BALTIMORE, Feb. 26, 2019 /PRNewswire/ -- Medifast, Inc.
(NYSE: MED), a leading manufacturer and distributor of clinically
proven, healthy living products and programs, today reported
financial results for the fourth quarter and full year ended
December 31, 2018.
Fourth Quarter 2018 Highlights:
- Revenue of $145.8 million, an
increase of 87.0% year-over-year
- Active earning Coaches of 24,100, an increase of 60.7%
year-over-year
- Net income of $15.7 million, an
increase of 114.2% year-over-year
- Earnings per diluted share ("EPS") of $1.30, an increase of 116.7% year-over-year
Full Year 2018 Highlights:
- Revenue of $501.0 million, an
increase of 66.1% year-over-year
- Net income of $55.8 million, an
increase of 101.3% year-over-year
- EPS of $4.62, an increase of
101.7% year-over-year
- Cash, cash equivalents, and investment securities of
$101.0 million and debt-free
- Returned $23.2 million to
stockholders through payment of quarterly cash dividend
- Repurchased $30 million of the
Company's common stock
"We are very pleased with our strong finish to 2018," commented
Dan Chard, Medifast's Chief
Executive Officer. "We reached a significant corporate milestone
generating over $500 million in
annual revenue and profitability exceeded our expectations.
Importantly, we achieved these results while accelerating the level
of strategic investment to support our long-term growth plans to
build our brand platform and operations as we continue to improve
the scalability of our business. As we move forward with our
strategic initiatives, both domestically and internationally, we
believe we remain well positioned to deliver long-term sustainable
growth and value for our shareholders as well as meaningful
improvements to the lives of OPTAVIA clients across the
country as they learn new healthy habits that make their lives
better."
Fourth Quarter 2018 Results
For the fourth quarter of 2018, revenue increased 87.0% to
$145.8 million from revenue of
$78.0 million for the fourth quarter
last year. OPTAVIA-branded products represented 72% of
consumable units sold for the fourth quarter of 2018 compared to
51% for the fourth quarter of last year. The total number of active
earning OPTAVIA Coaches for the fourth quarter of 2018
increased to 24,100, compared to 15,000 for the fourth quarter of
2017. The average revenue per active earning OPTAVIA Coach
for the fourth quarter of 2018 increased 26.2% to $5,756 compared to $4,562 for the fourth quarter last year.
Gross profit for the fourth quarter of 2018 increased to
$109.1 million from $59.1 million for the fourth quarter of 2017. The
Company's gross profit as a percentage of revenue decreased 100
basis points to 74.8% from 75.8% for the fourth quarter last year.
The decrease in gross margin percentage was driven by
increased inventory reserves for a select group of products as well
as higher freight costs to support year end customer demands.
Selling, general and administrative expenses ("SG&A") for
the fourth quarter of 2018 increased $39.7
million to $89.3 million
compared to $49.6 million for the
fourth quarter of 2017, primarily as a result of higher
OPTAVIA commissions expense, consulting costs related to
information technology projects, and investments the Company is
making in an upcoming International Leadership Advancement Trip
("ILAT") which is designed to reward qualifying business leaders
with exclusive training and development opportunities. As
previously disclosed, the ILAT expense was recorded in the third
and fourth quarters of 2018 and is expected to drive strong growth
in 2019. SG&A as a percentage of sales decreased 240
basis points to 61.2% of total revenue compared to 63.6% in the
fourth quarter of 2017.
Operating income increased $10.3
million to $19.8 million from
$9.5 million for the fourth quarter
of 2018 primarily as a result of increased gross profit, partially
offset by increased SG&A expenses. Operating income as a
percentage of revenue increased 140 basis points to 13.6% compared
to 12.2% in the fourth quarter of 2017.
The fourth quarter 2018 effective tax rate was 22.4%, compared
to 25.4% for the fourth quarter of 2017. This decrease was
primarily a result of the decrease in the Federal statutory rate
pursuant to the Tax Cuts & Jobs Act rate of 14.0% offset by
2.1% due to the elimination of the Domestic Manufacturer Deduction,
5.0% due to a decrease in the windfall related to stock
compensation and 3.0% due to a change in temporary differences
resulting from the Tax Cuts & Jobs Act.
Net income for the fourth quarter of 2018 was $15.7 million, or $1.30 per diluted share, based on approximately
12.0 million shares outstanding. Fourth quarter 2017 net income was
$7.3 million, or $0.60 per diluted share based on approximately
12.1 million shares outstanding.
