BALTIMORE, May 3, 2018 /PRNewswire/ -- Medifast, Inc.
(NYSE: MED), a leading manufacturer and distributor of clinically
proven, healthy living products and programs, today reported
financial results for the first quarter ended March 31, 2018.
First Quarter 2018 Highlights:
- Medifast revenue of $98.6
million, an increase of 39.6% year-over-year
- Active earning OPTAVIA Coaches of 16,700, an increase of
28.5% year-over-year
- Net income of $12.2 million
compared to net income of $6.1
million for the first quarter of 2017
- Earnings per diluted share ("EPS") of $1.01 compared to EPS of $0.51 for the first quarter of 2017
"We are off to a strong start in 2018 driven by our focused,
transformational business model that continues to deliver optimal
health to our clients through our community of OPTAVIA
Coaches," said Dan Chard, Medifast's
Chief Executive Officer. "This helped fuel growth and
profitability that exceeded our expectations for the first quarter
and has led to our raising our annual sales and earnings
outlook."
First Quarter 2018 Results
Effective at the beginning of the first quarter ended
March 31, 2018, we changed how we
report sales going forward to simplify and align with changes in
the way we now manage the business, review operating performance,
and allocate resources. We previously disclosed entity-wide
disclosures for sales by channel for OPTAVIA, Medifast
Direct, Franchise Medifast Weight Control Centers and Medifast
Wholesale. Due to the interchangeable nature of our customers
amongst sale channels, sales migration to OPTAVIA, and
realignment of internal operations, we will now be operating and
reporting as a single sales channel. This change in our
financial reporting structure is a testament to our success in
transforming and restructuring the business and reflection of how
the business is managed today.
For the first quarter of 2018, revenue increased 39.6% to
$98.6 million from revenue of
$70.6 million for the first quarter
last year. OPTAVIA branded products represented 58% of
consumable units sold for the first quarter of 2018 compared to 17%
for the first quarter of last year. The total number of active
earning OPTAVIA Coaches for the first quarter of 2018
increased to 16,700, compared to 13,000 for the first quarter of
2017. The average revenue per active earning OPTAVIA Coach
for the first quarter of 2018 increased 18.3% to $5,278 compared to $4,463 for the first quarter last year.
Gross profit for the first quarter of 2018 increased to
$74.8 million from $52.9 million for the first quarter of 2017. The
Company's gross profit as a percentage of revenue increased 100
basis points to 75.9% from 74.9% for the first quarter last year.
The increase in gross margin percentage was a result of
improved inventory management and shipping expenses.
Selling, general and administrative expenses ("SG&A")
increased $15.8 million to
$60.1 million compared to
$44.3 million for the first quarter
of 2017, primarily as a result of higher OPTAVIA commission
expense as a result of higher sales. SG&A as a percentage of
revenue decreased 170 basis points to 61.0% compared to 62.7% in
the first quarter last year.
Operating income increased $6.1
million to $14.7 million from
$8.6 million for the first quarter of
2017 primarily as a result of increased gross profit, partially
offset by increased SG&A expenses. Operating income as a
percentage of revenue increased 270 basis points to 14.9% compared
to 12.2% in the first quarter of 2017.
The first quarter 2018 effective tax rate was 18.1%, compared to
29.5% for the first quarter of 2017. This decrease was
primarily a result of the decrease in the Federal statutory rate
pursuant to the Tax Cuts & Jobs Act as well as the discrete
accounting for taxes associated with share-based
compensation. Excluding the discrete accounting for taxes
associated with share-based compensation, the first quarter
effective tax rate would have been 23.1%.
Net income for the first quarter of 2018 was $12.2 million, or $1.01 per diluted share, based on approximately
12.1 million shares outstanding. First quarter 2017 net income was
$6.1 million, or $0.51 per diluted share based on approximately
12.0 million shares outstanding.
