Second Quarter 2007 Highlights
- Total revenue increased 9.0% -
- Health management revenue expanded 29.6% -
- Gross profit margin increased approximately 130 basis points to 28.0% -
MINNEAPOLIS, Aug. 6 /PRNewswire-FirstCall/ -- Health Fitness
Corporation (OTC Bulletin Board: HFIT), a leading provider of employee
health management programs, today announced financial results for the
second quarter and six months ended June 30, 2007.
For the quarter ended June 30, 2007, revenue increased 9.0% to $17.0
million, from $15.6 million for the same period last year. Gross profit
during the quarter increased 14.3% to $4.8 million, from $4.2 million for
the same period last year. Operating income decreased to $0.38 million,
from $0.69 million for the same period last year. Net earnings applicable
to common shareholders decreased to $0.17 million, from $0.73 million in
the prior year period. Net earnings per diluted share decreased to $0.01,
from net earnings per diluted share of $0.02 for the same period last year.
Net earnings per diluted share for the second quarter of 2006 excluded a
$0.41 million non-cash gain related to a change in fair value of warrants.
For the six months ended June 30, 2007, revenue increased 11.4% to
$33.6 million, from $30.1 million for the same period last year. Gross
profit during the first six months increased 23.2% to $9.6 million, from
$7.8 million for the same period last year. Operating income increased
18.2% to $1.26 million, from $1.07 million for the same period last year.
Net earnings applicable to common shareholders decreased to $0.68 million,
from $1.29 million in the prior year period. Net earnings per diluted share
was $0.03, from net earnings per diluted share of $0.03 for the same period
last year. Net earnings per diluted share for the six months ended June 30,
2006 excluded a $0.84 million non-cash gain related to a change in fair
value of warrants.
"Overall, second quarter results were in line with our plan. The number
of new requests for proposal (RFP's) continues to expand, our health
management segment revenue grew approximately 30% and our operating income
was better than expected in light of the infrastructure investments we made
during the quarter," said Gregg Lehman, Ph.D., President and Chief
Executive Officer. "During the quarter, we strengthened the long-term
delivery of our health management services by adding new associates to
health coaching, research and outcomes, program development, marketing,
technology and account services. We also implemented Phase II of our
web-based health coaching program. In addition, we announced the launch of
our Research, Development and Outcomes (RDO) business function, which
aligns our product development team with research and outcomes to provide
our clients with stronger evidenced based program offerings as well as a
more robust ROI methodology."
Dr. Lehman continued, "We believe our commitment to positioning Health
Fitness as the leading provider of health improvement services is the
driving force behind the substantial year-over-year increase in the number
of RFP's. During the quarter, we received 29 proposal requests for health
management services, compared to 14 for the second quarter of 2006. We also
received 7 proposal requests for fitness management services, compared to 6
for the second quarter of 2006. Including the RFPs we received in first
quarter, we have won several of these opportunities. However, the majority
of the revenue related to these opportunities will be realized in 2008 due
to the timing of these wins and the lead-time needed for program
implementation. During the third quarter, we will increase our efforts to
cross-sell our health management services to our 125 existing fitness
management customers, which we believe will drive additional RFPs and
revenue. With a solid sales pipeline in place, coupled with our fitness
segment cross-selling strategy, we believe we are in a very good position
to experience long-term, profitable growth."
Dr. Lehman concluded, "For the remainder of 2007, and commensurate with
the addition of new business, we will continue to invest in our
infrastructure to drive future scalability. While these investments may
result in lower operating income over the short-term, we believe these
investments will result in improving operating leverage over an expanding
client base, beginning in 2008 and beyond."
Financial Highlights for the Second Quarter of 2007
-- Health management segment revenue grew 29.6% to $6.5 million, from
$5.0 million for the same period last year. Of this revenue growth,
staffing services revenue grew 16.4% to $3.9 million, from $3.3 million
for the same period last year, and program and consulting services
revenue grew 56.4% to $2.6 million, from $1.6 million for the same
period last year. Overall, health management revenue growth is
attributed to new customers and the expansion of existing customers.
The significant increase in program and consulting services, compared
to last year, was primarily driven by an increase in biometric
screening services, health coaching services and eHealth platform sales
and customizations.
-- Fitness management segment revenue declined 0.7% to $10.5 million, from
$10.6 million for the same period last year. Of this revenue decline,
staffing services revenue decreased 1.0% to $9.8 million, from
$10.0 million for the same period last year, and program and consulting
services revenue grew 5.3% to $0.7 million, from $0.6 million for the
same period last year. Overall, the slight decline in fitness
management segment revenue is primarily due to the previously announced
termination of a large automotive customer effective March 31, 2007.
