MINNEAPOLIS, Nov. 3 /PRNewswire-FirstCall/ -- Health Fitness Corporation
(NYSE Alternext US: FIT), a leading provider of integrated employee health and
productivity management solutions, today announced financial results for the
third quarter ended September 30, 2008.
For the third quarter, revenue increased approximately 8 percent to $18.5
million, from $17.2 million for the same period in 2007. Gross profit during
the quarter rose to $6.0 million, from $4.9 million during the prior-year
period. Operating income totaled $1.51 million for the quarter up from $0.23
million for the same period in 2007. Net earnings were $0.8 million, or $0.09
per diluted share, versus $0.02 million, or $0.00 per diluted share, in the
prior-year period.
2008 Third Quarter Business Segment Information
Revenue and gross profit information by segment:
Health Management
(in thousands)
REVENUE Q3 2008 Q3 2007
Staffing Services $4,552 $4,017
Program Services 3,624 2,514
Total Health Mgt $8,176 $6,531
GROSS PROFIT Q3 2008 Q3 2007
Staffing Services $1,280 $1,036
Program Services 2,142 1,378
Total Health Mgt $3,422 $2,414
During the 2008 third quarter, health management segment revenue grew 25.2
percent compared to the same period in 2007. Within the segment, staffing
services revenue increased 13.3 percent, which is attributable to new
customers and the expansion of services to existing customers. Program
services revenue grew 44.2 percent compared to the 2007 third quarter. This
gain was primarily driven by new and existing customers in the areas of
eHealth platform participation, biometric screenings and health coaching and
advising services.
Gross margin for the health management segment was 41.8 percent for the
quarter, up from 37.0 percent for the prior-year period. Within the segment,
gross margin for program services increased to 59.1 percent, from 54.8 percent
for the prior-year period, driven by revenue growth and productivity
enhancements related to biometric screenings and health coaching and advising
services. Gross margin for staffing services expanded to 28.1 percent for the
quarter from 25.8 percent for the prior-year period, reflecting lower costs
for employee paid time off and expense savings for marketing initiatives,
operating supplies and staff training.
Fitness Management
(in thousands)
REVENUE Q3 2008 Q3 2007
Staffing Services $9,702 $10,042
Program Services 619 580
Total Fitness Mgt $10,321 $10,622
GROSS PROFIT Q3 2008 Q3 2007
Staffing Services $2,356 $2,177
Program Services 209 294
Total Fitness Mgt $2,565 $2,471
During the 2008 third quarter, fitness management segment revenue
decreased 2.8 percent compared to the same period last year, which primarily
reflects the impact of 2007 contract cancellations.
Gross margin for the fitness management segment increased to 24.9 percent,
from 23.3 percent during the prior-year period, reflecting lower costs for
employee paid time off and medical benefits, in addition to expense savings
for equipment maintenance, group classes, operating supplies and liability
insurance.
"We are certainly pleased with the company's revenue growth and
significant margin expansion during the third quarter, especially in our
health management segment," said Gregg Lehman, Ph.D., president and chief
executive officer. "Although market conditions continue to be challenging, we
secured six new commitments during the quarter, which is an improvement from
the five commitments we reported in Q3 of last year."
Operating expenses as a percent of revenue were 24 percent, a 3 percent
reduction in comparison to the same period last year. The company anticipates
that operating expenses, as a percent of revenue, will continue to decline
over time as it achieves additional revenue growth, productivity enhancements
and operating expense leverage.
Lehman continued, "The market drivers that provide the rationale for our
service offerings remain the same and are expected to intensify. Costs of
health care will continue to rise, and companies will place an ever-increasing
emphasis on employee wellness and productivity. As a result of this emphasis,
we believe employers will continue to seek out ways to mitigate the direct and
indirect costs of health care. These dynamics, coupled with the strength of
our integrated health and fitness management service offerings, give us much
cause for optimism about our strategic direction and long-term growth
prospects."
Third Quarter Commitments and RFPs
During the quarter, the company secured four new health management
commitments and two new fitness management commitments, which combined may
realize annualized revenue of $1.7 million. This growth will be partially
offset by a potential annualized revenue loss of $1.1 million from fitness and
health management contract cancellations. Additionally, during the 2008 third
quarter, the company received 20 new RFPs for health management services and
five new RFPs for fitness management services.
Lehman added, "Due to current economic conditions, we witnessed continued
lengthening of sales cycles during the quarter as companies take longer to
evaluate our services among a broad array of other corporate initiatives. We
are encouraged that companies seem to be taking a long-term view and are still
demonstrating significant interest in the value proposition that our health
and fitness services can provide to their companies. This bears itself out in
the relatively robust condition of our RFP pipeline during the quarter. In the
quarters ahead, we will maintain our keen focus on providing an attractive
suite of services to our corporate customers, further refining our sales
approach and closely monitoring and controlling expense levels."
2008 Nine-Month Results
For the nine months ended September 30, 2008, revenue increased 10.4
percent to $56.0 million, from $50.7 million for the same period last year.
Gross profit rose 16.7 percent to $16.9 million, or 30.1 percent of revenue,
from $14.5 million, or 28.5 percent of revenue, for the prior-year period.
Operating income was $2.7 million for the nine months ended September 30,
2008, up from $1.5 million during the prior-year period, primarily reflecting
revenue increases and gross margin enhancement. Net earnings applicable to
common shareholders climbed to $1.5 million from $0.7 million during the same
period last year. Net earnings per diluted share totaled $0.15 compared to
$0.07 for the same period last year.
