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Medifast Reports Strong Q2 Results

Aug. 3, 2018 – According to CEO Dan Chard:  “We are pleased to report a further acceleration in the business momentum we reported in the first quarter of the year, resulting in record revenues and profitability that exceeded our expectations.” “The accelerating growth rate is an indication of the energy behind our integrated coach model tied to our powerful mission and a repeatable business rhythm capable of delivering long-term sustainable growth.

Second Quarter 2018 Highlights:

  • Revenue of $117.3 million, an increase of 54.9% year-over-year
  • Active earning Coaches of 19,700, an increase of 45.9% year-over-year
  • Net income of $14.1 million, an increase of 86.4% year-over-year.

For the second quarter of 2018, revenue increased 54.9% to $117.3 million from revenue of $75.7 million for the second quarter last year. OPTAVIA-branded products represented 64% of consumable units sold for the second quarter of 2018 compared to 30% for the second quarter of last year. The total number of active earning Coaches for the second quarter of 2018 increased to 19,700, compared to 13,500 for the second quarter of 2017. The average revenue per active earning Coach for the second quarter of 2018 increased 16.1% to $5,474 compared to $4,713 for the second quarter last year.

Gross profit for the second quarter of 2018 increased to $88.8 million from $57.6 million for the second quarter of 2017. The firm’s gross profit as a percentage of revenue decreased 40 basis points to 75.7% from 76.1% for the second quarter last year.  The decrease in gross margin percentage was a result of an acceleration in the number of new clients which increased the proportion of clients receiving a first-order discount.

The company’s balance sheet remains strong with stockholders’ equity of $102.9 million and working capital of $81.6 million as of June 30, 2018.  Cash, cash equivalents, and investment securities increased $4.5 million to $103.3 million as of June 30, 2018 compared to $98.8 million at December 31, 2017. Medifast remains free of interest bearing debt.

Medifast declared a quarterly cash dividend of $5.8 million, or $0.48 per share, during the second quarter of 2018.

The company expects third quarter revenue to be in the range of $120.0 million to $125.0 million and earnings per diluted share to be in the range of $1.05 to $1.10.  The firm is raising its guidance for the full year 2018, expecting revenue of $460 million to $470 million and earnings per diluted share of $4.35 to $4.45. This compares to the firm’s previous annual guidance for revenue of $385 million to $395 million

The complete Press Release and financial tables can be found here:

https://seekingalpha.com/pr/17235109-medifast-inc-announces-second-quarter-2018-financial-results

Marketdata Commentary

Medifast seems to be catching up to some competitor in terms of 2018 growth rates. The firm is now projecting a 19% increase in revenues, bolstered by a notable increase in the number of health coaches on board — 19,700. The company has apparently figured out how to add and train more substantial numbers of coaches more rapidly.This is a record figure for coaches employed by the company.

The firm’s gross profit percentage of 75%, coupled with a debt free balance sheet, is impressive. We wonder why management has not decided to spend some of those profits and cash on hand on more national TV advertising and online ads, to increase its exposure and make the company a household name in weight loss, joining the likes of Jenny Craig, Weight Watchers and NutriSystem. With expected 2018 revenues of $435 million, the firm is now likely on par with Jenny Craig revenues.

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