SOKO Fitness & Spa Group Reports Second Quarter Fiscal 2011 Financial Results
14.01.2011 12:01
Achieves Record Quarterly Revenue and Net Income of $9.8 Million and $3.3 Million, Respectively Company Narrows Fiscal 2011 Revenue Guidance to $39-$42 Million, or 30-40% YoY Growth
HARBIN, China, Jan. 14, 2011 /PRNewswire-Asia-FirstCall/ -- SOKO Fitness&Spa Group, Inc. (BULLETIN BOARD: SOKF) ("SOKO"), an operator of fitness centers and beauty salons and spas in Northeast China as well as Beijing, today announced its financial results for the second quarter and first six months of fiscal 2011, ended November 30, 2010.
Second Quarter Financial Highlights:
-- Revenue totaled $9.8 million, an increase of 32% over $7.4 million year-over-year.
-- Gross profit increased 29% to $6.6 million, compared with $5.2 million, in the same period a year ago. Gross margin was 67.6% for the second quarter of fiscal 2011, compared with 69.5% for the second quarter of fiscal 2010, and 66.1% for the first quarter of fiscal 2011. The decline in gross margin was related to increased promotional activity in the second quarter of fiscal 2010, which contributed to increased sales of higher-margin services.
-- Net income attributable to SOKO improved by 2% year-over-year to $3.3 million, or $0.15 per diluted share, compared with $3.2 million, or $0.17 per diluted share in the same period a year ago. Net income for the second quarter of fiscal 2010 included the abovementioned increase in sales of higher-margin services.
-- SOKO increased total fitness club members 54% year-over-year and 11% sequentially to approximately 22,900 and beauty salon and spa clients 27% year-over-year and 11% sequentially to approximately 25,320.
-- Cash and cash equivalents was $15.0 million as of November 30, 2010, a decrease of $9.5 million over August 31, 2010. The sequential decrease in cash and cash equivalents was related to increased investment in new facility openings, consistent with SOKO's growth strategy.
-- SOKO has narrowed its expected revenue range to $39-$42 million for fiscal 2011, ending May 31, 2011. This represents an increase of approximately 30-40% compared with fiscal 2010. Second Quarter and Recent Business Highlights:
-- Expanded presence in Northeastern China and Beijing through the opening of four new facilities, including its first facility operated under a management agreement in the new market of Dalian, Liaoning Province.
-- Continued aggressive expansion initiatives, with nine facilities under construction or engaged in pre-opening activities; SOKO remains on-track to add up to 16 new facilities in fiscal 2011 through new construction, acquisition or operation under management agreements.
"We achieved record quarterly sales and net income based on the strength of our offering and the successful and continued implementation of our growth strategy to increase our member and client base, as well as our aggressive facility opening efforts," said Tong Liu, Chief Executive Officer of SOKO. "In addition to our new members, clients and centers, our renewal rates remain strong due to the high level of service we provide our customers. We continue to invest in the growth of our business through ongoing expansion in our traditional markets of Harbin and Shenyang, while taking steps to establish SOKO's presence in new strategic markets where we believe we can quickly build our brand and develop profitable facilities. In conjunction with the opening of new facilities, which we believe will give us exposure to a growing base of potential customers, we are constantly working to improve the level of service we provide to fitness center members and spa and salon clients."
"In addition to growing SOKO's presence in our core markets and expanding our geographic footprint with entry into Dalian, we extended our business model through the initiation of our first facility management agreement for our fitness center in Dalian. Under this agreement, we will operate the minority-owned facility and receive a percentage of the center's pre-tax sales, maintaining an option to acquire full ownership after two years of operation. We believe this approach will provide us with an effective, lower-risk way to enter new markets as it grants us the ability to acquire complete control of a facility without incurring the significant upfront capital costs typically associated with the launch of a new fitness center, spa or salon. Of our 16 new facilities planned for fiscal 2011, we expect that at least five will operate under this new model."
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