is primarily due to fewer biometric screening engagements at our
fitness center sites.
-- During the quarter, we obtained four new customer commitments in our
health management segment that may realize incremental annualized
revenue of approximately $2.0 million. In our fitness management
segment, we obtained one new customer commitment that may realize
incremental annualized revenue of approximately $0.6 million. The
$2.6 million total for potential new, incremental annualized revenue
is offset by a potential annualized revenue loss of $1.2 million from
fitness management contract cancellations. Approximately
$0.7 million of these contract cancellations is due to our decision
to not renew an underperforming contract.
We generally evaluate prospective revenue and operating trends over a
12 to 18 month period of time. As a result, we do not view
short-term changes in contract revenue, lower growth rates, or higher
operating expenses to be an indication of future results, or a trend
in our business. We have adopted this view because revenue attrition
can be largely unpredictable as many of our contracts can be
terminated with a 30 day notice. At the same time, new customer
commitments, particularly in our health management segment, may take
90 to 180 days to generate full revenue once the planning process is
complete. All of these events, taken together, can temporarily
affect short-term revenue results and operating margins.
-- Gross margin for our health management segment fell to 37.0%, from
41.5% for the prior year period. This result is due to a gross
margin decrease for staffing services, which fell to 25.8%, from
30.6% last y
|SOURCE Health Fitness Corporation|
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