Medifast, Inc. Announces Second Quarter 2017 Financial Results

Second Quarter 2017 Revenue of $75.7 Million and EPS of $0.63 Exceed Company Guidance

OWINGS MILLS, Md., Aug. 8, 2017 /PRNewswire/ -- Medifast, Inc. (NYSE: MED), a leading provider of clinically studied healthy living products and programs, today reported financial results for the second quarter ended June 30, 2017.

Medifast logo. (PRNewsFoto/Medifast, Inc.)

"Our second quarter financial results reflect the successful execution of our strategic growth initiatives as our efforts have continued to position our business for an accelerated rate of growth.  We are very pleased to generate revenues and profitability above our expectations for the quarter," said Daniel R. Chard, Medifast's Chief Executive Officer.  "We have positive business momentum with our recently rebranded OPTAVIA coach community, and when combined with our scalable infrastructure and strong balance sheet, we believe we are well positioned for future growth and to create value for our shareholders."

Second Quarter 2017 Results

Net income in the second quarter of 2017 was $7.6 million, or $0.63 per diluted share, based on approximately 12.1 million shares outstanding. Second quarter 2016 net income was $3.4 million, or $0.29 per diluted share based on approximately 11.9 million shares outstanding.  Adjusted net income in the second quarter of 2016 was $7.5 million, or $0.63 per diluted share, excluding impairment costs.

For the second quarter of 2017, Medifast revenue increased 6.4% to $75.7 million from revenue of $71.1 million in the second quarter of 2016.

Revenue in OPTAVIA™, formerly known as Take Shape For Life®, was up 10.6% to $63.5 million in the second quarter of 2017, compared to $57.4 million in the second quarter of the prior year. This is the seventh consecutive quarter of growth. The total number of active earning OPTAVIA™ Coaches in the second quarter of 2017 increased to 13,500, compared to 12,800 in the second quarter of 2016. The average revenue per active earning OPTAVIA™ Coach for the second quarter of 2017 was $4,713 as compared to $4,479 in second quarter of 2016.

Medifast Direct revenue decreased to $8.6 million in the second quarter of 2017, compared to $9.3 million in the second quarter of 2016. Second quarter advertising spend increased to $1.9 million from $1.6 million in the second quarter of 2016.

Revenue in the Franchise Medifast Weight Control Centers decreased to $3.4 million from $4.1 million in the second quarter of last year. The decrease in revenue was primarily driven by fewer franchise centers in operation during the period combined with a decline in activity within the centers and a decrease in resellers. The Company ended the quarter with 36 franchise centers and 2 reseller locations in operation compared to 57 franchise centers at the end of the same period last year. 

Second quarter 2017 Wholesale revenue decreased to $0.2 million compared to the prior year period at $0.3 million.

Gross profit for the second quarter of 2017 increased to $57.6 million compared $53.2 million in the second quarter of 2016. The Company's gross profit as a percentage of revenue increased 130 basis points to 76.1% from 74.8% in the second quarter of 2016.  The increase as a percentage of revenue was primarily driven by a change in product mix with higher prices and efficiencies realized within the Company's supply chain.

Selling, general and administrative expenses ("SG&A") decreased $1.9 million to $46.3 million compared to $48.2 million in the second quarter of 2016. SG&A as a percentage of revenue decreased to 61.1% compared to 67.8% in the second quarter of 2016. The decrease in SG&A was primarily a result of the $6.1 million asset impairment costs incurred during the second quarter of 2016, partially offset by increased commission expenses and increased personnel costs. Excluding the impairment costs, SG&A increased $4.2 million to $46.3 million in the second quarter of 2017 compared to $42.1 million in the second quarter of 2016.  Adjusted SG&A as a percentage of revenue were 61.1% and 59.2% for the second quarter of 2017 and 2016, respectively.

Sales and marketing expense increased $0.4 million in the second quarter of 2017 compared to the second quarter of 2016. 

The second quarter 2017 effective tax rate was 33.8%, compared to 33.3% in the second quarter of 2016.   

Balance Sheet 

The Company's balance sheet remains strong with stockholders' equity of $104.2 million and working capital of approximately $85.6 million as of June 30, 2017.  Cash, cash equivalents, and investment securities increased $11.8 million to $88.6 million as of June 30, 2017 compared to $76.8 million at December 31, 2016. The Company remains free of interest bearing debt.

The Company declared a quarterly cash dividend of $4.1 million, or $0.32 per share, during the second quarter of 2017.  The Company did not repurchase any shares during the first quarter of 2017, and has approximately 850,000 shares remaining on its repurchase authorization as of June 30, 2017. 

Outlook

The Company expects third quarter revenue from continuing operations to be in the range of $72.0 million to $75.0 million and earnings per diluted share from continuing operations to be in the range of $0.48 to $0.51 per diluted share.  The Company reiterated its guidance for full year 2017 revenue of $290.0 million to $300.0 million and raised its full year 2017 earnings per diluted share of $2.05 to $2.15.  The fiscal year 2017 guidance assumes a 33% to 34% effective tax rate.

