MED Medifast Inc

Medifast (NYSE: MED), the health and wellness company known for its habit-based and Coach-guided lifestyle solution, OPTAVIA®, today reported results for the fourth quarter and full year ended December 31, 2023.

Fourth Quarter 2023

• Revenue of $191.0 million, with revenue per active earning Coach of $4,648
• Independent active earning OPTAVIA Coaches of 41,100
• Net income of $6.0 million (non-GAAP adjusted net income of $11.9 million)
• Earnings per diluted share ("EPS") of $0.55 (non-GAAP adjusted EPS of $1.09)

Full Year 2023

• Revenue of $1.1 billion
• Net income of $99.4 million (non-GAAP adjusted net income of $105.2 million)
• EPS of $9.10 (non-GAAP adjusted EPS of $9.64)
• Cash, Cash Equivalents, and Investments of $150.0 million and no interest-bearing debt

“We are realigning our business to respond to the evolving dynamics of the weight loss industry and to aggressively execute on bold initiatives to transform our business model,” said Dan Chard, Chairman & CEO of Medifast. “We are broadening our customer acquisition activities significantly, launching a broad-based national marketing effort and leaning into the medically-supported weight loss market through our collaboration with LifeMD.” Chard continued, “This remains a challenging market, and it will take time to navigate the transformational path that we are on. However, I believe that the investments we’re making in our business will broaden our addressable market and strengthen our ability to drive future growth.”

Fourth Quarter 2023 Results

Fourth quarter 2023 revenue decreased 43.4% to $191.0 million from $337.2 million for the fourth quarter of 2022, primarily driven by a decrease in the number of active earning OPTAVIA Coaches and the decline in the productivity per active earning OPTAVIA Coach. The average revenue per active earning OPTAVIA Coach was $4,648, compared to $5,538 for the fourth quarter last year, a decline of 16.1%, primarily driven by continued pressure on customer acquisition. The total number of active earning OPTAVIA Coaches decreased 32.5% to 41,100 compared to 60,900 for the fourth quarter of 2022.

Gross profit decreased 39.5% to $141.4 million from $233.6 million for the fourth quarter of 2022. The decrease in gross profit was primarily attributable to lower revenue, partially offset by the absence of restructuring costs of certain manufacturing agreements that occurred in the fourth quarter of 2022. The company’s gross profit as a percentage of revenue was 74.0% compared to 69.3% in the fourth quarter of 2022. The increase in gross margin percentage was primarily due to cost savings from the company's Fuel for the Future program as well as the absence of the restructuring costs that occurred in the prior year period. On a non-GAAP adjusted gross profit basis, excluding one-time expenses related to the 2022 restructuring, gross profit decreased 42.5% to $141.4 million and gross profit as a percentage of revenue increased 110 basis points to 74.0%.

Selling, general, and administrative expenses (“SG&A”) decreased 34.0% to $132.7 million compared to $201.0 million for the fourth quarter of 2022. The decrease in SG&A was primarily due to decreased Coach compensation on lower volumes and fewer active earning Coaches, progress on several cost reduction and optimization initiatives, and charitable donations in the fourth quarter of 2022, partially offset by market research and investment costs related to medically supported weight loss activities. As a percentage of revenue, SG&A increased 990 basis points year-over-year to 69.5% of revenue, as compared to 59.6% for the fourth quarter of 2022. The increase in SG&A as a percentage of revenue was primarily due to the loss of leverage on fixed costs due to lower sales volumes and market research and investment costs related to medically supported weight loss activities, partially offset by progress on several cost reduction and optimization initiatives and the charitable donations in 2022. On a non-GAAP adjusted basis, which excludes one-time costs to initiate the LifeMD collaboration and reorganize the IT and supply chain functions, SG&A decreased 35.0% to $125.1 million and as a percentage of revenue increased 840 basis points year-over-year to 65.5%.

Income from operations decreased 73.4% to $8.7 million from $32.6 million in the prior-year period, primarily as a result of decreased gross profit, partially offset by decreased SG&A. As a percentage of revenue, income from operations was 4.5% for the fourth quarter of 2023 compared to 9.7% in the prior-year period due to the factors described above impacting SG&A, partially offset by the factors impacting gross profit. On a non-GAAP adjusted basis, which excludes one-time expenses described previously, income from operations decreased 69.5% to $16.2 million. As a percentage of revenue, non-GAAP adjusted income from operations was 8.5%, a decrease of 730 basis points from the year-ago period.

The effective tax rate for the fourth quarter of 2023 was 38.4%, which was higher than expected and higher than the 18.2% recorded in the prior year’s fourth quarter, due to inventory overhead adjustments for tax reporting purposes, which reduced the expected tax benefit for charitable donations of inventory in the current period. On a non-GAAP adjusted basis, the effective tax rate in the fourth quarter of 2023 was 31.6%.

