MED - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the Medifast Second [ph] Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Katie Turner. ahead. go Please

Katie Turner

welcome call And third XXXX quarter Good webcast. to conference and earnings afternoon. Medifast

On me Officer. Eastern X:XX call release that and should the went with access Time. for Timothy Executive Chard, have afternoon September Robinson, Officer, the Chief out period Chief XX, the this PM Financial to By ending everyone today now, earnings are XXXX Daniel approximately at

is This available Medifast you've is on Investor If release, not the of www.medifastnow.com. the Relations available company's and website webcast it at be on call received being portion will website. the replay the

Before we on in statements. and expressions generally Actual begin, may not prepared statements placed to and words to we and additional other forward-looking similar therefore do reliance undue make The remind anticipate response not everyone remarks management would should These be guarantee expects, could forward-looking statements that identifies future your like statements performance forward-looking them. questions. contain believes, results in statements. turn call. as All call maybe date statements projected release call. over the the made Chard. on those that that this from herein CEO would with speak or I contained any Medifast And in projection of no materially Medifast obligation the to update forward-looking Dan forward-looking of differ today's any to like only assumes to forward-looking the

Daniel Chard

guidance. quarter answer brief will financial to XXXX third Good and Thank fourth results a pleased our financial of detail XXXX quarter Tim and our then available then with and and be everyone. review results questions. Tim you, share today. operational discuss in will our afternoon provide overview Katie. to business I annual financial your you I'll We're our more performance.

early successes achieved positions earnings expectations. successful we execution quarter. our strategic results and quarter the the to report initiatives growth of revenue of in us and our acceleration above revenue The third we earnings for operations and and Our initiatives reflect third are pleased growth some

XX.X% up guidance was to million, XX million XX.X million. of revenue XX of revenue above quarter Third our

as continue behind growth basis we to our also organization, resources and across initiatives. allied the accelerating improvement quarter sales, improvement our key a share per $X.XX which have We earnings Combining this with focused $X.XX see our ahead costs operational revenue experienced percentage per as we a efficiencies XX of $X.XX our third diluted point share drove SG&A to earnings of guidance. diluted in of

fuel enthusiasm done across has health also a optical that field have we from powerful the focused solid being This and and we this, their As positioned and our corporate we resonated been have transformational team, have and momentum our and business future. message better excitement, well energy We're helped us our business. never for created is experiencing around clients. leaders,

model coach line translated past officially OPTAVIA we coaches of unit Dallas, the and to convention this the essential our we call, we've our our results. pleased and rollout As we the ever Texas of been largest At our directly incredible OPTAVIA Take convention, quarter response OPTAVIA in products. company's from completed For received Shape largest in tangible rebranded through posted this Revenue with positive discussed hosted and on QX history. into OPTAVIA extremely We've clients July. our Life business the

OPTAVIA The number XX,XXX. coaches a third active the over to record of first quarter also earning grew represented time which for

working tools with message take powerful and of coach focused a to next level have our business OPTAVIA business distinct together exclusive growth. to community We OPTAVIA products, its incredible enhanced

In August we than over at XX% with mark for of community growth X ended coaches year-over-year consecutive second increase last set year. our coach quarter for new OPTAVIA reported an for on growth, our Q in nearly We of the its OPTAVIA any coaches, XX%. this a the results period was as this more OPTAVIA the quarter from OPTAVIA eight we operating and QX in a Sequentially, quarter joined company up revenue revenue quarterly XX,XXX nearly more nearly September, of two-month detail. up reported earning of Focusing year. our active history. XX% high third company's

