Medifast, Inc. (NYSE: MED), a leading manufacturer and distributor of clinically proven, healthy living products and programs, today reported financial results for the second quarter ended June 30, 2018.
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
- Earnings per diluted share (“EPS”) of $1.16, an increase of 84.1% year-over-year
“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,”
commented Dan Chard, Medifast’s Chief Executive Officer.
“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.
We are confident that we are well positioned for future growth and, based on these strong operational and financial results as well as our positive outlook for the remainder of the year, we are pleased to be able to raise our annual guidance once again this year.”
Second Quarter 2018 Results
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 Company’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.
Selling, general and administrative expenses (“SG&A”) increased $25.4 million to $71.7 million compared to $46.3 million for the second quarter of 2017, primarily as a result of higher commission expense resulting from higher product sales. SG&A as a percentage of revenue was flat compared to the second quarter last year.
Operating income increased $5.8 million to $17.1 million from $11.3 million for the second quarter of 2017 primarily as a result of increased gross profit, partially offset by increased SG&A expenses. Operating income as a percentage of revenue decreased 30 basis points to 14.6% compared to 14.9% in the second quarter of 2017.
The second quarter 2018 effective tax rate was 19.8%, compared to 33.8% for the second quarter of 2017. This decrease was primarily a result of the decrease in the Federal statutory rate pursuant to the Tax Cuts & Jobs Act as well as the discrete accounting for taxes associated with share-based compensation. The decrease in the effective rate was partially offset by 1.9% due to the elimination of the Domestic Manufacturer Deduction. Excluding the discrete accounting for taxes associated with share-based compensation, the second quarter effective tax rate would have been 22.0%.
Net income for the second quarter of 2018 was $14.1 million, or $1.16 per diluted share, based on approximately 12.2 million shares outstanding. Second quarter 2017 net income was $7.6 million, or $0.63 per diluted share based on approximately 12.1 million shares outstanding.
Medifast (NYSE: MED) is a leading manufacturer and distributor of clinically proven, healthy living products and programs. The brand has been recommended by more than 20,000 doctors since its founding. Its integrated coach model offers the world optimal health by leveraging nearly 40 years of experience from medical, franchise, e-commerce, and direct selling channels. Medifast and its community of independent OPTAVIA Coaches embrace the future of wellness with a shared vision to offer the world lifelong transformation, one healthy habit at a time™.
OPTAVIA is represented by a community of more than 19,000 OPTAVIA Coaches who teach Clients healthy habits, while offering support and guidance on their transformation journey. In 2018, Medifast announced it will expand into the Asia-Pacific markets of Hong Kong and Singapore in 2019 with its integrated coach model.
Medifast is traded on the New York Stock Exchange and was named to Forbes’ 100 Most Trustworthy Companies in America List in 2016 and 2017.
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