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Revenue Déjà Vu in Health Fitness’ Second Quarter

MINNEAPOLIS -- Health Fitness Corp., Minneapolis, reported revenue of $18.8 million in the second quarter of 2009, in line with second quarter 2008 revenue of $18.8 million, according to the company’s financials released last week. Gross profit for the quarter increased 1.4 percent to $5.6 million compared to $5.5 million in the second quarter of 2008. Gross margin for the quarter was 29.9 percent compared to 29.4 percent in last year’s second quarter. Health Fitness Corp. reported net earnings of $0.36 million, or $0.04 per diluted share, the same as in the second quarter of 2008.

The company generated three new health management commitments and three health management customer expansions during the quarter, resulting in potential annualized revenue of $3.7 million, compared to $1.9 million generated in the same quarter last year, a 95 percent increase.

In a statement from the company, Gregg Lehman, president and chief executive officer, said that the $3.7 million of potential annualized revenue from new health management business represents the company’s best quarter since the second quarter of 2006.

Health Fitness also generated four new fitness management commitments during the quarter, resulting in potential annualized revenue of $0.7 million, compared to $0.5 million of customer expansions in the same quarter last year, a 40 percent increase. This is the highest number of new fitness commitments for the company since the fourth quarter of 2006, Lehman said.

Not all is rosy, however. Health and fitness management annualized revenue loss from contract cancellations during the quarter totaled $0.1 million and $1.2 million, respectively, versus $0.2 million in last year’s second quarter for fitness management. Net of contract cancellations, total potential annualized revenue generated during the second quarter of 2009 was $3.1 million, up 41 percent compared to $2.2 million in the comparable quarter of 2008.

The weak economy has further eroded the company’s base of fitness revenue as evidenced by the $1.2 million of annualized revenue Health Fitness will lose from second quarter contract cancellations, Lehman said.

“The good news is that the economy appears to be stabilizing, which makes us believe that contract cancellations may be lower during the second half of the year,” he said in the statement. “When combined with approximately $3 million of potential annualized revenue in our fitness sales pipeline, there is a very good opportunity to start 2010 with positive revenue growth in our fitness segment."

Some notable health management wins for the second quarter include a $1.2 million expansion of a middle market customer that Health Fitness secured during the first quarter, and a $1.3 million commitment from a Fortune 100 financial services company.

Regarding the company’s health management sales pipeline, Health Fitness is currently among the finalists on 18 requests for proposal representing total potential annualized revenue of approximately $10 million, according to Lehman.

“Given the new commitments and expansions generated in the first half of the year, along with a strong sales pipeline, we are optimistic that 2010 will produce stronger top- and bottom-line results,” he said.

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