Balance Sheet
The Company's balance sheet remains strong with stockholders'
equity of $113.6 million and working
capital of $92.9 million as of
March 31, 2018. Cash, cash
equivalents, and investment securities increased $10.4 million to $109.2
million as of March 31, 2018
compared to $98.8 million at
December 31, 2017. The Company
remains free of interest bearing debt.
The Company declared a quarterly cash dividend of $5.7 million, or $0.48 per share, during the first quarter of
2018. The Company has approximately 850,000 shares remaining
on its repurchase authorization as of March
31, 2018.
Adoption of Accounting Standard Update 2014-09, Revenue
from Contracts with Customers ("ASC 606")
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 ending
March 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 March 31, 2018
from the implementation of ASC 606. For the quarter ended
March 31, 2018, revenue increased
$1.3 million, or 1.4%, which resulted
in gross profit increasing $1.1
million, or 1.5%. Reported gross profit as a
percentage of revenue increased 10 basis points to 75.9% from
75.8%. Income from operations was positively impacted by
$0.5 million, or 3.3%, resulting in
increased net income and diluted earnings per share of $0.4 million, or $0.03 per share, respectively.
As of March 31, 2018, working
capital decreased $2.1 million and
stockholders' equity decreased $1.6
million as a result of the impact ASC 606.
Outlook
The Company expects second quarter revenue to be in the range of
$99.0 million to $102.0 million and earnings per diluted share to
be in the range of $0.94 to
$0.97. The Company is raising
its guidance for the full year 2018, expecting revenue of
$385 million to $395 million and earnings per diluted share of
$3.55 to $3.65. This compares to the Company's previous
annual guidance for revenue of $350
million to $360 million and
earnings per diluted share of $3.15
to $3.25. The full year 2018 earnings
guidance assumes a 21% to 22% effective tax rate.
Conference Call Information
The conference call is scheduled for today, Thursday, May 3, 2018 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 May 17, 2018. In
addition, listeners may dial (855) 560-2579.
A telephonic playback will be available from 6:30 p.m. ET, May 8,
2018, through May 10, 2018.
Participants can dial (877) 344-7529 to hear the playback and enter
passcode 10119661.
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. In 2016, the company announced OPTAVIA®, an
exclusive brand and product line sold through its community of
independent Coaches who offer support and guidance to their
Clients. In partnership with OPTAVIA Coaches, franchise
partners, and its Scientific Advisory Board, Medifast offers
comprehensive wellness products and programs that focus on creating
sustainable change by helping people learn to incorporate healthy
habits into their lives. 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
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
|
(in thousands,
except per share amounts & dividend data)
|
|
|
|
Three months ended
March 31,
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
98,596
|
|
$
|
70,622
|
Cost of
sales
|
|
|
23,788
|
|
|
17,730
|
Gross
profit
|
|
|
74,808
|
|
|
52,892
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
|
60,125
|
|
|
44,283
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
14,683
|
|
|
8,609
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
Interest income,
net
|
|
|
249
|
|
|
63
|
Other income
(expense)
|
|
|
(1)
|
|
|
39
|
|
|
|
248
|
|
|
102
|
|
|
|
|
|
|
|
Income from
operations before income taxes
|
|
|
14,931
|
|
|
8,711
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
2,709
|
|
|
2,566
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
12,222
|
|
$
|
6,145
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
1.02
|
|
$
|
0.52
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
1.01
|
|
$
|
0.51
|
|
|
|
|
|
|
|
Weighted average
shares outstanding -
|
|
|
|
|
|
|
Basic
|
|
|
12,030
|
|
|
11,901
|
Diluted
|
|
|
12,139
|
|
|
12,009
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
