Medifast, Inc. Announces Fourth Quarter and Full Year 2016 Financial Results

Company Reports Full Year 2016 Net Revenue of $274.5 Million

Full Year 2016 Profitability Exceeds Guidance

Introduces First Quarter and Fiscal Year 2017 Outlook

OWINGS MILLS, Md., March 9, 2017 /PRNewswire/ -- Medifast, Inc. (NYSE: MED), a leading United States manufacturer and provider of clinically proven weight-loss and healthy living products and programs, today reported financial results for the fourth quarter and full year ended December 31, 2016.

Medifast logo

"2016 was a year of strong execution reflecting our continued disciplined approach to effectively managing our business. We grew our revenue for the first time since 2013, increased our profitability year-over-year, and raised our quarterly dividend for 2017, all of which supported a strong return for shareholders in 2016," said Daniel R. Chard, Medifast's Chief Executive Officer. "At the same time, we embarked on an exciting business evolution process to more aggressively pursue growth strategies. Going forward, we believe we are well positioned to achieve our operational and financial objectives."

Fourth Quarter 2016 Results

Results from Continuing Operations

Income from continuing operations in the fourth quarter of 2016 was $4.1 million, or $0.34 per diluted share, based on approximately 12.0 million shares outstanding. Fourth quarter 2015 income from continuing operations was $3.9 million, or $0.33 per diluted share based on approximately 11.9 million shares outstanding. 

For the fourth quarter, Medifast net revenue from continuing operations increased 2% to $62.5 million from revenue of $61.3 million in the fourth quarter of 2015.

Revenue in Take Shape For Life, was up 8% to $51.8 million in the fourth quarter of 2016, compared to $48.0 million in the fourth quarter of the prior year. This is the fifth consecutive quarter of year-over-year growth.

The total number of active earning Health Coaches in the fourth quarter was 12,500, compared to 11,900 in the fourth quarter of 2015. The average revenue per active earning Health Coach for the quarter was $4,158 as compared to $4,039 in fourth quarter of 2015.

The Company's Medifast Direct business unit revenue decreased to $6.8 million, compared to $9.3 million in the fourth quarter of 2015. Fourth quarter advertising spending for this business unit decreased to $1.6 million from $2.2 million in the fourth quarter of 2015.

Revenue in the Franchise Medifast Weight Control Centers business unit decreased modestly to $3.6 million from $3.7 million in the fourth quarter of last year. The decrease in revenue was primarily driven by fewer franchise centers in operation during the period. The Company ended the quarter with 37 franchise centers and 19 reseller locations in operation compared to 61 franchise centers at the end of the same period last year. 

In the fourth quarter, the Wholesale business unit revenue was consistent with the prior year period at $0.3 million.

Gross profit for the fourth quarter of 2016 increased $1.9 million to $47.1 million compared to the fourth quarter of 2015. The Company's gross profit as a percentage of revenue increased 160 basis points to 75.4% from 73.8% in the fourth quarter of 2015, primarily driven by price increases and efficiencies in the Company's supply chain operations.

Selling, general and administrative expenses ("SG&A") increased $0.8 million to $40.5 million compared to $39.7 million in the fourth quarter of 2015. SG&A as a percentage of net revenue increased 10 basis points to 64.8%, compared to 64.7% in the fourth quarter of 2015. The increase in SG&A was a result of Take Shape For Life commission expense which was a result of the 8% Take Shape For Life revenue growth for the quarter.

Sales and marketing expense decreased $1.1 million in the fourth quarter of 2016 compared to the fourth quarter of 2015. 

The fourth quarter 2016 effective tax rate was 38.2%, compared to 34.3% in the fourth quarter of 2015.  The increase in the effective tax rate was due to an increase in the effective state tax rate and a reduction in research and development credits.

Fiscal 2016 Results

Results from Continuing Operations

For the fiscal year ended December 31, 2016, Medifast net revenue was $274.5 million as compared to net revenue of $272.8 million in 2015.  As a percentage of net revenue, Take Shape For Life represented approximately 81.0%, Medifast Direct represented 12.8%, Medifast Franchise Weight Control Centers represented 5.7%, and Medifast Wholesale Physicians represented 0.5%.

Income from continuing operations for 2016 decreased $1.8 million to $17.8 million, or $1.49 per diluted share based on approximately 11.9 million shares, compared to $19.6 million, or $1.62 per diluted share for the comparable period last year based on approximately 12.1 million shares outstanding. For the fiscal year ended December 31, 2016, adjusted income from continuing operations, excluding the asset impairment charge and restructuring charges, was $22.6 million, or $1.89 per diluted share. Excluding the extraordinary legal and advisory expenses resulting from 13D filers in 2015, adjusted income from continuing operations would have been $20.9 million or $1.73 per diluted share in 2015.