In the fourth quarter of 2023, net income was $6.0 million, or $0.55 per diluted share, based on approximately 10.9 million shares of common stock outstanding. In the fourth quarter of 2022, net income was $26.5 million, or $2.41 per diluted share, based on approximately 11.0 million shares of common stock outstanding. On a non-GAAP adjusted basis, net income in the fourth quarter of 2023 was $11.9 million, or $1.09 per diluted share.

Full Year Fiscal 2023 Results

For the fiscal year ended December 31, 2023, revenue decreased 32.9% to $1.1 billion compared to revenue of $1.6 billion in 2022.

Net income for 2023 was $99.4 million, or $9.10 per diluted share, based on approximately 10.9 million shares outstanding. This compares to 2022 net income of $143.6 million, or $12.73 per diluted share, based on approximately 11.3 million shares outstanding. On a non-GAAP adjusted basis, net income decreased 35.6% to $105.2 million and EPS decreased 33.5% to $9.64 per diluted share compared to the prior year period’s adjusted EPS of $14.50 per diluted share.

Capital Allocation and Balance Sheet

The company’s balance sheet remains strong with cash, cash equivalents, and investments of $150.0 million and no interest-bearing debt as of December 31, 2023, compared to $87.7 million in cash, cash equivalents, and investments and no interest-bearing debt as of December 31, 2022.

Outlook

The company expects first quarter 2024 revenue to be in the range of $155 million to $175 million and first quarter 2024 diluted EPS to be in the range of $0.25 to $0.95. The EPS range excludes the costs related to the initiation of the LifeMD collaboration and any gains or losses from changes in the market price of the company’s LifeMD common stock investment.

Conference Call Information

The conference call is scheduled for today, Tuesday, February 20, 2024 at 4:30 p.m. ET. The call will be broadcast live over the Internet, hosted on the Investor Relations section of Medifast’s website at www.MedifastInc.com or directly at https://viavid.webcasts.com/starthere.jsp?ei=1652383&tp_key=34080c5b97 and will be archived online and available through May 20, 2024. In addition, listeners may dial (877) 451-6152 to join via telephone. A telephonic playback will be available from 8:30 p.m. ET, February 20, 2024, through February 27, 2024. Participants can dial (844) 512-2921 and enter access code 13743876 to hear the playback.

About Medifast®:

Medifast (NYSE: MED) is the health and wellness company known for its habit-based and coach-guided lifestyle solution OPTAVIA®, which provides people with a simple, yet comprehensive approach to help them achieve lasting optimal health and wellbeing. OPTAVIA's lifestyle plans deliver clinically proven health benefits as well as evidence-based tools, including scientifically developed products and a framework for habit creation reinforced by independent Coaches and Community support. As a physician-founded company with a 40+ year history, Medifast is a leader in the U.S. weight management industry. Through a collaboration with the national virtual primary care provider LifeMD, OPTAVIA customers have access to board-certified affiliated clinicians and medications, such as GLP-1s, that support treatment plans for obesity and other health conditions. The company continues to innovate and build upon its scientific and clinical heritage to fulfill its mission of offering the world Lifelong Transformation, One Healthy Habit at a Time®. Medifast was recognized in 2023 by Financial Times as one of The Americas' Fastest Growing Companies and in 2022 as one of America's Best Mid-Sized Companies by Forbes. For more information, visit MedifastInc.com and OPTAVIA.com and follow @Medifast on X.

MED-F

Forward Looking Statements

Please Note: This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by use of phrases or terminology such as "intend," "anticipate," "expect" or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals, outlook or targets contained herein are also considered forward-looking statements. These statements are based on the current expectations of the management of Medifast and are subject to certain events, risks, uncertainties and other factors. Some of these factors include, among others, Medifast's inability to maintain and grow the network of independent OPTAVIA Coaches; Industry competition and new weight loss products, including weight loss medications, or services; Medifast’s health or advertising related claims by our OPTAVIA customers; Medifast's inability to continue to develop new products; effectiveness of Medifast's advertising and marketing programs, including use of social media by OPTAVIA Coaches; the departure of one or more key personnel; Medifast's inability to protect against online security risks and cyberattacks; risks associated with Medifast's direct-to-consumer business model; disruptions in Medifast's supply chain; product liability claims; Medifast's planned growth into domestic markets including through its collaboration with LifeMD, Inc.; adverse publicity associated with Medifast's products; the impact of existing and future laws and regulations on Medifast’s business; fluctuations of Medifast's common stock market price; increases in litigation; actions of activist investors; the consequences of other geopolitical events, overall economic and market conditions and the resulting impact on consumer sentiment and spending patterns; and Medifast's ability to prevent or detect a failure of internal control over financial reporting. Although Medifast 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and other filings filed with the United States Securities and Exchange Commission, including its quarterly reports on Form 10-Q and 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