Fiscal 2018 Results
For the fiscal year ended December 31,
2018, revenue increased 66.1% to $501.0 million compared to revenue of
$301.6 million in 2017.
Net income for 2018 was $55.8
million, or $4.62 per diluted
share based on approximately 12.1 million shares, compared to
$27.7 million, or $2.29 per diluted share for the comparable period
last year based on approximately 12.1 million shares
outstanding.
Balance Sheet
The Company's balance sheet remains strong with stockholders'
equity of $109.1 million and working
capital of $85.2 million as of
December 31, 2018. Cash, cash
equivalents, and investment securities increased $2.2 million to $101.0
million as of December 31,
2018 compared to $98.8 million
at December 31, 2017. The Company
remains free of interest bearing debt. Inventory increased
$19.6 million to $38.9 million as of December 31, 2018 compared to $19.3 million as the Company increased inventory
levels to meet current and future customer demand.
The Company declared a quarterly cash dividend of $9.1 million, or $0.75 per share, during the fourth quarter of
2018.
Adoption of Accounting Standard Update 2014-09, Revenue
from Contracts with Customers ("ASC 606"
As announced in the first quarter of 2018, the Company adopted
ASC 606 on a modified retrospective basis. As a result, the
Company did not restate financial information for the three months
ended December 31, 2017. The
results of ASU 606 primarily impact the Company's timing of revenue
recognition for product shipments, as product revenue will be
recognized upon customer receipt in lieu of at the time of
shipment.
The following are the impacts to the financial results for the
three months ended December 31, 2018
from the implementation of ASC 606. For the quarter ended
December 31, 2018, revenue increased
$3.1 million, or 2.2%, which resulted
in increased gross profit of $2.4
million, or 2.2%. Gross profit as a percentage of
revenue increased 10 basis points to 74.8% for quarter ended
December 31, 2018. Income from
operations increased $1.0 million, or
5.5%, resulting in increased net income and diluted earnings per
share of $0.8 million, or
$0.07 per share, respectively.
As of December 31, 2018, working
capital decreased $2.3 million and
stockholders' equity decreased $1.8
million as a result of the impact ASC 606.
Outlook
The Company expects first quarter revenue to be in the range of
$150 million to $155 million and EPS to be in the range of
$1.50 to $1.55. For the full year 2019, the Company
expects revenue of $700 million to
$720 million and EPS of $6.45 to $6.65. The
full year 2019 earnings guidance assumes a 22.5% to 23.5% effective
tax rate. The Company expects the 2019 cadence of spending to
be similar to 2018 with its annual convention spend occurring in
the third quarter of the year and the cost of a 2020 Leadership
Advancement event to be incurred in the third and fourth quarters
of the year. Based on capital investments in the Company's future
growth, it expects capital expenditures in 2019 to be approximately
$15.0 million or 2.0% of
revenues.
Conference Call Information
The conference call is scheduled for today, Tuesday, February 26, 2019 at 4:30 p.m. ET. The call will be broadcast live
over the Internet hosted at the Investor Relations section of
Medifast's website at www.MedifastInc.com, and will be archived
online through March 12, 2019. In
addition, listeners may dial (855) 560-2579.
A telephonic playback will be available from 6:30 p.m. ET, February 26,
2019, through March 5, 2019.
Participants can dial (877) 344-7529 to hear the playback and enter
passcode 10128715.
About Medifast®:
Medifast (NYSE: MED) is a leading manufacturer and distributor
of clinically proven, healthy living products and programs. The
brand has been recommended by more than 20,000 doctors since its
founding. Its integrated coach model leverages nearly 40 years of
experience from medical, franchise, e-commerce, and direct selling
channels. Medifast and its community of independent OPTAVIA Coaches
embrace the future of wellness with a shared vision to offer the
world lifelong transformation, one healthy habit at a time™.
OPTAVIA® is represented by a community of OPTAVIA Coaches who teach
Clients healthy habits, while offering support and guidance on
their transformation journey. In 2018, Medifast announced it will
expand into the Asia-Pacific
markets of Hong Kong and
Singapore in 2019 with its
integrated coach model. Medifast is traded on the New York Stock
Exchange and was named to Forbes' 100 Most Trustworthy Companies in
America List in 2016 and 2017. For
more information, visit www.MedifastInc.com or
www.OPTAVIA.com.