|
0.48
|
|
$
|
0.32
|
MEDIFAST, INC. AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
(in thousands,
except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
ASSETS
|
Current
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
86,963
|
|
$
|
75,077
|
Accounts
receivable-net of doubtful accounts of $98 at March 31, 2018
and
|
|
|
|
|
|
|
|
allowance for sales
returns and doubtful accounts of $597 at December 31,
2017
|
|
|
|
1,025
|
|
|
576
|
Inventory
|
|
|
|
17,288
|
|
|
19,328
|
Investment
securities
|
|
|
|
22,278
|
|
|
23,757
|
Income taxes,
prepaid
|
|
|
|
-
|
|
|
2,272
|
Prepaid expenses and
other current assets
|
|
|
|
3,577
|
|
|
4,188
|
Total current
assets
|
|
|
|
131,131
|
|
|
125,198
|
|
|
|
|
|
|
|
|
Property, plant and
equipment - net
|
|
|
|
18,358
|
|
|
18,611
|
Other
assets
|
|
|
|
1,902
|
|
|
2,120
|
Deferred tax
assets
|
|
|
|
426
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
$
|
151,817
|
|
$
|
145,929
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
|
$
|
38,187
|
|
$
|
37,140
|
Total current
liabilities
|
|
|
|
38,187
|
|
|
37,140
|
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
|
-
|
|
|
208
|
Total
liabilities
|
|
|
|
38,187
|
|
|
37,348
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
Common stock, par
value $.001 per share: 20,000 shares authorized;
|
|
|
|
|
|
|
|
12,139 and 12,103
issued and 12,063 and 11,971 outstanding
|
|
|
|
|
|
|
|
at March 31, 2018 and
December 31, 2017, respectively
|
|
|
|
12
|
|
|
12
|
Additional paid-in
capital
|
|
|
|
6,369
|
|
|
4,967
|
Accumulated other
comprehensive loss
|
|
|
|
(244)
|
|
|
(160)
|
Retained
earnings
|
|
|
|
108,243
|
|
|
103,762
|
Less: Treasury stock
at cost, 9 shares at March 31, 2018
|
|
|
|
(750)
|
|
|
-
|
Total
stockholders' equity
|
|
|
|
113,630
|
|
|
108,581
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
$
|
151,817
|
|
$
|
145,929
|
As required by ASC
606, the impact of the adoption of the new revenue standard on our
Condensed Consolidated Statements of Income and Condensed
Consolidated Balance Sheets was as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31, 2018
|
|
|
As
Reported
|
|
Balances without
adoption
of ASC 606
|
|
Effect of
Change
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
98,596
|
|
$
|
97,254
|
|
$
|
1,342
|
Cost of
sales
|
|
|
23,788
|
|
|
23,521
|
|
|
(267)
|
Gross
profit
|
|
|
74,808
|
|
|
73,733
|
|
|
1,075
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
|
60,125
|
|
|
59,523
|
|
|
(602)
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
14,683
|
|
|
14,210
|
|
|
473
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
Interest income,
net
|
|
|
249
|
|
|
249
|
|
|
-
|
Other income
(expense)
|
|
|
(1)
|
|
|
(1)
|
|
|
-
|
|
|
|
248
|
|
|
248
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income from
operations before income taxes
|
|
|
14,931
|
|
|
14,458
|
|
|
473
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
2,709
|
|
|
2,608
|
|
|
(101)
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
12,222
|
|
$
|
11,850
|
|
$
|
372
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
1.02
|
|
$
|
0.99
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
1.01
|
|
$
|
0.98
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding -
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
12,030
|
|
|
12,030
|
|
|
|
Diluted
|
|
|
12,139
|
|
|
12,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2018
|
|
|
As
Reported
|
|
Balances without
adoption
of ASC 606
|
|
Effect of
Change
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
$
|
1,025
|
|
$
|
92
|
|
$
|
933
|
Inventory
|
|
|
17,288
|
|
|
16,624
|
|
|
664
|
Prepaid expenses and
other current assets
|
|
|
3,577
|
|
|
3,491
|
|
|
86
|
Deferred tax
assets
|
|
|
426
|
|
|
-
|
|
|
426
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
|
38,187
|
|
|
34,416
|
|
|
3,771
|
Deferred tax
liabilities
|
|
|
-
|
|
|
16
|
|
|
(16)
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
Retained
earnings
|
|
|
108,243
|
|
|
109,889
|
|
|
(1,646)
|
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SOURCE Medifast, Inc.