Medifast, Inc. (NYSE: MED), the company behind one of the fastest-growing health and wellness communities, OPTAVIA®, today reported results for the third quarter ended September 30, 2020.
Third Quarter 2020 Highlights Compared to Prior-Year Period
- Revenue increased 42.8% to $271.5 million
- 30.7% growth in active earning OPTAVIA Coaches to a record level of 42,100
- Revenue per active earning OPTAVIA Coach increased 8.2% over the second quarter to $6,329
- Net income increased 116.7% to $34.5 million
- Earnings per diluted share ("EPS") of $2.91, an increase of 120.5%
"Our business continues to go from strength to strength, with high levels of client demand and engagement among independent OPTAVIA Coaches, accelerated growth and record levels of active earning Coaches," said Dan Chard, Chief Executive Officer of Medifast. "Our programming efforts this year, along with enhancements to our organization, have given us a foundation for significant progress during the quarter. We continue to make investments to enhance our infrastructure to support our strong growth trajectory. We believe we are well positioned to capitalize on the ever-increasing focus on health and wellness across the United States and around the world. Our comprehensive solution is resonating with Coaches and Clients everywhere, and we will continue to focus on providing our Clients with the ability to achieve lifelong transformation one healthy habit at a time."
"While the COVID-19 pandemic continues to deliver challenges and obstacles to consumer-facing businesses, our entire organization as well as our dedicated Coaches have successfully adapted to the new dynamics. We remain highly confident in our ability to deliver long-term growth to all of our valued stakeholders."
Third Quarter 2020 Results
Third quarter revenue increased 42.8% to $271.5 million from revenue of $190.1 million for the third quarter of 2019. OPTAVIA-branded products represented 83.0% of consumable units sold for the third quarter compared to 78.0% for the same period a year ago.
The total number of active earning OPTAVIA Coaches increased 30.7% to 42,100, compared to 32,200 for the third quarter of 2019. The average revenue per active earning OPTAVIA Coach was $6,329 compared to $5,715 for the third quarter last year.
Gross profit increased 42.7% to $204.0 million from $142.9 million for the third quarter of 2019. The Company's gross profit as a percentage of revenue was 75.2% consistent with the third quarter of 2019.
Selling, general and administrative expenses ("SG&A") increased $36.8 million to $159.5 million compared to $122.7 million for the third quarter of 2019, primarily due to higher OPTAVIA commission expense as a result of growth in OPTAVIA sales and increased salaries and benefits related expenses partially offset by a decrease in sales and marketing expenses. SG&A as a percentage of revenue decreased 580 basis points year-over-year to 58.7% of revenue.
Income from operations increased $24.3 million to $44.6 million from $20.3 million in the prior-year period primarily as a result of increased gross profit partially offset by increased SG&A. Income from operations as a percentage of revenue was 16.4% for the quarter, an increase of 570 basis points from the year-ago period.
The effective tax rate was 22.8% for the third quarter of 2020 compared to 22.7% in the year-ago period. The slight increase in the effective tax rate was primarily driven by an increase in state income tax rate and a decrease in tax benefit of stock compensation, partially offset by an increase in research and development tax credit and a decrease in meals and entertainment.
Third quarter net income was $34.5 million, or $2.91 per diluted share, based on approximately 11.9 million shares outstanding. Third quarter 2019 net income was $15.9 million, or $1.32 per diluted share, based on approximately 12.1 million shares outstanding.
Balance Sheet
The Company's balance sheet remains strong with cash, cash equivalents, and investment securities of $169.9 million as of September 30, 2020 compared to $92.7 million at December 31, 2019. The Company remains free of interest-bearing debt.
The Company declared a quarterly cash dividend of $13.4 million, or $1.13 per share that is payable on November 6, 2020. There are approximately 2,323,000 shares of common stock remaining under the Company's share repurchase program. Medifast expects to maintain a program of paying dividends on a quarterly basis and intends to utilize its share repurchase program as opportunities arise.
About Medifast®:
Medifast (NYSE: MED) is the company behind one of the fastest-growing health and wellness communities, OPTAVIA®, which offers Lifelong Transformation, One Healthy Habit at a Time®. Based on nearly 40 years of experience, Medifast has redefined direct selling by combining the best aspects of the model. Its community of thousands of independent OPTAVIA Coaches teach Clients to develop holistic healthy habits through products and clinically proven plans, the Habits of Health® Transformational System and comprehensive support from a community of like-minded people. In 2019, Medifast expanded the OPTAVIA movement globally, beginning with the Asia-Pacific region. Medifast is traded on the New York Stock Exchange and was named to Fortune's 100 Fastest-Growing Companies list in 2019 and Forbes' 100 Most Trustworthy Companies in America List in 2016 and 2017. For more information, visit www.MedifastInc.com or www.OPTAVIA.com.
