First Quarter 2007 Highlights
- Total revenue increased 13.9% -
- Health management revenue expanded 37.2% -
- Gross profit margin increased approximately 430 basis points to 29.0% -
- Operating Income increased 132.5% -
MINNEAPOLIS, May 7 /PRNewswire-FirstCall/ -- Health Fitness Corporation
(OTC Bulletin Board: HFIT), a leading employee health improvement company,
today announced financial results for the first quarter ended March 31,
2007.
For the quarter ended March 31, 2007, revenue increased 13.9% to $16.6
million, from $14.6 million for the same period last year. Gross profit
during the quarter increased 33.4% to $4.8 million, from $3.6 million for
the same period last year. Operating income increased 132.5% to $0.89
million, from $0.38 million for the same period last year. Net earnings
applicable to common shareholders decreased to $0.51 million, from $0.56
million in the prior year period. Net earnings per diluted share increased
to $0.03, from net earnings per diluted share of $0.01 for the same period
last year. Net earnings per diluted share for the first quarter of 2006
excluded a $0.43 million non-cash gain related to a change in fair value of
warrants.
"We made solid progress during the quarter, as our financial results
met plan, and we strengthened our service capabilities, particularly in our
health management business segment," said Gregg Lehman, Ph.D., President
and Chief Executive Officer of Health Fitness. "While we continue to show
strong revenue growth, we also made a big improvement in our gross margin,
which grew to 29.0% in the quarter, from 24.7% in the same period in 2006.
Driving this growth is our health management segment, where gross margin
grew to 39.6% in the quarter, from 30.4% in the same period in 2006, which
is directly due to revenue growth from our higher margin health coaching
and biometric screening services. We also strengthened our health
management capabilities during the quarter by doubling our telephonic
health coaching staff, launching our EMPOWERED(TM) Health Coaching program
and enhancing the functionality of our eHealth platform. This commitment to
strengthen our health management services has resulted in a substantial
increase in the number of proposal requests since last year. In our first
quarter 2007, we received 28 proposal requests for health management
services, compared to 16 for the first quarter 2006. At the same time, we
also received 8 proposal requests for fitness management services, compared
to 5 for the first quarter 2006."
Dr. Lehman concluded, "We are very excited about these potential
business opportunities, because we believe it affirms the strategic
decisions and investments we have made to solidify our position as a
leading provider of employee health improvement services. For the remainder
of 2007, we will continue to invest in people, systems and infrastructure
to improve our ability to scale at a faster rate and gain greater operating
leverage. Although these investments may result in operating margins below
current levels, we believe they will strengthen our competitive position in
a fast-evolving marketplace."
Financial Highlights for the First Quarter of 2007
-- Health management segment revenue grew 37.2% to $5.9 million, from
$4.3 million for the same period last year. Of this revenue growth,
staffing services revenue grew 19.5% to $3.7 million, from $3.1 million
for the same period last year, and program and consulting services
revenue grew 81.4% to $2.2 million, from $1.2 million for the same
period last year. Overall, health management revenue growth is
attributed to new contracts and the expansion of existing contracts.
The significant increase in program and consulting services, compared
to last year, was primarily driven by a $0.6 million increase in
biometric screening services, and a $0.3 million increase in health
coaching services.
-- Fitness management segment revenue grew 4.1% to $10.7 million, from
$10.3 million for the same period last year. Of this revenue growth,
staffing services revenue grew 3.0% to $10.0 million, from $9.7 million
for the same period last year, and program and consulting services
revenue grew 23.0% to $0.7 million, from $0.6 million for the same
period last year. Overall, the growth in fitness management segment
revenue is attributed to new contracts, the expansion of existing
contracts, and growth of program revenue at existing sites, including
personal training, weight management services and massage therapy.
-- During the quarter, we added twelve new contracts in our health
management segment, which may realize incremental annualized revenue of
approximately $2.9 million. In our fitness management segment, we won
three new contracts, which may realize incremental annualized revenue
of approximately $1.4 million. The $4.3 million combined total for
this potential new, incremental annualized revenue will be offset by a
potential annualized revenue loss of $1.5 million from contract and
site cancellations during the quarter.
-- Gross profit from our health management segment, as a percent of
revenue, increased to 39.6%, from 30.4% for the prior year period.
This increase is primarily due to growth in our higher margin program
and consulting services, where gross margins increased to 64.0%, from
53.0% for the same period last year. Driving this growth in program
and consulting gross margins is the revenue growth we have realized
from biometric screening and health coaching services.
-- Gross profit from our fitness management segment, as a percent of
revenue, increased to 23.1%, from 22.4% in the prior year period. This
increase is primarily due to margin growth we experienced in staffing
services, which grew to 21.1% of revenue, from 20.6% for the same
period last year. This margin growth was offset by a slight margin
decrease in program and consulting services, which fell to 52.4% of
revenue, from 53.1% for the same period last year.
-- Operating expenses as a percent of revenue increased to 23.7%, from
22.1% for the same period last year. This increase is primarily due to
salaries and overhead expense growth attributable to our investment in
additional staff and higher stock-based compensation. These expense
increases were partially offset by a decrease in amortization expense
related to a prior acquisition.