For the nine months ended September 30, 2008, the company received a total
of 15 health management commitments and expanded services with two existing
health management customers. In addition, the company received two fitness
management commitments and expanded services with four fitness management
customers. Combined commitment and service-expansion activity for the first
nine months of 2008 may realize annualized revenue of $6.1 million, to be
partially offset by a potential annualized revenue loss of $1.7 million from
contract cancellations.
Through the first nine months, the company had received 71 new RFPs for
health management services and 21 new RFPs for fitness management services.
Balance Sheet
The company ended the third quarter of 2008 with $0.5 million in cash,
compared to $1.9 million at the end of 2007; the decrease primarily reflects
the company's $2.3 million stock repurchase during the second quarter of 2008.
Working capital at September 30, 2008 totaled $9.0 million, up approximately
$0.4 million compared to December 31, 2007. At September 30, 2008, the company
had no balance outstanding on its $3.25 million credit facility, and had
stockholders' equity of $26.6 million.
Reverse Stock Split
On October 6, 2008, the company completed a one-for-two reverse split of
its common stock. All common share information and all "per share"
information related to our common stock in this release has been restated to
reflect the one-for-two reverse split.
HealthFitness listed on NYSE Alternext US
On October 21, 2008, the company announced the approval of its application
to list its common stock on the NYSE Alternext US, formerly the American Stock
Exchange. Trading on the NYSE Alternext US began on Wednesday, Oct. 22, 2008
under the ticker symbol FIT.
Conference Call
Health Fitness Corporation will host a conference call today, November 3,
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 70207413. A replay of the call will be available until Monday,
November 17, 2008, 11 p.m. EST. To access the replay from the U.S., dial
1-800-642-1687 and enter ID number 70207413, from outside the U.S., dial
1-706-645-9291 and enter ID number 70207413. 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, the
company's anticipation that operating expenses, as a percent of revenue, will
continue to decline over time as it achieves additional revenue growth,
productivity enhancements and operating expense leverage; and the company's
belief that employers will continue to seek out ways to mitigate the direct
and indirect costs of health care and that these dynamics, coupled with the
strength of the company's integrated health and fitness management service
offerings, give the company much cause for optimism about its strategic
direction and long-term growth prospects, are forward-looking statements. In
addition, the estimated annualized revenue value of our new and lost customers
and expanded services 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)
SEPTEMBER 30, 2008 AND DECEMBER 31, 2007
September 30, December 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash $452,719 $1,946,028
Trade and other accounts receivable,
less allowances of $241,900 and $243,300 13,437,875 14,686,879
Inventory 521,794 569,458
Prepaid expenses and other 476,943 226,891
Deferred tax assets 325,748 406,367
Total current assets 15,215,079 17,835,623
PROPERTY AND EQUIPMENT, net 1,215,042 1,400,570
OTHER ASSETS
Goodwill 14,546,250 14,546,250
Software, less accumulated amortization of
$1,164,700 and $795,100 1,916,976 1,734,920
Trademark, less accumulated amortization of
$420,000 and $345,500 73,124 147,561
Other intangible assets, less accumulated
amortization of $295,600 and $241,700 233,459 287,334
Other - 9,807
$33,199,930 $35,962,065
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 1,372,933 $ 2,121,154
Accrued salaries, wages, and payroll taxes 3,008,169 4,011,580
Other accrued liabilities 551,666 1,187,045
Accrued self funded insurance 278,050 333,724
Deferred revenue 1,106,371 1,722,254
Total current liabilities 6,317,189 9,375,757
DEFERRED TAX LIABILITY 261,327 108,623
LONG-TERM OBLIGATIONS - -
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 25,000,000
shares authorized; 9,639,039 and 9,964,295
shares issued and outstanding at
September 30, 2008 and December 31, 2007,
respectively 96,390 99,642
Additional paid-in capital 28,076,859 29,449,854
Accumulated comprehensive loss from foreign
currency translation (65,199) (56,413)
Accumulated deficit (1,486,636) (3,015,398)
26,621,414 26,477,685
$33,199,930 $35,962,065
HEALTH FITNESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30,
September 30,
2008 2007 2008 2007
REVENUE $18,497,423 $17,153,058 $56,015,548 $50,722,258
COSTS OF REVENUE 12,510,045 12,268,332 39,149,412 36,272,205
GROSS PROFIT 5,987,378 4,884,726 16,866,136 14,450,053
OPERATING EXPENSES
Salaries 2,950,618 2,775,532 8,949,305 7,819,407
Other selling, general
and administrative 1,485,206 1,835,136 5,080,973 5,008,770
Amortization of acquired
intangible assets 42,771 42,771 128,311 128,311
Total operating
expenses 4,478,595 4,653,439 14,158,589 12,956,488
OPERATING INCOME 1,508,783 231,287 2,707,547 1,493,565
OTHER INCOME (EXPENSE)
Interest expense (16,252) (16,681) (20,383) (23,371)
Other, net (662) (4,432) 412 (1,856)
EARNINGS BEFORE INCOME
TAXES 1,491,869 210,174 2,687,576 1,468,338
INCOME TAX EXPENSE 650,519 193,151 1,158,814 766,644
NET EARNINGS $841,350 $17,023 $1,528,762 $701,694
NET EARNINGS PER SHARE:
Basic $0.09 $- $0.16 $0.07
Diluted 0.09 - 0.15 0.07
WEIGHTED AVERAGE COMMON SHARES:
Basic 9,610,238 9,917,429 9,837,994 9,809,111
Diluted 9,688,941 10,433,468 9,982,990 10,288,673