Discontinued Operations

As previously disclosed, the Company exited the Medifast Weight Control Center corporate model with the sale of 41 centers to existing franchise partners and the closure of the remaining 34 corporate centers. For fiscal 2016, the Company had no activity from discontinued operations compared to income from discontinued operations, net of tax, of $0.5 million for fiscal 2015.

Balance Sheet 

The Company's balance sheet remains strong with stockholders' equity of $96.0 million and working capital of approximately $76.9 million as of December 31, 2016.  Cash, cash equivalents, and investment securities increased $9.7 million to $76.8 million as of December 31, 2016 compared to $67.1 million at December 31, 2015. The Company remains free of interest bearing debt.

The Company declared a quarterly cash dividend of $3.9 million, or $0.32 per share, during the fourth quarter of 2016, a 28% increase over the previous quarter's cash dividend.  The Company did not repurchase any shares during the fourth quarter of 2016, and has approximately 850,000 shares remaining on its repurchase authorization as of December 31, 2016. 

Outlook

The Company expects first quarter net revenue from continuing operations to be in the range of $69.0 million to $73.0 million and earnings per diluted share from continuing operations to be in the range of $0.45 to $0.48 per diluted share.  2017 full year revenue from continuing operations is expected to be in the range of $290.0 million to $300.0 million and full year earnings per diluted share from continuing operations to be in the range of $2.00 to $2.10 per diluted share.  The fiscal year 2017 guidance assumes a 34% to 35% effective tax rate.

Non-GAAP Financial Measures

Our Non-GAAP financial measures include adjusted income from continuing operations and adjusted income per diluted share.  The Company believes these non-GAAP financial measures are useful to investors because it provides for a more direct comparison of the results for these periods. The non-GAAP financial information is provided in addition to, and not as an alternative to, the Company's reported results prepared in accordance with GAAP. Please refer to the tables in today's press release for a reconciliation of all non-GAAP financial measures.

Conference Call Information

The conference call is scheduled to begin at 4:30 p.m. ET on March 9, 2017. The call will be broadcast live over the Internet hosted at the Investor Relations section of Medifast's website at www.MedifastNow.com, and will be archived online through March 23, 2017. In addition, listeners may dial (855) 560-2579.

A telephonic playback will be available from 6:30 p.m. ET, March 9, 2017, through March 16, 2017. Participants can dial (877) 344-7529 to hear the playback and enter passcode 10102163.

About Medifast®:

Medifast (NYSE: MED) is the leading easy-to-use provider of clinically proven weight-loss and healthy living products and programs. Medifast aims to help customers lead a healthier lifestyle through a holistic approach to weight-loss and weight management. Medifast's proven results are based on the use of structured meal plans featuring Medifast Meals, which are nutritionally designed to assist customers with successful weight-loss and weight management. Medifast was founded in 1980 and is located in Owings Mills, Maryland. For more information, log onto www.MedifastNow.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 Health 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 BALANCE SHEETS

As of December 31, 2016 and 2015

(In thousands, except per share amounts)









2016



2015







ASSETS






Current assets:






Cash and cash equivalents

$

52,436


$

42,037

Accounts receivable-net of allowance for sales returns and doubtful accounts 






      of $449 and $417


1,387



1,633

Inventory


18,311



13,335

Investment securities


24,412



25,072

Income taxes, prepaid


1,249



1,549

Prepaid expenses and other current assets


3,502



2,886

Current assets of discontinued operations


-



353

     Total current assets


101,297



86,865







Property, plant and equipment - net


19,753



29,029

Other assets


162



205

Long-term assets of discontinued operations


4



19







 TOTAL ASSETS

$

121,216


$

116,118







LIABILITIES AND STOCKHOLDERS' EQUITY






Current liabilities:






Accounts payable and accrued expenses

$

24,300


$

22,504

Current maturities of capital leases


-



219

Current liabilities of discontinued operations


121



841

     Total current liabilities


24,421



23,564







Other liabilities: 






Long-term debt, net of current portion


779



3,682

Long-term liabilities of discontinued operations


-



288

     Total liabilities


25,200



27,534







Stockholders' Equity:






Common stock; par value $.001 per share; 20,000 shares authorized;






      12,027 and 12,014 issued at December 31, 2016 and 2015, respectively






      11,871 and 11,797 outstanding at December 31, 2016 and 2015, respectively


12



12

Additional paid-in capital


2,672



-

Accumulated other comprehensive loss


(165)



(62)

Retained earnings 


93,497



88,634

Total stockholders' equity


96,016



88,584







TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

121,216


$

116,118

 

 

MEDIFAST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts & dividend data)
