During the generate and higher we productivity third to higher acquisition quarter, order increased also year-over-year. a coach client new continued from resulting average value

hear from Just our a held coach Utah. some our the of I building The most retreat focused community. weeks business couple a our in habit leadership hand time. bringing on ago, at talented of and business together to lifelong make the stories coach fourth pleasure annual We the with leadership of one to quarter world had easier and and of aligned together initiatives. hand wonderful retreat brings It mission to OPTAVIA inspiring of OPTAVIA This Sundance real-time and which the created enhanced attending retreat successful phase our with their launch demographics new improve is the in will leaders skills enable behind the to of transformational and tools develop leverage enable was transformation that OPTAVIA community new their will appealing worked to believe new content it expand media and shared resources powerful the coaches healthy lives. next XXXX technology our business and seamlessly, Beginning OPTAVIA impact normal community connect inclusive we is even The be created and to help business activity both successful. diverse month, client and their to we've interaction. more enables social and to help OPTAVIA grow coaches digital more positively a coaches to clients. With information easily them one OPTAVIA to manage business platform receive to insights message system a success for we share OPTAVIA,

to now and the than our build upon momentum. coach business stronger ever is current very community ahead, well Looking OPTAVIA positioned

preparing month Downtown Maryland. time. time. expansion also make into into every share they corporate markets to in a world of offering the in our day and vision penetration moved habit Last progress includes as as we US deeper our others existing healthy We one markets Baltimore, new future transformation, coaches growth continue at for as inspire over of OPTAVIA new well mission which our lifelong office

space As Medifast leader this continues are establish and to a health community. we wellness pleased the as business join to itself national growing in

will honor Medifast’s serve OPTAVIA part who for destination headquarters from integral the home as business home and the a represent will coaches from an company's away new of country rich and across history Our culture. and

overall Now a gain let longer over revenue year-over-year rate trend. me performance drag improved year move QX. Medifast is on Direct, of the decline Medifast the to year no quarterly our revenue significant in

working model long-term the profitable a business. number to a of right supports growing placement spend, of and Our ensure customers find that growth to the team has been have sustainable acquire balance to the we advertising messaging of

of will to coach and very platform generation emphasis our a our our community. facilitate continue Direct this believe In We support far test Medifast markets is and summary, digital our over OPTAVIA testing coach accomplishments to into alignment We help response our community success direct of lead clients. long-term pleased in and OPTAVIA move an with will model will our we're time. that thus to example our as tool benefit ongoing for the enhance the expansion new an XXXX. units business to our This integrated that

in begun the As business to profitability. demonstrated to growth both results, our initiatives rate revenue by financial of strategic operational generate and have our an accelerated and evolve

infrastructure in for that like are balance the Robinson. the well our have our business and would unit. sheet to strong call positive to I positioned And momentum OPTAVIA when future. With business over CFO, We our we scalable Tim turn combined with

Timothy Robinson

third for Life everyone. Thank of Medifast And formally accounted Dan, of X.X%. XX.X X.X% In for the revenue Take prior you net year. OPTAVIA quarter, accounted to accounted increased good For Wholesale in Centers Franchise OPTAVIA million afternoon our expectations. Control XX.X Shape from XX.X% accounted Revenue Weight revenue, the third in Direct of revenue. of Medifast for approximately and XX.X the Medifast million million XX.X%, exceeded quarter for XX.X%

the mentioned, approximately Dan OPTAVIA coach year, in year. record the line the quarter to compared for third at in revenue in last XXXX. product XX,XXX in active remainder same of OPTAVIA As increased period as XX,XXX third July. compared to $X,XXX launched of the the of coaches Average second quarter for to and of quarter the earning health in per We essential last $X,XXX the the quarter active XX,XXX

most available during OPTAVIA full were the So sale products nearly complement quarter. the of for of

specifically plan thought revenues report our helpful basis. branded revenues in total particular don't quarter this it OPTAVIA stage products. at by brand to we would to on the XX% comprised of a regular were be we While that report

XXXX quarter XXX,XXX our period. centers franchised for the Our in and gross strategic of prior-year percentage franchise X.X to Medifast quarter during communicated an unit in million same driven year. of company the fourth compared to versus longer will profit in two franchise year. net the decreased the We third quarter percentage compared Medifast third quarter mostly points Direct X.X in reseller last in last by This increased revenues the primarily during The OPTAVIA to in no a in of end revenue period comprised Centers OPTAVIA for from in million is as to of in Medifast direction. to of same as fully X.X revenue margin model Weight of Control Gross integrated centers with manufacturing reseller by Lower launch. XXX,XXX quarter is XX.X% consistent to revenue as third revenue coach prior-year was million Wholesale XX.X% inventory period X.X period. decreased the Revenue decreased the in fewer compared of the costs to quarter to XXX,XXX decreased X.X% a the compared Gross XX into operation building margin which This decrease X.X million driven year. previously providers advertising the Franchise to of with in at XXXX. be XX healthcare the decrease XXXX. XXXX. our from location XX.X% the by Direct centers the basis from Medifast the business operation is decreased the revenue XX.X XX.X increase third locations million in period. million Total profit one this in in XX in million quarter ended

