Medifast Reports Q3 Results

Nov. 8, 2019

"Our focus on long-term, sustainable growth at Medifast continued during the third quarter as we achieved record revenues, rapid year over year growth in the number of active earning coaches and solid growth in gross profits and net income," said Dan Chard, Chief Executive Officer of Medifast."

Chard continued, "Growth at the rapid pace we've been achieving can present some short-term challenges that are reflected in our third quarter results and fourth quarter guidance. Spending on technological improvements to support our ambitions, upgrades in our supply chain and unexpected high levels of credit card related bad debt expense all combined to create short-term headwinds that held back margins for the period. "

Third quarter revenue increased 36.5% to $190.1 million from revenue of $139.2 million for the third quarter of 2018. OPTAVIA-branded products represented 78% of consumable units sold for the third quarter compared to 70% for the same period a year ago.

The total number of active earning OPTAVIA Coaches increased to 32,200, compared to 22,600 for the third quarter of 2018. The average revenue per active earning OPTAVIA Coach decreased 1.1% to $5,715 compared to $5,781 for the third quarter last year.

Gross profit increased 33.3% to $142.9 million from $107.2 million for the third quarter of 2018. The Company's gross profit as a percentage of revenue decreased 180 basis points year-over-year to 75.2% from 77.0%.

 SG&A for the third quarter of 2019 included approximately $3.2 million of cost related to a highly organized automated scheme using stolen identities and credit cards from outside the Company's systems, to transact business on the Company's e-commerce sites. Each of these transactions was pre-approved, prior to shipment, by the payment processor and subsequently reported to Medifast as utilizing a stolen card. These expenses were approximately $2.8 million, or $0.18 EPS, higher than the prior year period and were primarily comprised of higher bad debt and credit card fees. The Company believes it has successfully addressed the situation,

Third Quarter 2019 Highlights Compared to Prior-Year Period

Record revenue up 36.5% to $190.1 million

42.5% growth in active earning OPTAVIA Coaches to 32,200

Net income increased 15.4% to $15.9 million

Earnings per diluted share ("EPS") of $1.32, an increase of 15.8.

The company expects fourth quarter revenue to be in the range of $157 million to $167 million and EPS to be in the range of $1.03 to $1.13.  For the full year 2019, the Company now expects revenue of $700 million to $710 million and EPS of $5.80 to $5.90.

Marketdata Commentary

The company's stock plummeted following the news, down 30% on Friday, Nov. 8th. Medifast (MED) came out with quarterly earnings of $1.32 per share, missing the Zacks Consensus Estimate of $1.33 per share. The current consensus EPS estimate is $2.08 on $201.40 million in revenues for the coming quarter and $6.86 on $748.70 million in revenues for the current fiscal year.

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

https://finance.yahoo.com/news/medifast-inc-announces-third-quarter-210500187.html

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