Medifast Announces First Quarter 2008 Financial Results
Reports Record Quarterly Sales of over $25 million
OWINGS MILLS, Md., May 12 // PRNewswire-FirstCall // -- Medifast, Inc. (NYSE: MED) announced today first quarter financial results for the period ended March 31, 2008.
Financial highlights included:
- First quarter revenues increased 25%;
- Gross margins increased to 75.8% vs. 74.8%
- The direct sales segment of Take Shape for Life experienced sales increase of 63% year-over-year;
- Medifast Weight Control Centers quarterly revenues increased 75%;
For the first quarter Medifast reported revenue of $25.2 million, a 25% increase from $20.1 million in the first quarter of 2007. The Company reported net income of $1.4 million or $0.10 per basic and diluted share compared with $1.4 million, or $0.11 per basic share - $0.10 per diluted share in the first quarter of 2007.
The Company's balance sheet remains strong with stockholders' equity of $38.6 million and working capital of $9.8 million as of March 31, 2008. The current ratio was 2.3 to 1.
"We are pleased with the results of the quarter," commented Michael S. McDevitt, chief executive officer of Medifast, Inc. "Our multi-channel distribution model continues to gain traction, with virtually all of our channels achieving solid double-digit growth for the quarter. The Take Shape for Life division grew 63% year-over-year; and now represents approximately 39% of overall revenues for the first quarter. This growth can largely be attributed to the investments made during 2007 in the tools and training to promote growth in the recruiting of health coaches. In that regard, the number of active health coaches grew to 2,200 at the end of the first quarter of 2008 as compared to 1,350 for the same time period in 2007, an increase of 63%. We believe that the growth in health coach activity is a positive trend that should continue, and will lead to significant revenue growth in the near future."
Mr. McDevitt continued, "Our Medifast Weight Control Centers experienced revenue growth of 75% versus last year's comparable quarter. We are particularly pleased with the average monthly revenue per clinic growing 35%, to $39,000 per clinic in the first quarter from $29,000 in the first quarter last year. In the more established Dallas market, average monthly revenue per clinic is approximately $50,000. We believe that the recent growth in the Medifast Weight Control Centers validates our model and confirms the high demand from this segment of the weight loss market. During the first quarter we opened four additional corporate owned clinics in the Houston market and we plan on opening four additional corporate owned clinics in the Houston market by the end of the second quarter of 2008. We also expect to further develop the Dallas market by opening two additional clinics. Although we are in the very early stages of developing this channel, we are heartened by the consumer response."
"During the quarter," Mr. McDevitt continued, "Medifast Direct Response increased revenues by 6%. The engine that drives product sales in this business is advertising spend. Commencing this month, we have realigned our advertising spend between the different media types. In the first quarter of 2008, we assessed the return to spend on each advertising medium which has changed since prior year. We have made adjustments to the allocation of our advertising dollars between print, TV, and web and believe we will see the benefit of these changes in the coming quarters of 2008. Additionally, we will continue to generate revenue by expanding our client base through remarketing efforts such as direct mail and e-mail campaigns. The umbrella of national brand awareness generated by our direct response advertising drives business across our multi-channeled platform by fueling customers and business leads to Take Shape for Life and creating walk-ins to Medifast Weight Control Centers. The Company provides customers many options for support on our clinically proven weight loss program. The solutions that we provide to consumers dedicated to improving their quality of life have proven to be effective and we are dedicated to delivering our value proposition to the market in the most efficient and cost-effective manner possible."
Gross margins increased to 75.8% from 74.8% for the first quarter of 2008 compared with a year ago. The gross margin improved due to efficiencies gained from new machinery purchases in prior year as well as new shipping rules that resulted in additional shipping revenue from customers netting against shipping expense
2008 Full-Year Guidance
Management reiterates expectations of revenue growth for full-year 2008 in the range of 8-10%; and diluted earnings per share growth in the range of 30-35% for the year ended December 31, 2008.
First Quarter 2008 Conference Call
Interested parties can access the call by dialing (877) 407-8031 or (201) 689-8031, or can listen via a live Internet web cast, which can be found at http://www.choosemedifast.com in the section marked "Investor Relations." A replay of the call is available via web cast at http://www.choosemedifast.com until August 12, 2008 or by playback at (877) 660-6853 or (201) 612-7415 through June 12, 2008. Please use account #286 and conference id #282077 for the replay.
