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Medifast Reports Q4and Full year 2013 Results

"We made consistent progress on our strategic initiatives in 2013 to better position Medifast for long-term profitable growth," commented Michael C. MacDonald, Medifast's Chairman and Chief Executive Officer. "In the fourth quarter our team managed the business well generating strong operational efficiencies that resulted in a 480 basis point improvement in operating margin. Looking ahead, we believe Medifast is increasingly well positioned to capitalize on our future growth opportunities as we execute our strategic initiatives and in turn increase long-term shareholder value."

For the fourth quarter ended December 31, 2013, Medifast net revenue decreased 7% to $77.3 million from net revenue of $83.2 million in the fourth quarter of the prior year. Revenue in the direct sales channel, Take Shape for Life, was comparable to the prior year at $51.7 million in the 4th quarter of 2013 vs. $51.8 million in the same period last year. The company ended the 4th quarter with approximately 10,500 active health coaches and the average revenue per health coach per month for the quarter decreased 6% to $1,477 vs. $1,571 in the 4th quarter of 2012.

The Medifast Direct channel revenue decreased 24% to $13.9 million, compared to $18.2 million in the 4th quarter of 2012.

In the fourth quarter, the Medifast Weight Control Centers and Wholesale Physicians channel revenue decreased 12% to $11.7 million, due to the Company's focus on creating operational efficiency, optimizing staffing, and managing expenses including advertising spend.  The Company ended the fourth quarter with a total of 75 corporate centers and 41 franchise centers.  Going forward, the Company expects to sell the assets of approximately 10 to 15 existing corporate-owned Medifast Weight Control Centers to an existing business partner in the first half of 2014, which would then be transitioned to the franchise model.

Fiscal Year 2013
For the fiscal year ended December 31, 2013, Medifast net revenue increased to $356.9 million from net revenue of $356.7 million in 2012.

Net income for the fiscal year 2013 increased $8.1 million to $24.0 million.

For fiscal year 2014 the company expects net revenue to be in the range of $340 to $380 million and earnings per diluted share are expected to be in the range of $1.80 to $1.90 as compared to the 2013 fiscal year. The annual range of revenue expectations is partly dependent on the timing of the transition of corporate-owned centers to the franchise model.

The complete pres release and financial tables can be found here:

Marketdata Commentary

In the conference call yesterday, the company mentioned a stock buyback program and that they expect the second half of 2014 to be stronger, due to new product introductions and a new line of microwavable "lean & green" entrees. They are also launching new websites to serve the Canadian market, and developing a new desktop and mobile app. The firm has no debt. Some analysts will focus on the few negatives and the miss on revenue targets in 2013. However, in this tough retail environment, for diet companies, flat sales is not a bad outcome at all. Competitors such as Weight Watchers saw sales fall 6.2% in 2013, NutriSystem fell 10%, and Jenny Craig fell 12% (Marketdata estimate). So, flat sales while maintaining profitability is pretty good. The company also has the luxury of not having to spend heavily on marketing for the MLM TSFL division, which relies mostly on word-of-mouth. All in all, we feel confident that management has a good handle on things and is controlling costs, coupled with upcoming new products and new markets.

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