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Medifast, Inc.
First Quarter 2010 Highlights Include: -- Net revenue increased 75% year-over-year to $60.6 million, compared to $34.6 million in 2009; -- Take Shape for Life revenue increased 94% year-over-year to $37.6 million; -- Active health coaches increased 78% to 7,100 coaches compared to 4,000 last year; -- Medifast Weight Control Center comparable store sales increased 30% year-over-year; -- Gross profit margin increased 140 basis points to 75.5% compared to the prior year; -- Diluted earnings per share increased 94% to $0.33, compared to $0.17 last year.
For the first quarter ended March 31, 2010, Medifast reported net revenue increased 75% to $60.6 million from net revenue of $34.6 million in the first quarter of the prior year. Each of the Company's three primary distribution channels; Take Shape for Life, Direct Response, and Medifast Weight Control Centers, contributed to this strong year-over-year increase by generating record first quarter results.
Revenues in the direct sales channel, Take Shape for Life, increased 94% to $37.6 million in the first quarter of 2010 compared to $19.4 million in the same period last year. This growth was driven by increased client product sales and increased revenue generated per health coach as result of a record increase in the number of active health coaches. The number of active health coaches increased 78% to approximately 7,100 compared to 4,000 in the first quarter of 2009.
The Company's direct response channel revenue increased 43% to $16.4 million, compared to $11.4 million in first quarter of 2009. On the Company's planned increase in marketing and advertising expenses by approximately 34% or $5.8 million, the direct response channel generated a 2.8 to 1 revenue-to-spend ratio during the first quarter of 2010 compared to a 2.6 to 1 ratio in 2009.
In the first quarter, Medifast Weight Control Center channel revenue increased 75% to $6.6 million, primarily due to record organic growth, improved marketing and advertising effectiveness, and increased revenue per customer, compared to the first quarter of 2009. Comparable store sales increased 30% for the first quarter of 2010 for clinics open greater than one year. The company ended the first quarter with 27 corporate and 18 franchise clinics.
"We continue to experience very strong growth in each of our multi-platform distribution channels. Increasingly the Take Shape for Life, Direct Response, and Medifast Weight Control Center channels are providing a complimentary source of support for health coaches and clients to connect and share Medifast's clinically proven weight-loss programs," said Michael S. McDevitt, Medifast's chief executive officer. "We will expand our platform by strategically investing in our infrastructure and enhancing our message to reach more consumers in both new and existing markets in the future."
Mr. McDevitt continued, "We believe our vertically integrated operations and increased capacity allow us to continually improve the long-term leverage of our business model by expanding our margins and long-term profitable growth. We look forward to building upon the record achievements during the first quarter in 2010."
Gross profit for the first quarter of 2010 increased 78.6% to $45.8 million, compared to $25.6 million in the first quarter of the prior year. The Company's gross profit margin increased 140 basis points to 75.5% in the first quarter versus 74.1% in the first quarter of 2009. Overall, the gross profit margin improvement was primarily due to improved pricing on raw materials and packaging, as well as increased manufacturing efficiencies. In addition, due to the growth of the business, shipping revenue has increased and is now recognized in the Company's consolidated revenue. Previously, shipping revenue was netted against shipping expense in the Company's cost of sales.
Operating income for the first quarter of 2010 was $8.2 million compared to $4.0 million in the same period a year ago. The Company's operating margin expanded 190 basis points to 13.5% from 11.6% for the same period last year. This improvement was due to strong net revenue growth that helped drive improved gross margin, increased leverage of sales and marketing expenses, and the overall strength of the Company's proven business model.
Net income for the first quarter of 2010 was $4.9 million, or $0.33 per diluted share, compared to net income of $2.5 million or $0.17 per share for the comparable period last year.
Operating cash flow increased to $14.2 million for the first quarter of 2010 compared to $5.3 million in the same period last year.
Colonel Brad MacDonald, (Ret.), Chairman of the Board of Directors of Medifast, Inc. commented, "The Board of Directors is extremely pleased with the fact that our recent first quarter of 2010 results mark Medifast's 42nd consecutive quarter of profitable growth. With over 30 years of clinically proven results and products recommended by over 20,000 physicians, Medifast is a differentiated leader in the medical weight loss marketplace and we believe this continues to be a key factor of our current and future success."
Balance Sheet
The Company's balance sheet remains strong with stockholders' equity of $55.3 million and working capital of $33.1 million as of March 31, 2010. Cash, cash equivalents, and investment securities increased 72% or $11.7 million to $28 million, as a result of improved operating cash flow.