Medifast (NYSE: MED) is the leading easy-to-use, clinically proven portion-controlled weight loss program. Medifast has been recommended by 15,000 physicians and used by over one million customers. Medifast is committed to enriching lives by providing innovative choices for lasting health. Medifast programs have been proven effective through studies by major university teaching hospitals. The company sells its products and programs via four unique distribution channels: 1) the web and national call centers, 2) national network of physicians, 3) medically supervised Medifast Weight Control Centers, and 4) the Take Shape For Life direct-selling division, a network of health coaches. Medifast was founded in 1980 and is located in Owings Mills, Maryland. For more information, log onto http://www.ChooseMedifast.com.
Please Note: This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by use of phrases or terminology such as "intend" or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. Medifast believes this release should be read in conjunction with all of its filings with the United States Securities and Exchange Commission and cautions its readers that these forward-looking statements are subject to certain events, risks, uncertainties, and other factors. Some of these factors include, among others, Medifast's inability to attract and retain independent Associates and Members, stability in the pricing of print, TV and Direct Mail marketing initiatives affecting the cost to acquire customers, increases in competition, litigation, regulatory changes, and its planned growth into new domestic and international markets and new channels of distribution. Although Medifast's believes that the expectations, statements, and assumptions reflected in these forward- looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this release, as well as those set forth in its latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q, and other filings filed with the United States Securities and Exchange Commission, including its current reports on Form 8-K. All of the forward-looking statements contained herein speak only as of the date of this release.
MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2008 December 31, 2007
Cash and cash equivalents $1,407,000 $2,195,000
Accounts receivable-net of
allowance for doubtful accounts of
$100,000 475,000 493,000
Inventory 9,973,000 9,181,000
Investment securities 1,405,000 1,439,000
Deferred compensation 723,000 814,000
Prepaid expenses and other current
assets 3,245,000 2,727,000
Prepaid income tax 143,000 -
Note receivable - current 180,000 180,000
Deferred tax asset 82,000 100,000
Total Current Assets 17,633,000 17,129,000
Property, plant and equipment - net 19,150,000 17,031,000
Trademarks and intangibles - net 6,897,000 7,356,000
Deferred tax asset, net of current
portion 897,000 897,000
Note receivable, net of current
portion 1,180,000 1,212,000
Other assets 301,000 99,000
TOTAL ASSETS $46,058,000 $43,724,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses $5,382,000 $4,279,000
Income taxes payable - 592,000
Line of credit 2,176,000 1,599,000
Current maturities of long-term
debt 257,000 264,000
Total Current Liabilities 7,815,000 6,734,000
Long-term debt, net of current
portion 4,505,000 4,570,000
Total Liabilities 12,320,000 11,304,000
Common stock; par value $.001 per
share; 20,000,000 authorized;
13,814,098 and 13,709,098 shares
issued and outstanding,
respectively 14,000 14,000
Additional paid-in capital 27,225,000 26,953,000
Accumulated other comprehensive
income 154,000 321,000
Retained Earnings 11,183,000 9,818,000
Less: cost of 270,534 and 270,534
shares of common stock in treasury (1,971,000) (1,971,000)
Less: unearned compensation (2,867,000) (2,715,000)
Total Stockholders' Equity 33,738,000 32,420,000
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $46,058,000 $43,724,000
MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31,
Revenue, net $25,169,000 $20,089,000
Cost of sales 6,100,000 5,058,000
Gross Profit 19,069,000 15,031,000
Selling, general, and administration 17,007,000 13,117,000
Income from operations 2,062,000 1,914,000
Interest expense (103,000) (95,000)
Interest income 38,000 33,000
Other expense 36,000 51,000
Net income before provision for
income taxes 2,033,000 1,903,000
Provision for income tax (expense) (668,000) (530,000)
Net income $1,365,000 $1,373,000
Basic earnings per share $0.10 $0.11
Diluted earnings per share $0.10 $0.10
Weighted average shares outstanding -
Basic 13,101,157 12,899,543
Diluted 13,799,293 13,690,788
SOURCE Medifast, Inc.