-- Operating margin for the first quarter expanded to 5.3%, from 2.6% for
the prior year period. This increase is primarily due to the gross
margin expansion within our health management segment, which was
partially offset by investments we have made to support our future
growth plans.
-- We ended the first quarter with approximately $0.05 million of cash,
working capital of $7.2 million, an increase of $1.4 million since
December 31, 2006, no long term debt and stockholders' equity of
$25.3 million. We believe our strong balance sheet, in addition to our
existing credit facility, will provide sufficient capital to fund our
anticipated 2007 capital and operational investments.
Conference Call
Health Fitness Corporation will host a conference call today, May 7,
2007 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 1-800-811-8845; internationally, dial 1-913-981-4905. The call will
also be broadcast live over the Internet, which is 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 the Company
Health Fitness Corporation is a leading provider of employee health
improvement services to corporations, hospitals, and communities. Serving
clients for over 30 years, HFC provides fitness and health management
services to more than 400 on-site and remote locations across the U.S. and
Canada. For more information about Health Fitness Corporation, go to
http://www.hfit.com.
Forward Looking Statements
Certain statements in this release, including, without limitation,
those relating to our commitment to strengthen our health management
services, our potential business opportunities, management's belief that
the strategic decisions and investments we have made will solidify our
position as a leading provider of employee health improvement services,
management's belief that our planned investments will improve our future
ability to scale at a faster rate, gain greater operating leverage and
strengthen our competitive position in a fast-evolving marketplace, and
management's belief that our strong balance sheet, in addition to our
existing credit facility, will provide sufficient capital to fund our
anticipated 2007 capital and operational investments, are forward-looking
statements. In addition, the estimated annualized revenue value of our new
and lost contracts 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 contract duration, in addition to
other revenue we may lose in the future due to contract 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, 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 successfully, 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 (UNAUDITED)
Three Months Ended
March 31,
2007 2006
REVENUE $16,590,033 $14,567,261
COSTS OF REVENUE 11,780,139 10,962,781
GROSS PROFIT 4,809,894 3,604,480
OPERATING EXPENSES
Salaries 2,398,802 1,995,899
Selling, general and administrative 1,482,525 1,119,176
Amortization of intangible assets 42,770 108,462
Total operating expenses 3,924,097 3,223,537
OPERATING INCOME 885,797 380,943
OTHER INCOME (EXPENSE)
Interest expense (2,099) (1,680)
Change in fair value of warrants -- 434,521
Other, net (1,514) (4,010)
EARNINGS BEFORE INCOME TAX EXPENSE 882,184 809,774
INCOME TAX EXPENSE 370,517 150,101
NET EARNINGS 511,667 659,673
Dividend to preferred shareholders -- 96,410
NET EARNINGS APPLICABLE TO COMMON SHAREHOLDERS $511,667 $563,263
NET EARNINGS PER COMMON SHARE:
Basic $0.03 $0.04
Diluted 0.03 0.01
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 19,306,797 15,001,832
Diluted 20,252,110 19,666,941
HEALTH FITNESS CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31,
2007 2006
ASSETS
CURRENT ASSETS
Cash $54,404 $987,465
Trade and other accounts receivable,
less allowances of $284,500 and $283,100 12,058,954 12,404,856
Prepaid expenses and other 1,110,698 701,889
Deferred tax assets 217,476 217,476
Total current assets 13,441,532 14,311,686
PROPERTY AND EQUIPMENT, net 888,408 767,675
OTHER ASSETS
Goodwill 14,522,877 14,509,469
Software technology, less accumulated
amortization of $471,600 and $370,200 1,682,617 1,658,575
Trademark, less accumulated amortization
of $271,100 and $246,300 221,996 246,809
Other intangible assets, less accumulated
amortization of $186,200 and $166,500 342,890 362,528
Deferred tax assets 437,011 437,010
Other 21,260 24,597
$31,558,591 $32,318,349
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $1,448,255 $1,811,939
Accrued salaries, wages, and payroll taxes 2,257,352 3,249,424
Accrued acquisition earnout -- 1,475,000
Other accrued liabilities 339,099 120,044
Accrued self funded insurance 332,114 201,053
Line of credit 619,649 --
Deferred revenue 1,253,967 1,663,121
Total current liabilities 6,250,436 8,520,581
LONG-TERM OBLIGATIONS -- --
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 50,000,000
shares authorized; 19,664,073 and 19,220,217
shares issued and outstanding 196,370 192,202
Additional paid-in capital 26,976,912 25,989,447
Accumulated comprehensive income (28,099) (35,186)
Accumulated deficit (1,837,028) (2,348,695)
25,308,155 23,797,768
$31,558,591 $32,318,349
SOURCE Health Fitness Corporation
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Related links:
http://www.hfit.com
http://www.prnewswire.com/comp/000921.html/
CONTACT:
Wes Winnekins, CFO, of Health Fitness
Corporation, +1-952-897-5275; or John Mills of Integrated
Corporate Relations, +1-310-954-1105
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