Outlook
The Company continues to expect gross profit margin improvement in the range of 50 to 100 basis points in 2010 as compared to the prior year, due to a decrease in the cost of each unit sold and continued manufacturing efficiencies. The Company also continues to anticipate the full year 2010 advertising spend to increase by 15 to 20% compared to last year.
The full year tax rate is expected to be in the range of 39% to 40% and full year diluted shares outstanding of approximately 14.8 to 15.0 million compared to 2009.
In 2010 the Company plans to open 13 to 15 new Medifast Weight Control Centers with the proven model of providing one-on-one support through a personal counselor and personalized program.
Conference Call Information
The Company will host a conference call to discuss these results with additional comments and details. Participants from the Company will be Michael S. McDevitt, Chief Executive Officer, and Brendan Connors, Vice President of Finance.
The conference call is scheduled to begin at 4:30 p.m. EDT on May 5, 2010. The call will be broadcast live over the Internet hosted at the Investor Relations section of Medifast's website at www.choosemedifast.com, and will be archived online through May 19, 2010. In addition, listeners may dial (877) 407-4018 in North America, and international listeners may dial (201) 689-8471.
A telephonic playback will be available from 7:30 p.m. EDT, May 5, 2010, through May 19, 2010. Participants can dial (877) 660-6853 to hear the playback. The account number is 3055 and the passcode is 349602.
About Medifast
Medifast, Inc.
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 Associates 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.
Investor Contact: Brendan Connors Vice President of Financeir@choosemedifast.com ICR, Inc. Katie Turner John Mills (646) 277-1200 MEDIFAST, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, 2010 2009 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $20,814,000 $10,604,000 Accounts receivable-net of allowance for sales returns and doubtful accounts of $100,000 1,101,000 676,000 Inventory 13,586,000 11,232,000 Investment securities 7,181,000 5,699,000 Deferred compensation 0 641,000 Prepaid expenses and other current assets 2,491,000 5,334,000 Note receivable - current 46,000 46,000 Deferred income taxes 83,000 100,000 ------ ------- Total current assets 45,302,000 34,332,000 ---------- ---------- Property, plant and equipment - net 24,716,000 23,237,000 Trademarks and intangibles - net 3,815,000 4,104,000 Note receivable, net of current assets 112,000 112,000 Other assets 243,000 379,000 ------- ------- TOTAL ASSETS $74,188,000 $62,164,000 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses 10,621,000 4,967,000 Income taxes payable 759,000 22,000 Current maturities of long-term debt 796,000 796,000 ------- ------- Total current liabilities 12,176,000 5,785,000 Other liabilities Long-term debt, net of current portion 5,245,000 5,444,000 Deferred tax liability- non current 1,464,000 1,360,000 Total liabilities 18,885,000 12,589,000 ---------- ---------- Stockholders' Equity: Preferred stock, $.001 par value (1,500,000 authorized, no shares issued and outstanding) - - Common stock; par value $.001 per share; 20,000,000 shares authorized; 15,403,941 issued and 15,036,103 outstanding at 3/31/10 and 15,398,941 issued and 15,031,103 shares outstanding at 12/31/09 16,000 16,000 Additional paid-in capital 29,352,000 28,456,000 Accumulated other comprehensive income 90,000 159,000 Retained earnings 29,165,000 24,264,000 Less: cost of 367,838 and 367,838 shares of common stock in treasury (3,320,000) (3,320,000) Total stockholders' equity 55,303,000 49,575,000 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $74,188,000 $62,164,000 =========== =========== MEDIFAST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 2010 2009 ---- ---- Revenue $60,585,000 $34,605,000 Cost of sales 14,817,000 8,979,000 ---------- --------- Gross Profit 45,768,000 25,626,000 Selling, general, and administration 37,567,000 21,610,000 Income from operations 8,201,000 4,016,000 --------- --------- Other income/(expense) Interest income/(expense), net 28,000 (5,000) Other expense (15,000) (35,000) ------- ------- 13,000 (40,000) ------ ------- Income before provision for income taxes 8,214,000 3,976,000 Provision for income tax (expense) (3,313,000) (1,491,000) ---------- ---------- Net income $4,901,000 $2,485,000 ========== ========== Basic earnings per share $0.35 $0.19 ===== ===== Diluted earnings per share $0.33 $0.17 ===== ===== Weighted average shares outstanding - Basic 13,908,144 13,284,431 ========== ========== Diluted 14,671,187 14,494,898 ========== ==========
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SOURCE: Medifast, Inc.
CONTACT: Investors, Brendan Connors, Vice President of Finance of
Medifast, Inc.,
ICR, Inc., +1-646-277-1200, for Medifast, Inc.
Web Site: http://www.choosemedifast.com/