MED-F
Forward Looking Statements
Please Note: This release contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally can be identified by use
of phrases or terminology such as "intend" or other similar words
or the negative of such terminology. Similarly, descriptions of
Medifast's objectives, strategies, plans, goals or targets
contained herein are also considered forward-looking statements.
Medifast believes this release should be read in conjunction with
all of its filings with the United States Securities and Exchange
Commission and cautions its readers that these forward-looking
statements are subject to certain events, risks, uncertainties, and
other factors. Some of these factors include, among others,
Medifast's inability to attract and retain independent
OPTAVIA Coaches and Members, stability in the pricing of
print, TV and Direct Mail marketing initiatives affecting the cost
to acquire customers, increases in competition, litigation,
regulatory changes, and its planned growth into new domestic and
international markets and new channels of distribution. Although
Medifast believes that the expectations, statements, and
assumptions reflected in these forward- looking statements are
reasonable, it cautions readers to always consider all of the risk
factors and any other cautionary statements carefully in evaluating
each forward-looking statement in this release, as well as those
set forth in its latest Annual Report on Form 10-K and Quarterly
Report on Form 10-Q, and other filings filed with the United States
Securities and Exchange Commission, including its current reports
on Form 8-K. All of the forward-looking statements contained herein
speak only as of the date of this release.
MEDIFAST, INC. AND
SUBSIDIARIES
|
CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
|
(in thousands,
except per share amounts & dividend data)
|
|
|
|
Three months ended
December 31,
|
|
Year ended
December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
145,844
|
|
$
|
78,007
|
|
$
|
501,003
|
|
$
|
301,563
|
Cost of
sales
|
|
|
36,753
|
|
|
18,881
|
|
|
121,104
|
|
|
73,751
|
Gross
profit
|
|
|
109,091
|
|
|
59,126
|
|
|
379,899
|
|
|
227,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
|
89,288
|
|
|
49,640
|
|
|
310,836
|
|
|
188,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
19,803
|
|
|
9,486
|
|
|
69,063
|
|
|
39,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income,
net
|
|
|
366
|
|
|
206
|
|
|
1,306
|
|
|
558
|
Other income
(expense)
|
|
|
1
|
|
|
104
|
|
|
179
|
|
|
136
|
|
|
|
367
|
|
|
310
|
|
|
1,485
|
|
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations before income taxes
|
|
|
20,170
|
|
|
9,796
|
|
|
70,548
|
|
|
40,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
4,517
|
|
|
2,490
|
|
|
14,759
|
|
|
12,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
15,653
|
|
$
|
7,306
|
|
$
|
55,789
|
|
$
|
27,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
1.32
|
|
$
|
0.61
|
|
$
|
4.67
|
|
$
|
2.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
1.30
|
|
$
|
0.60
|
|
$
|
4.62
|
|
$
|
2.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,894
|
|
|
11,941
|
|
|
11,947
|
|
|
11,924
|
Diluted
|
|
|
12,014
|
|
|
12,148
|
|
|
12,079
|
|
|
12,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
|
0.75
|
|
$
|
0.48
|
|
$
|
2.19
|
|
$
|
1.44
|
MEDIFAST, INC. AND
SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
|
(in thousands,
except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
|
|
|
|
|
|
|
ASSETS
|
Current
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
81,364
|
|
$
|
75,077
|
Accounts
receivable-net of doubtful accounts of $394 and $40
at
|
|
|
|
|
|
|
|
December 31, 2018 and
2017, respectively.
