,824,262 3,982,046 17,780,750 13,954,212
OPERATING INCOME 366,562 605,416 1,860,127 3,676,372
OTHER INCOME (EXPENSE)
Interest expense (12,400) (1,681) (35,771) (7,512)
Change in fair
value of warrants - - - 841,215
Other, net (6,771) 2,114 (8,627) 9,646
EARNINGS BEFORE
INCOME TAXES 347,391 605,849 1,815,729 4,519,721
INCOME TAX EXPENSE 139,334 142,300 905,978 1,495,184
NET EARNINGS 208,057 463,549 909,751 3,024,537
Deemed dividend to
preferred
shareholders - - - 1,576,454
Dividend to
preferred
shareholders - - - 96,410
NET EARNINGS APPLICABLE
TO COMMON SHAREHOLDERS $208,057 $463,549 $909,751 $1,351,673
NET EARNINGS PER
COMMON SHARE:
Basic $0.01 $0.02 $0.05 $0.07
Diluted 0.01 0.02 0.04 0.03
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 19,887,125 19,085,789 19,685,980 18,023,298
Diluted 20,828,832 19,823,346 20,657,438 18,772,675
HEALTH FITNESS CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2007 AND 2006 (Unaudited)
2007 2006
ASSETS
CURRENT ASSETS
Cash $1,946,028 $987,465
Trade and other accounts receivable,
less allowances of $243,300 and $283,100 14,686,879 12,404,856
Inventory 569,458 326,065
Prepaid expenses and other 226,891 375,824
Deferred tax assets 406,367 217,476
Total current assets 17,835,623 14,311,686
PROPERTY AND EQUIPMENT, net 1,400,570 767,675
OTHER ASSETS
Goodwill 14,546,250 14,509,469
Software technology, less accumulated
amortization of $795,100 and $370,200 1,734,920 1,658,575
Trademark, less accumulated amortization
of $345,500 and $246,300 147,561 246,809
Other intangible assets, less accumulated
amortization of $241,700 and $166,500 287,334 362,528
Deferred tax assets - 437,010
Other 9,807 24,597
$35,962,065 $32,318,349
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 2,121,154 $1,811,939
Accrued salaries, wages, and payroll
taxes 4,011,580 3,249,424
Accrued acquisition earnout - 1,475,000
Other accrued liabilities 1,187,045 120,044
Accrued self funded insurance 333,724 201,053
Deferred revenue 1,722,254 1,663,121
Total current liabilities 9,375,757 8,520,581
DEFERRED TAX LIABILITY 108,623 -
LONG-TERM OBLIGATIONS - -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 50,000,000
shares authorized; 19,928,590 and
19,220,217 shares issued and outstanding
at December 31, 2007 and 2006 199,285 192,202
Additional paid-in capital 29,350,211 27,565,901
Accumulated comprehensive income from
foreign currency translation (56,413) (35,186)
Accumulated deficit (3,015,398) (3,925,149)
26,477,685 23,797,768
$35,962,065 $32,318,349
SOURCE Health Fitness Corporation
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Related links:
http://www.hfit.com
CONTACT:
Wes Winnekins, CFO of Health Fitness
Corporation, +1-952-897-5275, or David Heinsch of Padilla Speer
Beardsley, +1-612-455-1768, for Health Fitness Corporation
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