Three Months Ended December 31,


Years Ended December 31,



2016


2015


2016


2015














Revenue


$

62,467


$

61,312


$

274,534


$

272,773

Cost of sales



15,385



16,094



68,870



71,458

Gross profit



47,082



45,218



205,664



201,315














Selling, general, and administrative



40,468



39,684



178,805



172,631














Income from operations



6,614



5,534



26,859



28,684














Other income (expense)













Interest and dividend income, net



43



211



283



661

Other income (expense)



3



197



(20)



326




46



408



263



987














Income from continuing operations before income taxes



6,660



5,942



27,122



29,671

Provision for income taxes



2,547



2,040



9,287



10,104














Income from continuing operations



4,113



3,902



17,835



19,567

Income from discontinued operations, net of tax



-



(42)



-



491

Net income


$

4,113


$

3,860


$

17,835


$

20,058














Basic earnings per share













Earnings per share from continuing operations


$

0.35


$

0.33


$

1.51


$

1.64

Earnings per share from discontinued operations


$

-


$

-


$

-


$

0.04

Earnings per share


$

0.35


$

0.33


$

1.51


$

1.68














Diluted earnings per share













Earnings per share from continuing operations


$

0.34


$

0.33


$

1.49


$

1.62

Earnings per share from discontinued operations


$

-


$

-


$

-


$

0.04

Earnings per share


$

0.34


$

0.33


$

1.49


$

1.66














Weighted average shares outstanding -













     Basic



11,849



11,766



11,842



11,959

     Diluted



12,004



11,903



11,947



12,071














Cash dividends declared per share


$

0.32


$

0.25


$

1.07


$

0.25

 

 

 

MEDIFAST, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES(1)

(In thousands, except per share amounts)
















Three Months Ended December 31,


Years Ended December 31,



2016


2015


2016


2015














Selling, general, and administrative


$

40,468


$

39,684


$

178,805


$

172,631

Adjustments













Impairment of assets



-



-



6,083



-

Restructuring charges



-



-



1,166



-

Legal expenses- 13D



-



-



-



2,084

Franchise loan guarantee accrual



-



-



-



-

Adjusted selling, general, and administrative


$

40,468


$

39,684


$

171,556


$

170,547





























Three Months Ended December 31,


Years Ended December 31,



2016


2015


2016


2015














Income from operations


$

6,614


$

5,534


$

26,859


$

28,684

Adjustments













Impairment of assets



-



-



6,083



-

Restructuring charges



-



-



1,166



-

Legal expenses- 13D



-



-



-



2,084

Franchise loan guarantee accrual



-



-



-



-

Adjusted income from operations 


$

6,614


$

5,534


$

34,108


$

30,768





























Three Months Ended December 31,


Years Ended December 31,



2016


2015


2016


2015














Income from continuing operations


$

4,113


$

3,902


$

17,835


$

19,567

Adjustments (2)













Impairment of assets



-



-



4,000



-

Restructuring charges



-



-



767



-

Legal expenses- 13D



-



-



-



1,374

Franchise loan guarantee accrual



-



-



-



-

Adjusted income from continuing operations


$

4,113


$

3,902


$

22,602


$

20,941

Loss on discontinued operations, net of tax



-



(42)



-



491

Adjusted net income


$

4,113


$

3,860


$

22,602


$

21,432














Diluted earnings per share from continuing operations (3)


$

0.34


$

0.33


$

1.49


$

1.62

Impact for adjustments (3)



-



-



0.40



0.11

Adjusted diluted earnings per share from continuing operations (3)


$

0.34


$

0.33


$

1.89


$

1.73

Diluted loss per share from discontinued operations (3)


$

-


$

-


$

-


$

0.04

Adjusted diluted earnings per share (3)


$

0.34


$

0.33


$

1.89


$

1.77





















































(1) In regards to the restructuring charges, these non-GAAP measures are being provided as pro-forma statements to provide information regarding expected future performance.  The departed executives included in the restructuring were employed in 2015; and therefore, the 2016 results excluding these charges are not comparative to the 2015 results.

(2) The tax effected impact of adjustments is calculated utilizing the effective tax rate for the period presented, which may differ for quarterly and year-to-date periods. 

(3) The weighted-average diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

 

 

SOURCE Medifast, Inc.

For further information: Investor Contact:ICR, Inc., Katie Turner, (646) 277-1228


print email rss

Sign up to get updates, tips & special offers:

Need to get in touch with us?

Stay connected with Medifast:

Copyright © 2014 Medifast, Inc. All Right Reserved.
Trademarks | Terms | Privacy | Guarantee

Medifast makes no claim that these results are representative of all participants on the Medifast Program. Medifast recommends you consult with a physician before starting a weight-loss program. Individual results will vary. Medifast is the brand recommended by more than 20,000 doctors since 1980. Typical weight loss on the Medifast 5 & 1 Plan® is 2-5 lbs per week for the first two weeks and 1-2 lbs per week thereafter.