BALTIMORE, May 5, 2020 /PRNewswire/ -- Medifast (NYSE:
MED), the company behind one of the fastest-growing health and
wellness communities, OPTAVIA®, today reported results
for the first quarter ended March 31,
2020.
First Quarter 2020 Highlights Compared to Prior-Year
Period
- Revenue increased 7.6% to $178.5
million
- 19.9% growth in active earning OPTAVIA Coaches to
32,600
- Net income decreased 11.0% to $18.5
million
- Non-GAAP adjusted net income increased 10.2% to $22.9 million
- Earnings per diluted share ("EPS") of $1.56, a decrease of 8.2%
- Non-GAAP adjusted earnings per diluted share of $1.93, a 13.5% increase
- Declared a quarterly cash dividend of $13.4 million, or $1.13 per share payable on May 6, 2020, an increase of over 50% compared to
the prior-year period
- Strong financial position with $105.3
million of cash, cash equivalents and investment securities
with no debt.
"We had a strong start to the year, with revenue and EPS
exceeding guidance driven by a record number of active earning
OPTAVIA coaches. Our performance demonstrates the compelling
fundamentals of our business, and the resonance of our products and
services with Coaches and Clients in the
United States and increasingly around the world. We have a
highly attractive financial model and a strong balance sheet that
positions the Company for long-term growth, and we are seeing
encouraging trends as our community of independent OPTAVIA
Coaches adapts to new ways of working and interacting with their
clients. Our organization has reacted well to the challenges of the
global COVID-19 pandemic and we've made adjustments to our planned
programs to reflect the new operating environment. While the full
impact of the pandemic is unpredictable and difficult to forecast,
we feel highly confident in our ability to drive demand and deliver
effectively for our OPTAVIA Coaches and their clients," said
Dan Chard, Chief Executive Officer
of Medifast.
First Quarter 2020 Results
First quarter revenue increased 7.6% to $178.5 million from revenue of $165.9 million for the first quarter of 2019.
OPTAVIA-branded products represented 79% of consumable
units sold for the first quarter compared to 73% for the same
period a year ago.
The total number of active earning OPTAVIA Coaches
increased 19.9% to 32,600, compared to 27,200 for the first quarter
of 2019. The average revenue per active earning OPTAVIA
Coach decreased 8.3% to $5,333
compared to $5,817 for the first
quarter last year.
Gross profit increased 8.1% to $135.2
million from $125.1 million
for the first quarter of 2019. The Company's gross profit as a
percentage of revenue increased 40 basis points year-over-year to
75.8% from 75.4%, which was the result of our price increase taken
mid-year 2019 coupled with a reduction of sales discounts realized
during the first quarter of 2020 as compared to a year ago.
Selling, general and administrative expenses ("SG&A")
increased $11.3 million to
$111.7 million compared to
$100.4 million for the first quarter
of 2019, primarily due to higher OPTAVIA commission expense,
incremental professional service costs in connection with the
Schedule 13D filing, increased salaries and benefits and severance.
SG&A as a percentage of revenue increased 210 basis points
year-over-year to 62.6% of revenue. Non-GAAP adjusted SG&A
increased $5.7 million to
$106.1 million and Non-GAAP adjusted
SG&A as a percentage of revenue decreased 100 basis points
year-over-year to 59.5%. Non-GAAP adjusted SG&A excludes
expenses in connection with the Schedule 13D filing of $4.6 million and severance costs of $1.0 million resulting from organizational change
with the Company's CFO.
Income from operations decreased $1.2
million to $23.5 million from
$24.7 million in the prior-year
period as increased gross profit was offset by increased SG&A.
Income from operations as a percentage of revenue was 13.2% for the
quarter, a decrease of 170 basis points from the year-ago period.
Non-GAAP adjusted income from operations increased $4.4 million to $29.1
million. Non-GAAP adjusted income from operations as a
percentage of revenue was 16.3%, an increase of 140 basis points
from the year-ago period.
The effective tax rate was 21.8% for the first quarter of 2020
compared to a 17.1% expense in the year-ago period. The
increase in the first quarter effective tax rate primarily reflects
the impact of an increase in the state tax rate and a decrease in
tax benefit of stock compensation.
First quarter net income was $18.5
million, or $1.56 per diluted
share, based on approximately 11.8 million shares outstanding.
Non-GAAP adjusted net income was $22.9
million, or $1.93 per diluted
share. First quarter 2019 net income was $20.8 million, or $1.70 per diluted share, based on approximately
12.2 million shares outstanding.
