OWINGS MILLS, Md., April 29 /PRNewswire-FirstCall/ — Medifast, Inc. (NYSE: MED - News) 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 choosemedifast.com in the section marked “Investor Relations.” A replay of the call is available via web cast at choosemedifast.com 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.
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