Highlights - Total revenue increased 11 percent
MINNEAPOLIS, Aug. 4 /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 second quarter ended June 30, 2008.
For the second quarter, revenue increased 10.8 percent to $18.8 million,
from $17.0 million for the same period in 2007. Gross profit during the
quarter rose to $5.5 million, from $4.8 million during the prior-year period.
Operating income totaled $0.64 million for the quarter compared to $0.38
million for the same period in 2007. Net earnings were $0.36 million, or $0.02
per diluted share, versus $0.17 million, or $0.01 per diluted share, in the
prior-year period.
"For the third quarter in a row, we reported double-digit revenue gains.
We are also pleased with the improvement in gross margins during the second
quarter. While revenue from our fitness management segment was essentially
flat, we were able to replace the revenue lost from contract cancellations
that occurred during the first six months of 2007. Our health management
segment continued to experience double-digit growth, with the second quarter
resulting in new customer commitments and expansion of existing customers,"
said Gregg Lehman, Ph.D., president and chief executive officer. "At the same
time, we have not been immune from the challenging economy, which has
lengthened sales cycles and delayed some customer commitments."
Operating expenses as a percent of revenue were 26 percent, essentially
even with the same period last year. The company anticipates that operating
expenses, as a percent of revenue, will decline as it achieves additional
revenue growth and productivity enhancements.
Second Quarter Commitments and RFPs
During the quarter, the company secured two new health management
commitments, up-sold health management services to two fitness management
customers and expanded services for four fitness management customers, all of
which may realize annualized revenue of $2.4 million. This total annualized
revenue will be partially offset by a potential annualized revenue loss of
$0.2 million from fitness management contract cancellations. Additionally,
during the 2008 second quarter, the company received 25 new RFPs for health
management services and three new RFPs for fitness management services.
Lehman added, "To counteract longer customer evaluation periods, we are
refining our health management sales approach to focus on our unique value
proposition and ability to reduce costs during the first year of a customer
engagement. For the interim, I have taken a more direct managerial role within
our sales organization to oversee this important work and to ensure that we
are maximizing our sales opportunities. We believe that by focusing on
lowering employers' direct and indirect health care costs, coupled with a
solution-based sales approach, we can better cultivate existing and upcoming
RFPs and grow the number of customer commitments."
2008 First-Half Results
For the six months ended June 30, 2008, revenue increased 12 percent to
$37.5 million, from $33.6 million for the same period last year. Gross profit
increased 13.7 percent to $10.9 million from $9.6 million for the prior-year
period.
Operating income was $1.2 million for the six months ended June 30, 2008,
compared to $1.3 million during the prior-year period, reflecting
infrastructure investments the company has made to address future business
growth. Net earnings applicable to common shareholders totaled $0.7 million,
flat with the prior-year period. Net earnings per diluted share totaled $0.03
compared to $0.03 for the same period last year.
For the six months ended June 30, 2008, the company received a total of 11
health management commitments, up-sold health management services to two
fitness management customers and expanded services for four fitness management
customers, all of which may realize annualized revenue of $4.4 million. This
total annualized revenue will be partially offset by a potential annualized
revenue loss of $0.6 million from fitness management contract cancellations.
Lehman concluded, "For the first six months of 2008, we have received a
total of 51 health management and 16 fitness management RFPs, which is
comparable to the number we received halfway through 2007. Despite the
challenging economy, a number of these RFPs have developed into an active
sales pipeline that includes an above-average number of potential
opportunities. As we enter the last half of 2008, we are confident in the
strength of our service offerings, our ability to secure new customer
commitments and the continued growth of our health management segment, which
drives the opportunity to improve operating margins."
Balance Sheet
The company ended the second quarter of 2008 with $0.2 million in cash,
compared to $1.9 million at the end of 2007, the decrease of which reflects
the company's $2.3 million stock repurchase during the second quarter of 2008.
Working capital at June 30, 2008 totaled $7.6 million, a decrease of
approximately $0.9 million compared to December 31, 2007. At June 30, 2008,
the company did not have any long-term debt and stockholders' equity totaled
$25.5 million.
2008 Second Quarter Business Segment Information
Revenue and gross profit information by segment:
Health Management
(in thousands)
REVENUE Q2 2008Q2 2007
Staffing Services $4,569 $3,921
Program and Consulting Services3,760 2,609
Total Health Mgt $8,329 $6,530
GROSS PROFIT Q2 2008Q2 2007
Staffing Services $1,238 $1,010
Program and Consulting Services1,713 1,522
Total Health Mgt $2,951 $2,532
During the 2008 second quarter, health management segment revenue grew
27.5 percent compared to the same period in 2007. Within the segment, staffing
services revenue increased 16.5 percent, which is attributable to new
customers and the expansion of services to existing customers. Program and
consulting services revenue grew 44.1 percent compared to the 2007 second
quarter. This increase is driven by new and existing customers and the
resulting increase in biometric screening and health coaching and advising
services.
Gross margin for the health management segment was 35.4 percent for the
quarter, compared to 38.8 percent for the prior-year period. This decrease is
due in part to lower pricing for new business won in 2007, and the cost of
additional screening and health coaching staff hired in late 2007 to meet
forecasted future demand for these services.
Fitness Management
(in thousands)
REVENUE Q2 2008Q2 2007
Staffing Services $9,837 $9,821
Program and Consulting Services 650628
Total Fitness Mgt $ 10,487 $ 10,449
GROSS PROFIT Q2 2008Q2 2007
Staffing Services $2,350 $2,002
Program and Consulting Services 236221
Total Fitness Mgt $2,586 $2,223
During the 2008 second quarter, fitness management segment revenue was
essentially flat with the same period last year, which reflects the company's
success in replacing revenue lost from 2007 contract cancellations.