Balance Sheet
The Company's balance sheet remains strong with cash, cash
equivalents, and investment securities of $105.3 million as of March
31, 2020 compared to $92.7
million at December 31, 2019.
The Company remains free of interest-bearing debt.
The Company declared a quarterly cash dividend of $13.4 million, or $1.13 per share that is payable on May 6, 2020. The Company did not repurchase any
shares during the first quarter of 2020. There are
approximately 2,369,000 shares of common stock remaining under the
Company's share repurchase program. Medifast expects to maintain a
program of paying dividends on a quarterly basis.
Outlook
The Company cannot reasonably estimate the extent and duration
of the business and macroeconomic impacts, and related financial
impacts to the Company, from the COVID-19 pandemic. The Company
intends to update its guidance for full year 2020 when it can
reasonably estimate the impact.
Conference Call Information
The conference call is scheduled for today, Tuesday, May 5, 2020 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 19, 2020. In
addition, listeners may dial (855) 560-2579.
A telephonic playback will be available from 6:30 p.m. ET, May 5,
2020, through May 12, 2020.
Participants can dial (877) 344-7529 to hear the playback and enter
passcode 10143084.
About Medifast®:
Medifast (NYSE: MED) is the company behind one of the
fastest-growing health and wellness
communities, OPTAVIA®, which offers Lifelong
Transformation, One Healthy Habit at a Time®. Based on nearly 40
years of experience, Medifast has redefined direct selling by
combining the best aspects of the model. Its community of thousands
of independent OPTAVIA Coaches teach Clients to develop
holistic healthy habits through products and clinically proven
plans, the Habits of Health® Transformational System and
comprehensive support from a community of like-minded people. In
2019, Medifast expanded the OPTAVIA movement globally,
beginning with the Asia-Pacific region. Medifast is
traded on the New York Stock Exchange and was named to Fortune's
100 Fastest-Growing Companies list in 2019 and 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
Financial Disclaimer
OPTAVIA makes no guarantee of financial success. Success
with OPTAVIA results from successful sales efforts, which
require hard work, diligence, skill, persistence, competence, and
leadership. Please see the OPTAVIA Income Disclosure
Statement (bit.ly/idsOPTAVIA) for statistics on actual
earnings of Coaches.
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," "anticipate," "expects"
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, the impact of the COVID-19 pandemic
on Medifast's results, Medifast's inability to attract and retain
independent OPTAVIA Coaches and clients, Medifast's
inability to prevent the use of stolen identities and credit cards
outside of the Company's systems to transact business on the
Company's e-commerce sites, increases in competition, litigation,
regulatory changes, the severity, length and ultimate impact of
COVID-19 on people and economies, and Medifast's 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,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
178,461
|
|
$
|
165,876
|
Cost of
sales
|
|
|
43,221
|
|
|
40,729
|
Gross
profit
|
|
|
135,240
|
|
|
125,147
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
|
111,707
|
|
|
100,432
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
23,533
|
|
|
24,715
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
Interest income,
net
|
|
|
110
|
|
|
312
|
Other
expense
|
|
|
(19)
|
|
|
(6)
|
|
|
|
91
|
|
|
306
|
|
|
|
|
|
|
|
Income from
operations before income taxes
|
|
|
23,624
|
|
|
25,021
|
|
|
|
|
|
|
|
Provision for income
taxes
|
|
|
5,147
|
|
|
4,271
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
18,477
|
|
$
|
20,750
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
$
|
1.57
|
|
$
|
1.75
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
$
|
1.56
|
|
$
|
1.70
|
|
|
|
|
|
|
|
Weighted average
shares outstanding -
|
|
|
|
|
|
|
Basic
|
|
|
11,772
|
|
|
11,880
|
Diluted
|
|
|
11,824
|
|
|
12,240
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
|
1.13
|
|
$
|
0.75
|
MEDIFAST, INC. AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
(in thousands,
except par value)
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
ASSETS
|
Current
Assets
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