This revenue loss was partially offset by new staffing service revenue,
the expansion of existing customers, and growth of program revenue at
existing sites, including personal training and health coaching
services.
-- During the quarter, we obtained eleven new customer commitments in our
health management segment that may realize incremental annualized
revenue of approximately $2.2 million, which includes approximately
$0.7 million of potential annualized revenue from two existing fitness
management customers. In our fitness management segment, we obtained
one new customer commitment, and received a commitment to expand our
management services for an existing customer, all of which may realize
incremental annualized revenue of approximately $0.7 million. The
$2.9 million combined total for this potential new, incremental
annualized revenue will be offset by a potential annualized revenue
loss of $0.6 million from customer and site cancellations during the
quarter.
-- Gross profit from our health management segment, as a percent of
revenue, increased to 38.6%, from 37.5% for the prior year period.
This increase is primarily due to growth in our higher margin program
and consulting services.
-- Gross profit from our fitness management segment, as a percent of
revenue, slightly decreased to 21.5%, from 21.6% in the prior year
period. This result is primarily due to a margin decrease in program
and consulting services, which fell to 37.0% of revenue, from 44.5% for
the same period last year. This decline was partially offset by margin
growth in staffing services, which grew to 20.4% of revenue, from
20.2% for the same period last year.
-- Operating expenses as a percent of revenue increased to 25.8%, from
22.3% for the same period last year. This increase is primarily due to
growth in salaries, stock-based compensation and general operating
expenses attributable to our investment in additional staff within
certain operating units, including Research, Development and Outcomes,
Marketing, Technology and Account Services. These expense increases
were partially offset by a decrease in amortization expense related to
a prior acquisition.
-- Operating margin for the second quarter declined to 2.2%, from 4.4% for
the prior year period. This decrease is primarily due to investments
we have made to support our future growth plans.
-- We ended the second quarter with approximately $0.13 million of cash,
working capital of $7.5 million, an increase of $1.7 million since
December 31, 2006, no long term debt and stockholders' equity of
$25.8 million. We believe our strong balance sheet, in addition to our
existing credit facility, will provide sufficient working capital to
fund our anticipated 2007 capital and operational investments.
Financial Highlights for the Six Months Ended June 30, 2007 Compared to
the Same Period Last Year.
-- Health management segment revenue grew 33.1% to $12.4 million, from
$9.3 million for the same period last year. Of this revenue growth,
staffing services revenue grew 17.9% to $7.6 million, from $6.4 million
for the same period last year, and program and consulting services
revenue grew 67.1% to $4.8 million, from $2.9 million for the same
period last year. Overall, health management revenue growth is
attributed to new customers and the expansion of existing customers.
The significant increase in program and consulting services, compared
to last year, was primarily driven by an increase in biometric
screening services, health coaching services and eHealth platform sales
and customizations.
-- Fitness management segment revenue grew 1.7% to $21.2 million, from
$20.9 million for the same period last year. Of this revenue increase,
staffing services revenue increased 1.0% to $19.8 million, from
$19.7 million for the same period last year, and program and consulting
services revenue grew 13.6% to $1.4 million, from $1.2 million for the
same period last year. Overall, the increase in fitness management
segment revenue is attributed to new customers, the expansion of
existing customers, and growth of program revenue at existing sites,
including personal training, weight management services and massage
therapy. This growth was partially offset by the previously announced
termination of a large automotive customer effective March 31, 2007.
-- Gross profit from our health management segment, as a percent of
revenue, increased to 39.1%, from 34.2% 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 60.9%, from
57.0% for the same period last year.
-- Gross profit from our fitness management segment, as a percent of
revenue, increased to 22.3%, from 22.0% in the prior year period. This
increase is primarily due to margin growth we experienced in staffing
services, which grew to 20.8% of revenue, from 20.4% for the same
period last year. This margin growth was offset by a margin decrease
in program and consulting services, which fell to 44.8% of revenue,
from 48.6% for the same period last year.
-- Operating expenses as a percent of revenue increased to 24.7%, from
22.2% for the same period last year. This increase is primarily due to
growth in salaries, stock-based compensation and general operating
expenses attributable to our investment in additional staff. These
expense increases were partially offset by a decrease in amortization
expense related to a prior acquisition.
-- Operating margin for the six months ended June 30, 2007 increased to
3.8%, from 3.5% for the prior year period. This increase is primarily
due to revenue growth in our higher margin health management segment,
as well improvement in fitness management gross margins. This was
partially offset by our continued investment in additional staff.