Gross margin for the fitness management segment increased to 24.7 percent,
from 21.3 percent during the prior-year period, which is primarily due to
higher margins on new staffing services business and improved margins for
personal training services.
Share Repurchase Plan
On May 27, 2008, the company completed its share repurchase plan. Under
this plan, the company repurchased 1.14 million shares of its common stock on
the open market in accordance with Securities and Exchange Commission Rule
10b-18 and other pertinent rules and regulations. Share repurchases were
funded by the company's available working capital.
Conference Call
Health Fitness Corporation will host a conference call today, August 4,
2008, at 4 p.m. Central (2 p.m. Pacific; 5 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 1-888-258-7584; internationally, dial 1-706-902-1477. To access the call,
enter ID number 57406618. A replay of the call will be available until Monday,
August 18, 2008, 11 p.m. EST. To access the replay from the U.S., dial
1-800-642-1687 and enter ID number 57406618, from outside the U.S., dial
1-706-645-9291 and enter ID number 57406618. The call will also be broadcast
live over the Internet and accessible through the Investor Relations section
of the company's Web site at http://www.hfit.com, where the call will be
archived for 30 days.
About HealthFitness
HealthFitness 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, HealthFitness partners with
employers to effectively manage their health care and productivity costs by
improving individual health and well-being. HealthFitness serves more than
300 clients globally via on-site management and remotely via Web and
telephonic services. HealthFitness 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. HealthFitness 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 HealthFitness, visit http://www.hfit.com.
Forward Looking Statements
Certain statements in this release, including, without limitation,
management's belief that operating expenses, as a percent of revenue, will
decline as the company focuses on revenue growth and productivity
enhancements; management's belief that by focusing on lowering employer's
direct and indirect health care costs, coupled with a solution-based sales
approach, the company can better cultivate existing and upcoming RFPs and grow
the number of customer commitments; management's belief that economic
conditions are causing some companies to lengthen their evaluation periods;
and management's belief that the company, despite a challenging economy, is
confident in the strength of its service offerings, its ability to secure new
customer commitments and its opportunity to improve operating margins, 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 2008 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. Furthermore, there can
be no assurance that any RFPs we receive will develop into customer
commitments. 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,
the level of demand for our services, customer acceptance of higher service
pricing, 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, our ability to limit and manage expenses, 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 2007 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 BALANCE SHEETS (UNAUDITED)
JUNE 30, 2008 AND DECEMBER 31, 2007
June 30, December 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash $201,722 $1,946,028
Trade and other accounts receivable,
less allowances of $242,800
and $243,300 13,570,650 14,686,879
Inventory 589,784569,458
Prepaid expenses and other 473,885226,891
Deferred tax assets406,367406,367
Total current assets 15,242,408 17,835,623
PROPERTY AND EQUIPMENT, net1,313,692 1,400,570
OTHER ASSETS
Goodwill14,546,250 14,546,250
Software, less accumulated amortization
of $1,033,100 and $795,100 1,805,649 1,734,920
Trademark, less accumulated amortization
of $395,100 and $345,500 97,936147,561
Other intangible assets, less accumulated
amortization of $277,700 and $241,700 251,417287,334
Other1,401 9,807
$33,258,753$35,962,065
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 1,012,088$ 2,121,154
Accrued salaries, wages, and payroll
taxes 3,876,816 4,011,580
Other accrued liabilities 521,904 1,187,045
Accrued self funded insurance 289,357333,724
Line of credit 640,068 -
Deferred revenue 1,299,483 1,722,254
Total current liabilities 7,639,716 9,375,757
DEFERRED TAX LIABILITY 108,623108,623
LONG-TERM OBLIGATIONS - -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 50,000,000
shares authorized; 19,221,576 and
19,928,590 shares issued and outstanding
at June 30, 2008 and December 31, 2007,
respectively 192,216199,285
Additional paid-in capital 27,703,966 29,350,211
Accumulated comprehensive loss from
foreign currency translation (57,782) (56,413)
Accumulated deficit (2,327,986)(3,015,398)
25,510,414 26,477,685
$33,258,753$35,962,065
HEALTH FITNESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months EndedSix Months Ended
June 30, June 30,
2008 2007 2008 2007
REVENUE$18,815,458 $16,979,167 $37,518,125 $33,569,200
COSTS OF REVENUE13,278,965 12,223,734 26,639,367 24,003,873
GROSS PROFIT 5,536,4934,755,433 10,878,7589,565,327
OPERATING EXPENSES
Salaries 3,026,3102,645,0735,998,6875,043,875
Other selling,
general and
administrative1,832,1021,691,1093,595,7673,173,634
Amortization of
acquired intangible
assets 42,770 42,770 85,540 85,540
Total operating
expenses4,901,1824,378,9529,679,9948,303,049
OPERATING INCOME 635,311 376,4811,198,7641,262,278
OTHER INCOME (EXPENSE)
Interest expense (3,208) (4,591) (4,131) (6,690)
Other, net(1,211) 4,0901,0742,576
EARNINGS BEFORE INCOME
TAXES 630,892 375,9801,195,7071,258,164
INCOME TAX EXPENSE 268,192 202,976 508,295 573,493
NET EARNINGS $362,700 $173,004 $ 687,412 $ 684,671
NET EARNINGS PER SHARE:
Basic $0.02$0.01 $ 0.03 $ 0.04
Diluted 0.02 0.01 0.03 0.03
WEIGHTED AVERAGE COMMON
SHARES:
Basic 19,727,954 19,702,693 19,906,247 19,508,107
Diluted 19,984,737 20,558,007 20,281,772 20,415,501
SOURCE Health Fitness Corporation