$
|
90,670
|
|
$
|
76,974
|
Accounts
receivable-net of doubtful accounts of $112 and $235
at
|
|
|
|
|
|
|
|
March 31, 2020 and
December 31, 2019, respectively
|
|
|
|
390
|
|
|
1,437
|
Inventories
|
|
|
|
47,883
|
|
|
48,771
|
Investment
securities
|
|
|
|
14,593
|
|
|
15,704
|
Income taxes,
prepaid
|
|
|
|
193
|
|
|
5,169
|
Prepaid expenses and
other current assets
|
|
|
|
7,493
|
|
|
6,096
|
Total current
assets
|
|
|
|
161,222
|
|
|
154,151
|
|
|
|
|
|
|
|
|
Property, plant and
equipment - net of accumulated depreciation
|
|
|
|
25,324
|
|
|
26,039
|
Right-of-use
assets
|
|
|
|
12,146
|
|
|
12,803
|
Other
assets
|
|
|
|
2,181
|
|
|
353
|
Deferred tax
assets
|
|
|
|
1,270
|
|
|
1,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
$
|
202,143
|
|
$
|
194,653
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
Current
Liabilities
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
|
|
$
|
78,586
|
|
$
|
76,220
|
Current lease
obligations
|
|
|
|
3,233
|
|
|
3,168
|
Total current
liabilities
|
|
|
|
81,819
|
|
|
79,388
|
|
|
|
|
|
|
|
|
Lease obligations,
less current lease obligations
|
|
|
|
9,575
|
|
|
10,433
|
Total
liabilities
|
|
|
|
91,394
|
|
|
89,821
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
Common stock, par
value $.001 per share: 20,000 shares authorized;
|
|
|
|
|
|
|
|
11,785 and 12,272
issued and 11,781 and 11,764 outstanding
|
|
|
|
|
|
|
|
at March 31, 2020 and
December 31, 2019, respectively
|
|
|
|
12
|
|
|
12
|
Additional paid-in
capital
|
|
|
|
494
|
|
|
-
|
Accumulated other
comprehensive income
|
|
|
|
70
|
|
|
25
|
Retained
earnings
|
|
|
|
110,173
|
|
|
168,788
|
Less: Treasury stock
at cost, 0 and 489 shares at March 31, 2020
and December 31, 2019, respectively
|
|
|
|
-
|
|
|
(63,993)
|
Total
stockholders' equity
|
|
|
|
110,749
|
|
|
104,832
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
$
|
202,143
|
|
$
|
194,653
|
Non-GAAP Financial Measures
In an effort to provide investors with additional information
regarding our results as determined by US GAAP ("GAAP"), we
disclose various non-GAAP financial measures in our quarterly
earnings press release and other public disclosures. The following
GAAP financial measures have been presented on an as adjusted
basis: SG&A, income from operations, net income and diluted
earnings per share. Each of these as adjusted financial measures
excludes the impact of certain amounts as further identified below
and have not been calculated in accordance with GAAP. A
reconciliation of each of these non-GAAP financial measures to its
most comparable GAAP financial measure is included below. These
non-GAAP financial measures are not intended to replace GAAP
financial measures.
We use these non-GAAP financial measures internally to evaluate
and manage the Company's operations because we believe they provide
useful supplemental information regarding the Company's on-going
economic performance. We have chosen to provide this information to
investors to enable them to perform more meaningful comparisons of
operating results and as a means to emphasize the results of
on-going operations.
The following tables reconcile the non-GAAP financial measures
included in this report (in thousands):
MEDIFAST, INC. AND
SUBSIDIARIES
|
NON-GAAP FINANCIAL
MEASURES (UNAUDITED)
|
(in thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
$
|
111,707
|
|
$
|
100,432
|
Adjustments
|
|
|
|
|
|
|
Professional services
for 13D Filing
|
|
|
4,608
|
|
|
-
|
Incremental severance
costs
|
|
|
998
|
|
|
-
|
Adjusted selling,
general, and administrative
|
|
$
|
106,101
|
|
$
|
100,432
|
|
|
|
|
|
|
|
Income from
operations
|
|
$
|
23,533
|
|
$
|
24,715
|
Adjustments
|
|
|
|
|
|
|
Professional services
for 13D Filing
|
|
|
4,608
|
|
|
-
|
Incremental severance
costs
|
|
|
998
|
|
|
-
|
Adjusted income from
operations
|
|
$
|
29,139
|
|
$
|
24,715
|
|
|
|
|
|
|
|
Net income
|
|
$
|
18,477
|
|
$
|
20,750
|
Adjustments, net of
tax
|
|
|
|
|
|
|
Professional services
for 13D Filing
|
|
|
3,604
|
|
|
-
|
Incremental severance
costs
|
|
|
781
|
|
|
-
|
Adjusted net
income
|
|
$
|
22,862
|
|
$
|
20,750
|
|
|
|
|
|
|
|
Diluted earnings per
share(1)
|
|
$
|
1.56
|
|
$
|
1.70
|
Impact for
adjustments(1)
|
|
|
0.37
|
|
|
-
|
Adjusted diluted
earnings per share(1)
|
|
$
|
1.93
|
|
$
|
1.70
|
|
|
|
|
|
|
|
(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.
|
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SOURCE Medifast, Inc.