|
|
|
|
1,011
|
|
|
576
|
Inventory
|
|
|
|
38,888
|
|
|
19,328
|
Investment
securities
|
|
|
|
19,670
|
|
|
23,757
|
Income taxes,
prepaid
|
|
|
|
-
|
|
|
2,272
|
Prepaid expenses and
other current assets
|
|
|
|
4,586
|
|
|
4,188
|
Total current
assets
|
|
|
|
145,519
|
|
|
125,198
|
|
|
|
|
|
|
|
|
Property, plant and
equipment - net
|
|
|
|
19,747
|
|
|
18,611
|
Other
assets
|
|
|
|
1,183
|
|
|
2,120
|
Deferred tax
assets
|
|
|
|
2,980
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
$
|
169,429
|
|
$
|
145,929
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
|
$
|
60,323
|
|
$
|
37,140
|
Total current
liabilities
|
|
|
|
60,323
|
|
|
37,140
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
|
-
|
|
|
208
|
Total
liabilities
|
|
|
|
60,323
|
|
|
37,348
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
Common stock, par
value $.001 per share: 20,000 shares authorized;
|
|
|
|
|
|
|
|
12,117 and 12,103
issued and 11,868 and 11,971 outstanding
|
|
|
|
|
|
|
|
at December 31, 2018
and December 31, 2017, respectively
|
|
|
|
12
|
|
|
12
|
Additional paid-in
capital
|
|
|
|
8,802
|
|
|
4,967
|
Accumulated other
comprehensive loss
|
|
|
|
(173)
|
|
|
(160)
|
Retained
earnings
|
|
|
|
131,344
|
|
|
103,762
|
Less: Treasury stock
at cost, 193 shares at December 31, 2018
|
|
|
|
(30,879)
|
|
|
-
|
Total
stockholders' equity
|
|
|
|
109,106
|
|
|
108,581
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
$
|
169,429
|
|
$
|
145,929
|
|
|
|
|
|
|
|
|
The impact of the
adoption of the new revenue standard on the Company's Consolidated
Statements of Income and Consolidated Balance Sheets was as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2018
|
|
Year ended
December 31, 2018
|
|
|
As
Reported
|
|
Balances
without
adoption of ASC 606
|
|
Effect of
Change
|
|
As
Reported
|
|
Balances
without
adoption of ASC 606
|
|
Effect of
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
145,844
|
|
$
|
142,753
|
|
$
|
3,091
|
|
$
|
501,003
|
|
$
|
499,195
|
|
$
|
1,808
|
Cost of
sales
|
|
|
36,753
|
|
|
36,046
|
|
|
(707)
|
|
|
121,104
|
|
|
120,590
|
|
|
(514)
|
Gross
profit
|
|
|
109,091
|
|
|
106,707
|
|
|
2,384
|
|
|
379,899
|
|
|
378,605
|
|
|
1,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
|
89,288
|
|
|
87,943
|
|
|
(1,345)
|
|
|
310,836
|
|
|
309,851
|
|
|
(985)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
19,803
|
|
|
18,764
|
|
|
1,039
|
|
|
69,063
|
|
|
68,754
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income,
net
|
|
|
366
|
|
|
366
|
|
|
-
|
|
|
1,306
|
|
|
1,306
|
|
|
-
|
Other income
(expense)
|
|
|
1
|
|
|
1
|
|
|
-
|
|
|
179
|
|
|
179
|
|
|
-
|
|
|
|
367
|
|
|
367
|
|
|
-
|
|
|
1,485
|
|
|
1,485
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations before income taxes
|
|
|
20,170
|
|
|
19,131
|
|
|
1,039
|
|
|
70,548
|
|
|
70,239
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
4,517
|
|
|
4,300
|
|
|
(217)
|
|
|
14,759
|
|
|
14,696
|
|
|
(63)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
15,653
|
|
$
|
14,831
|
|
$
|
822
|
|
$
|
55,789
|
|
$
|
55,543
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
1.32
|
|
$
|
1.25
|
|
$
|
0.07
|
|
$
|
4.67
|
|
$
|
4.65
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
1.30
|
|
$
|
1.23
|
|
$
|
0.07
|
|
$
|
4.62
|
|
$
|
4.60
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,894
|
|
|
11,894
|
|
|
|
|
|
11,947
|
|
|
11,947
|
|
|
|
Diluted
|
|
|
12,014
|
|
|
12,014
|
|
|
|
|
|
12,079
|
|
|
12,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
Balances
without
adoption of ASC 606
|
|
Effect of
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
$
|
1,011
|
|
$
|
81
|
|
$
|
930
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
|
38,888
|
|
|
38,421
|
|
|
467
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and
other current assets
|
|
|
4,586
|
|
|
4,509
|
|
|
77
|
|
|
|
|
|
|
|
|
|
Deferred tax
assets
|
|
|
2,980
|
|
|
2,498
|
|
|
482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
|
60,323
|
|
|
56,595
|
|
|
3,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
131,344
|
|
|
133,116
|
|
|
(1,772)
|
|
|
|
|
|
|
|
|
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/medifast-inc-announces-fourth-quarter-and-full-year-2018-financial-results-300802664.html
SOURCE Medifast, Inc.