higher income increase year recall, in brand. the were producing XX.X% shares the The of of we general third in of quarter in the million X.X diluted was in outstanding. Selling, expenses of our prior As the based XX.X revenues in quarter inventory on on expense of XX.X primarily third XX% or million compared million approximately build XXXX OPTAVIA coaches. result the to the growth our or XX per year. may and and to a SG&A OPTAVIA success commission of revenues XXXX million were you last was $X.XX OPTAVIA initial quarter based or third of share over Net administrative

income XXXX approximately on $X.XX X.X million net XX.X based or Third shares share quarter was outstanding. diluted per

in XX.X% driven state the quarter to Our of by compared increase The rate an third effective the tax rate period. the in for taxes primarily XXXX. was was XX.X% increase in income

balance of XX.X XX.X as XX, with million XXXX at of of capital and working compared sheet million million and XXXX. XX, investment September to XXXX. increased strong XXX.X Cash, XX.X Our September equity remains stockholders XX.X securities cash million as equivalents XX, to very December of million

Our X. Directors dividend of quarter during November quarterly $X.XX on declared Board payable the

to range our to the in fourth we range of diluted in be turning guidance, So expect quarter and share. million of $X.XX to be to $X.XX XX.X per share earnings diluted to million XX.X the revenue

$X.XX/ range We XXX narrowing earnings the range XXX guidance share are of per diluted to diluted $X.XX million revenue to guidance and be full-year raising therefore to our to XXXX share. in are full-year per our million

your Our assumes in our now and overview. XX% operational I to Well fiscal are and available tax appreciate XX% concludes rate. And We that questions. XXXX financial interest effective Medifast. guidance take Dan your of Operator? to year a

Operator

question first will The with come Frank Sidoti. Instructions] [Operator from Camma

Frank Camma

know just was you markets year? timeline some get more a something tell about you next comments detail we Dan little wondering, there I on prepared actually time, I the us you to on international about it? as gave when early detail is might give over be might Can more

Daniel Chard

at been it this common December. are Where point, has question. is Yeah. in pretty we a This

but be with enable we’ll will make final us announcements next we soon the decisions sharing don't with and as an post will new we as more do, at timeline to live go be point, actually exact have those So piece our you. that specific month, December. make We this we will that certainly to platform

Frank Camma

since achieved mean bit, counter going? less talk numbers are a I and you sort obviously, just I you that you little Could but quarter you productive. I talk relationship too. in when because newer impressed growing good a we decline was good of that, the metrics when little Can productivity, sometimes talk almost of know coaches had see tend – a coaches, here, the you that or be about often about number last with productivity just Can the you're all the a sustainability get that you a to

Daniel Chard

Yeah.

mean to our the I we're coach think a are productivity. higher seeing to a your products transition from there's Two ceiling the Medifast point, brand I things happening. on OPTAVIA those typically community, the price. brand have among One, slightly

related that I So is and the product, OPTAVIA. the productivity the to the of to important improvements a of that portion part but which to of think more it higher launch the of related communication makes up majority relates the excitement price

future. while maybe see a be to that see number to continue healthy growth the little should more near So continue won't go a bit the number we and level up, at very in

Frank Camma

us kind about how I relative out but Can since you year had was on, My just Tim benefit going to are think forward which level, and last little gross we utilization. think utilization, course -- a that on we planned of of obviously margin, the the margin. last where you gross correctly, your profit modeled for tell like just that should called pressure

Timothy Robinson

Sure.

what you quarter is normal. saw I think past this

what absorption effectively your was year as costs. into we have you a your costs overproduced, you time overhead this saw higher level standard I think last of

margins volume thing and good So for goes spiked. a when it's up, it

more plan So time year with a a this I our it our to margins were it still great than utilization improve XX%, where last of But indication to so continue I year is we there's think this this think was volumes. opportunity is time. under of