Conference Call
Health Fitness Corporation will host a conference call today, August 6,
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 1-800-817-4887; internationally, dial 1-913-981-4913. A replay of the
call will be available until Monday, August 20, 2007, 11:59 p.m. ET. To
access the replay from the U.S., dial 1-888-203-1112 and enter passcode
5864082, from outside the U.S., dial 1-719-457-0820 and enter passcode
5864082. 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 employee health
improvement services 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 its commitment to positioning the Company as the
leading provider of health improvement services is the driving force behind
the substantial increase in the number of requests for proposal,
management's belief that the current sales pipeline, coupled with a fitness
segment cross-selling strategy, will position the Company for long-term,
profitable growth, management's belief that planned investments will result
in improving operating leverage over an expanding client base, beginning in
2008 and beyond, and management's belief that our strong balance sheet, in
addition to our existing credit facility, will provide sufficient working
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 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, 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.
HEALTH FITNESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
REVENUE $16,979,167 $15,575,130 $33,569,200 $30,142,391
COSTS OF REVENUE 12,223,734 11,415,116 24,003,873 22,377,897
GROSS PROFIT 4,755,433 4,160,014 9,565,327 7,764,494
OPERATING EXPENSES
Salaries 2,645,073 2,146,470 5,043,875 4,142,369
Other selling,
general and
administrative 1,691,109 1,219,161 3,173,634 2,338,337
Amortization of
acquired intangible
assets 42,770 107,610 85,540 216,072
Total operating
expenses 4,378,952 3,473,241 8,303,049 6,696,778
OPERATING INCOME 376,481 686,773 1,262,278 1,067,716
OTHER INCOME (EXPENSE)
Interest expense (4,591) (2,470) (6,690) (4,150)
Change in fair value
of warrants -- 406,694 -- 841,215
Other, net 4,090 14,071 2,576 10,061
EARNINGS BEFORE INCOME
TAXES 375,980
1,105,068 1,258,164 1,914,842
INCOME TAX EXPENSE 202,976 377,594 573,493 527,695
NET EARNINGS 173,004 727,474 684,671 1,387,147
Dividend to preferred
shareholders -- -- -- 96,410
NET EARNINGS APPLICABLE
TO COMMON SHAREHOLDERS $173,004 $727,474 $684,671 $ 1,290,737
NET EARNINGS PER SHARE:
Basic $0.01 $0.04 $0.04 $0.08
Diluted 0.01 0.02 0.03 0.03
WEIGHTED AVERAGE COMMON SHARES:
Basic 19,702,693 18,831,169 19,508,107 17,005,769
Diluted 20,558,007 20,310,830 20,415,501 20,305,674
HEALTH FITNESS CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31,
2007 2006
ASSETS
CURRENT ASSETS
Cash $ 131,753 $987,465
Trade and other accounts receivable,
less allowances of $210,499
and $283,100 12,427,703 12,404,856
Inventories 809,400 326,065
Prepaid expenses and other 601,315 375,824
Deferred tax assets 217,476 217,476
Total current assets 14,187,647 14,311,686
PROPERTY AND EQUIPMENT, net 1,123,325 767,675
OTHER ASSETS
Goodwill 14,529,674 14,509,469
Software technology, less accumulated
amortization of $577,900 and $370,200 1,614,815 1,658,575
Trademark, less accumulated amortization
of $295,900 and $246,300 197,185 246,809
Other intangible assets, less accumulated
amortization of $205,800 and $166,500 323,250 362,528
Deferred tax assets 437,010 437,010
Other 17,927 24,597
$32,430,833 $32,318,349
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $1,229,617 $1,811,939
Accrued salaries, wages, and payroll
taxes 3,577,563 3,249,424
Accrued acquisition earnout -- 1,475,000
Other accrued liabilities 177,049 120,044
Accrued self funded insurance 196,956 201,053
Line of credit 274,491 --
Deferred revenue 1,210,020 1,663,121
Total current liabilities 6,665,696 8,520,581
LONG-TERM OBLIGATIONS -- --
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
50,000,000 shares authorized;
19,803,177 and 19,220,217 shares
issued and outstanding 197,823 192,202
Additional paid-in capital 27,282,030 25,989,447
Accumulated comprehensive income (50,692) (35,186)
Accumulated deficit (1,664,024) (2,348,695)
25,765,137 23,797,768
$32,430,833 $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, for Health Fitness
Corporation
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