Medifast Reports Q4 and Full Year 2017 Results, Beats Estimates

March 6, 2018 - According to management: "Our financial results exceeded our expectations and we are pleased to report a strong finish to the year with revenue through our OPTAVIA Coaches model generating record growth," said Dan Chard, Medifast's Chief Executive Officer.  "Looking ahead, our OPTAVIA coach community is now stronger than ever and very well-positioned to build upon the current business momentum as they share our mission of offering the world lifelong transformation, one healthy habit at a time."

Medifast had revenue of $78.0 million for the quarter and $301.6 million for the year.

OPTAVIA had revenue (the firm's MLM division) of $68.6 million for the quarter and $256.6 million for the year--85% of the total.

The total number of active earning OPTAVIA Coaches for the fourth quarter of 2017 increased to 15,000, compared to 12,500 for the fourth quarter of 2016. The average revenue per active earning OPTAVIA Coach for the fourth quarter of 2017 increased 9.7% to $4,562 compared to $4,158 for the fourth quarter last year.

For the fiscal year ended Dec. 31, 2017, Medifast revenue was $301.6 million as compared to $274.5 million in 2016.  As a percentage of revenue, OPTAVIA represented approximately 85.1%, Medifast Direct represented 10.6%, Franchise Medifast Weight Control Centers represented 4.0%, and Medifast Wholesale represented 0.3%.Net income for 2017 increased $9.9 million to $27.7 million, or $2.29 per diluted share based on approximately 12.1 million shares.


The company expects Q1 2018 revenue to be in the range of $88.5 million to $91.5 million and earnings per diluted share to be in the range of $0.84 to $0.87.  For the full year 2018, the company expects revenue of $350 million to $360 million and earnings per diluted share of $3.15 to $3.25. (This forecast implies a strong 18% increase in top line sales in 2018.). Management also said that it will no longer report results based on its four divisions (direct, franchise, MLM, wholesale sales), but rather just for Optavia--its MLM division, since 85% of revenues come from this model.

Marketdata Commentary

After listening to their conference call, apparently, Medifast is betting on international markets for its future growth, and this is understandable as a company with an MLM sales model. Most of the large MLMs, such as Herbalife, AMWAY, Nu-Skin, etc. generate the majority of their sales of meal replacements and supplements from markets outside the U.S.  The firm is adding two new people and will spend $3-5 million of its tax savings this year on preparations for entry into Singapore and Hong Kong. Entering the Asian market via Singapore and Hong Kong is a good move, since these are affluent and more Westernized markets than mainland China. They can serve as a beachhead for testing and later entry to China, after working out the bugs. We are surprised that MED didn't really mention Mexico as being important to future geographic expansion. They did have some operations there but nothing was said about the status of that market.


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