CONSOLIDATED STATEMENTS OF INCOME (THREE MONTHS ENDED - UNAUDITED)

(U.S. dollars in thousands, except per share amounts & dividend data)

 

 

Three months ended December 31,

 

Year ended December 31,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Revenue

$

191,015

 

 

$

337,245

 

 

$

1,072,054

 

 

$

1,598,577

 

Cost of sales

 

49,646

 

 

 

103,649

 

 

 

296,204

 

 

 

458,163

 

Gross profit

 

141,369

 

 

 

233,596

 

 

 

775,850

 

 

 

1,140,414

 

 

 

 

 

 

 

 

 

Selling, general, and administrative

 

132,693

 

 

 

200,998

 

 

 

649,448

 

 

 

955,608

 

 

 

 

 

 

 

 

 

Income from operations

 

8,676

 

 

 

32,598

 

 

 

126,402

 

 

 

184,806

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

Interest income (expense)

 

1,176

 

 

 

(181

)

 

 

2,490

 

 

 

(701

)

Other expense

 

(50

)

 

 

(9

)

 

 

(95

)

 

 

(46

)

 

 

1,126

 

 

 

(190

)

 

 

2,395

 

 

 

(747

)

 

 

 

 

 

 

 

 

Income from operations before income taxes

 

9,802

 

 

 

32,408

 

 

 

128,797

 

 

 

184,059

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

3,766

 

 

 

5,890

 

 

 

29,382

 

 

 

40,491

 

 

 

 

 

 

 

 

 

Net income

$

6,036

 

 

$

26,518

 

 

$

99,415

 

 

$

143,568

 

 

 

 

 

 

 

 

 

Earnings per share - basic

$

0.55

 

 

$

2.43

 

 

$

9.13

 

 

$

12.82

 

 

 

 

 

 

 

 

 

Earnings per share - diluted

$

0.55

 

 

$

2.41

 

 

$

9.10

 

 

$

12.73

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

Basic

 

10,893

 

 

 

10,913

 

 

 

10,884

 

 

 

11,195

 

Diluted

 

10,935

 

 

 

10,993

 

 

 

10,921

 

 

 

11,276

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

$

—

 

 

$

1.64

 

 

$

4.95

 

 

$

6.56

 

MEDIFAST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands, except par value)

 

 

December 31, 2023

 

December 31, 2022

 

 

 

 

ASSETS

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

$

94,440

 

$

87,691

 

Inventories

 

54,591

 

 

118,856

 

Investments

 

55,601

 

 

—

 

Income taxes, prepaid

 

8,727

 

 

—

 

Prepaid expenses and other current assets

 

10,670

 

 

16,237

 

Total current assets

 

224,029

 

 

222,784

 

 

 

 

 

Property, plant and equipment - net of accumulated depreciation

 

51,467

 

 

57,185

 

Right-of-use assets

 

15,645

 

 

18,460

 

Other assets

 

14,650

 

 

12,456

 

Deferred tax assets

 

4,117

 

 

5,328

 

 

 

 

 

TOTAL ASSETS

$

309,908

 

$

316,213

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

Current Liabilities

 

 

 

Accounts payable and accrued expenses

$

86,415

 

$

134,690

 

Income taxes payable

 

—

 

 

428

 

Current lease obligations

 

5,885

 

 

5,776

 

Total current liabilities

 

92,300

 

 

140,894

 

 

 

 

 

Lease obligations, net of current lease obligations

 

16,127

 

 

20,275

 

Total liabilities

 

108,427

 

 

161,169

 

 

 

 

 

Stockholders' Equity

 

 

 

Common stock, par value 0.001 per share: 20,000 shares authorized;

 

 

 

10,896 and 10,928 issued and 10,896 and 10,873 outstanding

 

 

 

at December 31, 2023 and December 31, 2022, respectively

 

11

 

 

11

 

Additional paid-in capital

 

26,573

 

 

21,555

 

Accumulated other comprehensive income

 

248

 

 

24

 

Retained earnings

 

174,649

 

 

139,852

 

Less: treasury stock at cost, 0 and 54 shares at December 31, 2023 and December 31, 2022, respectively

 

—

 

 

(6,398

)

Total stockholders' equity

 

201,481

 

 

155,044

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

309,908

 

$

316,213

 

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in this quarterly earnings press release, our annual report, and other public disclosures. The following GAAP financial measures have been presented on an as adjusted basis: cost of sales, gross profit, SG&A expenses, income from operations, other income (expense), provision for income taxes, net income, and diluted earnings per share. Each of these as adjusted financial measures excludes the impact of certain amounts identified below and have not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included below. These non-GAAP financial measures are not intended to replace GAAP financial measures.

