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Optavia - Medifast Q1 Sales Up 68.2% To $165.9 Million

Optavia – Medifast Q1 Sales Up 68.2% To $165.9 Million

Medifast, Inc. (NYSE: MED), a leading manufacturer and distributor of healthy living products and programs, today reported financial results for the first quarter ended March 31, 2019.

First Quarter 2019 Highlights:

  • Revenue of $165.9 million, an increase of 68.2% year-over-year
  • Active earning OPTAVIA Coaches of 27,200, an increase of 62.9% year-over-year
  • Net income of $20.8 million, an increase of 69.8% year-over-year
  • Earnings per diluted share (“EPS”) of $1.70, an increase of 68.3% year-over-year
  • Cash, cash equivalents, and investment securities of $120.4 million and debt-free
  • Quarterly cash dividend of $9.1 million, or $0.75 per share, declared March 13, 2019 and payable in the second quarter of 2019

“Our strong start to the year was fueled by a record number of active earning OPTAVIA Coaches and increased coach productivity,”

commented Dan Chard, Medifast’s Chief Executive Officer.

“These achievements helped generate first quarter revenue and earnings above our expectations and gives us confidence to raise our outlook for the full year 2019.  Going forward, we believe Medifast remains well positioned to deliver long-term sustainable growth and value for our stockholders as well as meaningful improvements to the lives of OPTAVIA clients through our growing community of OPTAVIA Coaches who join us in helping clients achieve optimal health and wellbeing.”

First Quarter 2019 Results

For the first quarter of 2019, revenue increased 68.2% to $165.9 million from revenue of $98.6 million for the first quarter of 2018. OPTAVIA-branded products represented 73% of consumable units sold for the first quarter of 2019 compared to 58% for the first quarter of last year. The total number of active earning OPTAVIA Coaches for the first quarter of 2019 increased to 27,200, compared to 16,700 for the first quarter of 2018. The average revenue per active earning OPTAVIA Coach for the first quarter of 2019 increased 10.2% to $5,817 compared to $5,278 for the first quarter last year.

Gross profit for the first quarter of 2019 increased to $125.1 million from $74.8 million for the first quarter of 2018. The Company’s gross profit as a percentage of revenue decreased 50 basis points to 75.4% from 75.9% for the first quarter last year. The decrease in gross margin percentage was a result of higher obsolescence and shipping costs.

Selling, general and administrative expenses (“SG&A”) for the first quarter of 2019 increased $40.3 millionto $100.4 million compared to $60.1 million for the first quarter of 2018, primarily as a result of higher OPTAVIA commissions expense, increased salaries and benefits, increased consulting costs related to information technology projects, and increased credit card fees resulting from higher sales.  SG&A as a percentage of sales decreased 50 basis points to 60.5% of revenue compared to 61.0% in the first quarter of 2018.

Operating income increased $10.0 million to $24.7 million from $14.7 million for the first quarter of 2018 primarily as a result of increased gross profit, partially offset by increased SG&A expenses.  Operating income as a percentage of revenue was 14.9% for the first quarter of 2019 and 2018, respectively.

The first quarter 2019 effective tax rate was 17.1%, compared to 18.1% for the first quarter of 2018.  This decrease was primarily a result of a 2.4% decrease relating to the discrete accounting for taxes associated with share-based compensation offset by a 3.5% benefit from the net operating loss due to state apportionment.

Net income for the first quarter of 2019 was $20.8 million, or $1.70 per diluted share, based on approximately 12.2 million shares outstanding. First quarter 2018 net income was $12.2 million, or $1.01per diluted share based on approximately 12.1 million shares outstanding.

Balance Sheet

The Company’s balance sheet remains strong with stockholders’ equity of $122.1 million and working capital of $92.4 million as of March 31, 2019.  Cash, cash equivalents, and investment securities increased $19.4 million to $120.4 million as of March 31, 2019 compared to $101.0 million at December 31, 2018. The Company remains free of interest bearing debt.  Inventory increased $4.4 million to $43.3 million at March 31, 2019 compared to $38.9 million at December 31, 2018 as the Company increased inventory levels to meet current and anticipated customer demand. The Company declared a quarterly cash dividend of $9.1 million, or $0.75 per share, during the first quarter of 2019.

Outlook

The Company expects second quarter revenue to be in the range of $180 million to $185 million and EPS to be in the range of $1.67 to $1.72.  For the full year 2019, the Company now expects revenue of $720 million to $740 million and EPS of $6.70 to $6.90, compared to the Company’s previous guidance for revenue of $700 million to $720 million and EPS of $6.45 to $6.65. The full year 2019 earnings guidance assumes a 21.5% to 22.5% effective tax rate.  The Company expects the 2019 cadence of spending to be similar to 2018 with its annual convention spend occurring in the third quarter of the year and the cost of a 2020 Leadership Advancement event to be incurred in the third and fourth quarters of the year.

About Medifast®:

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 leverages 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 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.

For more information, visit www.MedifastInc.com or www.OPTAVIA.com.

 

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