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Medifast Reports Record First Quarter 2009 Financial Results

Record Quarterly Revenues: $33.7 million vs. $25.2 million - Increase of 34%

Record Quarterly Diluted EPS: $0.17 vs. $0.10 - Increase of 70%

Operating Margins Improve to 11.9%

OWINGS MILLS, Md., April 29 /PRNewswire-FirstCall/ -- Medifast, Inc. (NYSE: MED) announced today first quarter financial results for the period ended March 31, 2009.

First Quarter highlights included:

  • First quarter revenues increased 34% compared to 2008 to $33.7 million;
  • Diluted EPS for the quarter increased 70% to $0.17 versus $0.10 year-over-year;
  • Direct sales segment, Take Shape for Life, increased sales 92% year-over-year for the quarter;
  • Medifast Weight Control Centers quarterly revenues increased 72%;
  • Improvement achieved in direct response revenue-to-spend ratio;
  • Operating margins improve to 11.9% versus 8.2% in the comparable quarter

For the first quarter ended March 31, 2009, Medifast reported revenue of $33.7 million, a 34% increase from $25.2 million in the first quarter of 2008. The Company reported net income of $2.5 million, or $0.17 per fully diluted share, compared with $1.4 million, or $0.10 per fully diluted share in the first quarter of 2008, a diluted EPS increase of 70%.

"We are extremely pleased with the record results of the first quarter," commented Michael S. McDevitt, Chief Executive Officer of Medifast, Inc. "Our business model is showing growth or improvement across all segments and is gaining traction with the more than 200 million Americans who are currently overweight or obese, and are looking for a solution that is safe and effective. With nearly 30 years of clinically proven results and having been recommended by over 15,000 doctors, Medifast is clearly differentiating itself from the commercial weight loss companies, and becoming the leader in the medical weight loss marketplace."

Mr. McDevitt continued, "Revenues in the direct sales segment, Take Shape for Life, increased 92% to $18.9 million compared with $9.8 million in the comparable quarter of 2008. Growth in revenues for the segment was driven by increased customer product sales as a result of an increase in active health coaches. The number of active health coaches during the first quarter increased to approximately 4,000 compared with 2,200 during the period a year ago, an increase of 82% and up from 3,400 at the close of 2008. We continue to see the benefits of a physician-lead network of coaches that are able to support their clients in their weight-loss efforts. In today's environment where trust and recommendation are becoming a more important component in purchasing decisions, Take Shape for Life continues to excel. TSFL customers who have utilized the Medifast products and programs and successfully have addressed their body weight and health issues are increasingly choosing to become active health coaches. Their personal success serves as a first-hand example of the benefits that can be achieved through the Medifast weight loss program. Leading by example provides the credibility needed to help friends, family and clients to meet their personal health goals. We are proud of the work that our health coaches do to help get America healthy."

"We also saw improvement in the revenue generated on every dollar spent on advertising spent in Medifast Direct, our direct response segment. During the first quarter, our revenue-to-spend improved to 2.6 to 1 versus 2.5 to 1 in the first quarter of 2008 on an advertising budget of $4.3 million in the first quarter. That equates to an additional $450,000 of revenue with essentially no associated advertising cost. The overall advertising spend in the first quarter was down approximately 17% from the spend in the same quarter last year, however, with the improved efficiencies, each dollar spent brought in more bottom-line profit for the business. The improvement in efficiency played a large role in the year-over-year EPS growth achieved in the first quarter. Looking ahead, we will continue to focus on generating efficiencies in this segment."

"We also saw tremendous growth in our Medifast Weight Control Centers segment," continued Mr. McDevitt. "Sales increased to $3.0 million compared to $1.8 million, an increase of 72%. The growth in revenues for this segment was attributed to increased same store sales, the opening of additional corporate clinics during the second half of 2008 and the introduction of our franchise model. For the first quarter, for clinics open greater than one year, we experienced average monthly store sales of $53,000, a 12% increase versus the prior year. We continue to be gratified by the strong same store sales growth of this segment, which we believe bodes well for not only the continuation of our corporate expansion, but also our franchise model."

The gross margins increased to 76.1% during the first quarter of 2009 versus 75.8% a year ago. Ms. Meg Sheetz, President and COO of Medifast, Inc. commented, "The margin improvement is reflective of the addition of efficient new machinery and process improvements achieved in our vertically integrated business model."

Bradley MacDonald, Executive Chairman of the Board and Co-Founder of Take Shape for Life said, "The Board of Directors is extraordinarily pleased with the financial results of the Company in this tough economy. The Company posted its 38th consecutive quarter of profitability by maximizing the leverage on assets purchased over the last 10 years, and has achieved a 41% compounded annual revenue growth rate since the year 1999. We are delighted with the performance of our Management team in continuing to advance the clinically proven Medifast products and protocols and helping millions of Americans combat obesity."