Non-GAAP Financial Measures

Our Non-GAAP financial measures include adjusted selling, general and administrative expenses, adjusted net income, and adjusted earnings 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 August 8, 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 August 22, 2017. In addition, listeners may dial (855) 560-2579.

A telephonic playback will be available from 6:30 p.m. ET, August 8, 2017, through August 15, 2017. Participants can dial (877) 344-7529 to hear the playback and enter passcode 10110807.

About Medifast®:

Medifast (NYSE: MED) is a leading provider of clinically studied healthy living products and programs. It partners with OPTAVIA™ Coaches to help its clients achieve Optimal Health™ and Wellbeing through a comprehensive approach to Lifelong Transformation, One Healthy Habit at a Time™, with personal support and scientifically proven plans and Fuelings.  Medifast was founded in 1980 in Owings Mills, Maryland and is the brand recommended by more than 20,000 Doctors since 1980.  The company was named to Forbes' 100 Most Trustworthy Companies in America List in 2017 and 2016. For more information, visit 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 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 BALANCE SHEETS (UNAUDITED)

(in thousands, except par value)







June 30,



December 31,






2017



2016










ASSETS

Current Assets









Cash and cash equivalents




$

63,532


$

52,436

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









 of $456 and $449 at June 30, 2017 and December 31, 2016, respectively





914



1,387

Inventory





18,048



18,311

Investment securities





25,020



24,412

Income taxes, prepaid





-



1,249

Prepaid expenses and other current assets





3,210



3,502

Total current assets





110,724



101,297










Property, plant and equipment - net





18,505



19,753

Other assets





286



162

Long-term assets of discontinued operations





-



4










TOTAL ASSETS




$

129,515


$

121,216










LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities









Accounts payable and accrued expenses




$

25,144


$

24,300

Current liabilities of discontinued operations





-



121

Total current liabilities





25,144



24,421










Deferred tax liabilities





196



779

Total liabilities





25,340



25,200










Stockholders' Equity









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









12,124 and 12,027 issued and 11,930 and 11,871 outstanding









at June 30, 2017 and December 31, 2016, respectively





12



12

Additional paid-in capital





4,630



2,672

Accumulated other comprehensive income (loss)





14



(165)

Retained earnings 





99,519



93,497

Total stockholders' equity





104,175



96,016










TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY




$

129,515


$

121,216










 

 

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

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






Three months ended June 30,



Six months ended June 30,




2017


2016


2017


2016
















Revenue


$

75,729


$

71,144


$

146,351


$

143,489


Cost of sales



18,118



17,919



35,848



37,070


Gross profit



57,611



53,225



110,503



106,419
















Selling, general, and administrative



46,301



48,201



90,584



95,127
















Income from operations



11,310



5,024



19,919



11,292
















Other income (expense)














Interest and dividend income, net



141



65



204



180


Other income (expense)



(3)



3



36



(21)





138



68



240



159
















Income from operations before income taxes



11,448



5,092



20,159



11,451
















Provision for income taxes



3,864



1,695



6,430



3,794
















Net income


$

7,584


$

3,397


$

13,729


$

7,657
















Earnings per share - basic


$

0.64


$

0.29


$

1.15


$

0.65
















Earnings per share - diluted


$

0.63


$

0.29


$

1.14


$

0.64
















Weighted average shares outstanding -














     Basic



11,929



11,811



11,915



11,817


     Diluted



12,056



11,884



12,044



11,891
















Cash dividends declared per share


$

0.32


$

0.25


$

0.64


$

0.50
















 

 















MEDIFAST, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(in thousands, except per share amounts)















































Three months ended June 30,


Six months ended June 30,




2017


2016


2017


2016
















Selling, general, and administrative


$

46,301


$

48,201


$

90,584


$

95,127


Adjustments














Impairment of assets



-



6,083



-



6,083


Restructuring charges



-



-



-



1,166


Adjusted selling, general, and administrative


$

46,301


$

42,118


$

90,584


$

87,878
































Three months ended June 30,


Six months ended June 30,




2017


2016


2016


2015
















Net income


$

7,584


$

3,397


$

13,729


$

7,657


Adjustments














Impairment of assets



-



4,058



-



4,067


Restructuring charges



-



-



-



780


Adjusted net income


$

7,584


$

7,455


$

13,729


$

12,504
















Diluted earnings per share (1)


$

0.63


$

0.29


$

1.14


$

0.64


Impact for adjustments (1)



-



0.34



-



0.41


Adjusted diluted earnings per share (1)


$

0.63


$

0.63


$

1.14


$

1.05
















(1) 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 © Medifast, Inc. All Right Reserved.
Trademarks | Terms | Privacy | Guarantee

Medifast is the brand recommended by more than 20,000 doctors since 1980.