customer commitments, and received a commitment to expand an existing
customer, all of which may realize incremental annualized revenue of
approximately $2.7 million. The $9.8 million combined total for this
potential new, incremental annualized revenue will be offset by a
potential annualized revenue loss of $3.3 million, which is entirely
attributed to the cancellation of fitness management contracts.
Approximately $0.7 million of these contract cancellations is due to
our decision to not renew an underperforming contract.
-- Gross margin for our health management segment increased to 38.4%,
from 36.9% for the prior year period. This increase is primarily due
to the accelerated growth of our higher margin program and consulting
service revenue, despite the slight fall in gross margin to 58.9%,
from 59.0% for 2006. Offsetting this margin expansion was a decrease
of gross margin from staffing services, which fell to 25.5% from
26.4%, due primarily to the refund of workers compensation premiums
in the third quarter of 2006.
-- Gross margin for our fitness management segment decreased to 22.5%,
from 23.9% for the prior year period. This decrease is due in part
to gross margins from staffing services of 21.0%, compared to 22.4%
for the same period last year, which is primarily due to a refund of
workers compensation premiums in the third quarter of 2006, and a
decrease of gross margin for programs and consulting services to
46.2%, from 48.0% for the same period last year, which is primarily
due to slight gross margin decreases for personal training services,
weight management products and eHealth platform services.
-- Operating expenses as a percent of revenue increased to 2
|SOURCE Health Fitness Corporation|
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