The Company's balance sheet remains strong with stockholders' equity of $41 million and working capital of $15.9 million as of March 31, 2009. Cash and cash equivalents increased by $4.5 million to $6.3 million at the end of the quarter as a result of operating cash flows, improvements in inventory and the decrease of capital expenditures.

Mr. McDevitt concluded, "As we have discussed in the past, we are beginning to see tremendous leverage in our business model as our sales continue to increase. Being completely vertically integrated is allowing us to improve our gross and operating margins as fixed overhead is absorbed. We look forward to continuing on the leverage achieved during the first quarter."

First Quarter 2009 Conference Call

The Company will hold a conference call and web cast to discuss the results on Wednesday, April 29, 2009 at 11:00 a.m. ET.

Interested parties can access the call by dialing (877) 407-0782 or (201) 689-8567, or can listen via a live Internet web cast, which can be found at in the section marked "Investor Relations." A replay of the call is available via web cast at until July 30, 2009 or by playback at (877) 660-6853 or (201) 612-7415 through May 30, 2009. Please use account #286 and conference #319100 for the replay.

About Medifast:

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 MED-F

Safe Harbor:

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.

    Contact:  Brendan Connors                Lytham Partners, LLC
              Vice President - Finance       Joe Diaz
              Robert Blum
                                             Joe Dorame

                            Financial tables to follow:

                          MEDIFAST, INC. AND SUBSIDIARIES

                                                     March 31,   December 31,
                                                       2009         2008
      Current assets:
        Cash and cash equivalents                   $6,297,000    $1,841,000
        Accounts receivable - net of allowance
         for doubtful accounts of $100,000             574,000       448,000
        Inventory                                   12,363,000    13,856,000
        Investment securities                        1,129,000     1,099,000
        Deferred compensation                          451,000       531,000
        Prepaid expenses and other current assets    1,925,000     2,034,000
        Prepaid income tax                           1,091,000     1,131,000
        Note receivable - current                      180,000       180,000
        Deferred tax asset                             100,000       100,000
          Total Current Assets                      24,110,000    21,220,000

        Property, plant and equipment - net         21,626,000    21,709,000
        Trademarks and intangibles - net             5,122,000     5,547,000
        Deferred tax asset, net of current portion   1,241,000     1,131,000
        Note receivable, net of current portion      1,046,000     1,080,000
        Other assets                                   352,000       350,000

          TOTAL ASSETS                             $53,497,000   $51,037,000

      Current liabilities
        Accounts payable and accrued expenses       $4,832,000    $5,130,000
        Line of credit                               3,179,000     3,164,000
        Current maturities of long-term debt           257,000       257,000
          Total Current liabilities                  8,268,000     8,551,000

        Long-term debt, net of current liabilities   4,249,000     4,313,000
          Total liabilities                         12,517,000    12,864,000
      Stockholders' equity:

        Common stock; par value $.001 per share;
         20,000,000 authorized; 14,689,960 and
         14,585,960 shares issued and outstanding,
         respectively                                   15,000        15,000
        Additional paid-in capital                  31,227,000    30,787,000
        Accumulated other comprehensive (loss)        (447,000)     (389,000)
        Retained earnings                           17,738,000    15,253,000
                                                    48,533,000    45,666,000
        Less:  cost of 301,092 and 272,192
         shares of common stock in treasury,
         respectively                               (2,058,000)   (1,956,000)
        Less: unearned compensation                 (5,495,000)   (5,537,000)
          Total Stockholders' Equity                40,980,000    38,173,000

             EQUITY                                $53,497,000   $51,037,000

                           MEDIFAST, INC. AND SUBSIDIARIES

                                                     Three Months Ended
                                                         March 31,
                                                    2009           2008
    Revenue                                     $33,680,000    $25,169,000
    Cost of sales                                 8,054,000      6,100,000
    Gross Profit                                 25,626,000     19,069,000

    Selling, general, and administration         21,610,000     17,007,000

    Income from operations                        4,016,000      2,062,000

    Other income/(expense)
      Interest expense, net                          (5,000)       (65,000)
      Other income/(expense)                        (35,000)        36,000
                                                    (40,000)       (29,000)

    Income before provision for income taxes      3,976,000      2,033,000
    Provision for income tax (expense)           (1,491,000)      (668,000)

    Net income                                   $2,485,000     $1,365,000

    Basic earnings per share                          $0.19          $0.10
    Diluted earnings per share                        $0.17          $0.10

    Weighted average shares outstanding -
      Basic                                      13,284,431     13,101,157
      Diluted                                    14,494,898     13,799,293

SOURCE Medifast, Inc.
Copyright©2009 PR Newswire.
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