We use these non-GAAP financial measures internally to evaluate and manage the company's operations because we believe they provide useful supplemental information regarding the company's on-going economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.

The following tables reconcile the non-GAAP financial measures included in this release:

 

Three months ended December 31, 2023

 

GAAP

 

IT and Supply Chain Optimization

 

LifeMD Collaboration Costs(2)

 

Non-GAAP

Cost of sales

$

49,646

 

$

—

 

 

$

—

 

 

$

49,646

Gross profit

 

141,369

 

 

—

 

 

 

—

 

 

 

141,369

Selling, general, and administrative

 

132,693

 

 

(2,555

)

 

 

(5,000

)

 

 

125,138

Income from operations

 

8,676

 

 

2,555

 

 

 

5,000

 

 

 

16,231

Other income

 

1,126

 

 

—

 

 

 

—

 

 

 

1,126

Provision for income taxes

 

3,766

 

 

583

 

 

 

1,141

 

 

 

5,490

Net income

 

6,036

 

 

1,972

 

 

 

3,859

 

 

 

11,867

Diluted earnings per share (1)

 

0.55

 

 

0.18

 

 

 

0.35

 

 

 

1.09

 

Three months ended December 31, 2022

 

GAAP

 

Donation Adjustments

 

Restructuring of External Manufacturing Agreements

 

Non-GAAP

Cost of sales

$

103,649

 

 

$

—

 

 

$

(12,195

)

 

$

91,454

 

Gross profit

 

233,596

 

 

 

—

 

 

 

12,195

 

 

 

245,791

 

Selling, general, and administrative

 

200,998

 

 

 

(8,473

)

 

 

—

 

 

 

192,525

 

Income from operations

 

32,598

 

 

 

8,473

 

 

 

12,195

 

 

 

53,266

 

Other expense

 

(190

)

 

 

—

 

 

 

—

 

 

 

(190

)

Provision for income taxes

 

5,890

 

 

 

3,813

 

 

 

2,744

 

 

 

12,447

 

Net income

 

26,518

 

 

 

4,660

 

 

 

9,451

 

 

 

40,629

 

Diluted earnings per share (1)

 

2.41

 

 

 

0.42

 

 

 

0.86

 

 

 

3.70

 

 

Year ended December 31, 2023

 

GAAP

 

IT and Supply Chain Optimization

 

LifeMD Collaboration Costs(2)

 

Non-GAAP

Cost of sales

$

296,204

 

$

—

 

 

$

—

 

 

$

296,204

Gross profit

 

775,850

 

 

—

 

 

 

—

 

 

 

775,850

Selling, general, and administrative

 

649,448

 

 

(2,555

)

 

 

(5,000

)

 

 

641,893

Income from operations

 

126,402

 

 

2,555

 

 

 

5,000

 

 

 

133,957

Other income

 

2,395

 

 

—

 

 

 

—

 

 

 

2,395

Provision for income taxes

 

29,382

 

 

583

 

 

 

1,141

 

 

 

31,106

Net income

 

99,415

 

 

1,972

 

 

 

3,859

 

 

 

105,246

Diluted earnings per share (1)

 

9.10

 

 

0.18

 

 

 

0.35

 

 

 

9.64

 

Year ended December 31, 2022

 

GAAP

 

Donation Adjustments

 

Restructuring of External Manufacturing Agreements

 

Non-GAAP

Cost of sales

$

458,163

 

 

$

—

 

 

$

(12,195

)

 

$

445,968

 

Gross profit

 

1,140,414

 

 

 

—

 

 

 

12,195

 

 

 

1,152,609

 

Selling, general, and administrative

 

955,608

 

 

 

(18,986

)

 

 

—

 

 

 

936,622

 

Income from operations

 

184,806

 

 

 

18,986

 

 

 

12,195

 

 

 

215,987

 

Other expense

 

(747

)

 

 

—

 

 

 

—

 

 

 

(747

)

Provision for income taxes

 

40,491

 

 

 

8,544

 

 

 

2,744

 

 

 

51,779

 

Net income

 

143,568

 

 

 

10,442

 

 

 

9,451

 

 

 

163,461

 

Diluted earnings per share (1)

 

12.73

 

 

 

0.93

 

 

 

0.84

 

 

 

14.50

 

(1) The weighted-average diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

(2) It is expected that the remaining $5.0 million of LifeMD Collaboration Costs will be recorded in 2024.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240220965429/en/

Investor Contact: Medifast, Inc. Steven Zenker InvestorRelations@medifastinc.com (443) 379-5256