Operator

Linda Bolton next with from comes Weiser Davidson. Our question DA

Linda Bolton Weiser

Is over it for flowing is something to a to and line or line that's going the going process this you time period, be or explain just something add you're innovation you skews new So time this maybe it this OPTAVIA line, the being? line you'll that or that long works? in a of where something or skews of at for is full terms more rest as be replacing? where the of up freshen your kind rolled out is in to So start to conference. how going the the over the the process can Is for

Daniel Chard

kind profile Linda question, that what from completed rollout I’d Medifast. the a of Great of say we it the convention was the flavor complete at and as with existed line

is what Now see you'll a refresh. consistent

we’ll these past two continue brand the products – and but at flavors of and and even is to that from launched of standpoint several to keep snack example new weeks, kind are an rollouts, categories as new positioning fit under our a the extension wellness we So fairly current and may health products several minor this OPTAVIA of out look company. we’ll continue to roll other

Linda Bolton Weiser

the selling does it numbers. math of the the And terms the then by that here could doing in imply for if like I'm XX% direct quarter. your fourth It right guidance that over looks revenue of sort be growth

doing that? I the am So math on right

Timothy Robinson

XX% XX%. historically Linda, high the revenue bit little a of business guidance bottom other And had of mean, consolidated is end I the guidance units end is a l drag. have the the Yeah. of

not your be certainly, So is It's XX%. off. possible over certainly math to

Linda Bolton Weiser

million. Okay said And been, one X.X adjusting experimenting piece, in of it you Medifast sounds it then terms I the and something you’ve spend like of the think advertising or was been level you’ve Direct or

to consider should we go that we a should is still So about or lower that spending number think normal how level? that that's now going or

Timothy Robinson

future think in probably I level. see you'll around that is what the

new community. our as doing to the is Our in Medifast coach Medifast Direct of biggest Direct a way testing use bringing initiative for clients for we're

been for we've several quarters. on that working So

key of wrap that that, the future, identify possible it that, possible doing could in again, about we’re your foreseeable levers we it keep it’s do the we once think where kind for up I in it's but to modeling we As purposes is. going

Linda Bolton Weiser

quarter, is And projected. then in strong balance, balance was cash cash of in like higher cash than had it pretty terms mean your it looks the just I I your flows, the

stock very I dividend, were that doing it, point terminology to the still way So one the you your cash the a about were to to quite risen like increased. would of stock big well if has XX% thinking you yield dividend as a that wonder remember a, think some saying you we a now. your front at sort maintain maybe But yield. because is want and I imply you're -- about somebody really dividend at which have of look flow here, that increase on X% of on kind if you've X% your

the the So way that? how about is should about board thinking and management we think

Timothy Robinson

Yeah.

end a initiated up decision like will we we said to we last initiated a we year, the at I we brought it Those yield. the we've made and haven’t the been dividend December, Linda, initiated dividend think That would up XXXX we raised of evaluate been to yet. next and XX% ever decisions and the year but in yield So board X% X% for coming and strong to since what have payer dividend. is be that back

exactly I been think combination. that determined, story hasn’t a powerful growth but dividend with the the now is So strong

Linda Bolton Weiser

that that decision, is December? announced in is And typically

Timothy Robinson

two the has years, first The in two The payable years, in quarter. it it was so. past been December, past declared

Linda Bolton Weiser

it finally, of just think the was when referred but you it, missed just I the the X? phase targeted IT you sorry to phase completed, if phases completed and I did will be two then to it that then platform, And X say and is be

Daniel Chard

to the any think it who IT, live is one online, OPTAVIA a this go investment related in launch. to December is projection selling final our Our but be I and won’t company X significant like is

some on the general technology the coach has community business. of branded that enhancements components on be waiting some has then will use So, rolled the December some that we out for and to facilitate been that basic it X important

Linda Bolton Weiser

that And to in that's then and -- XXXX? Is that's there final. be the I'm sorry, phase one another completed last the has

Daniel Chard

X. phase That's Yeah.

So shopping will not cart as X, to we this be end, phase do our needed being well is upgraded meaning phase multi-country, front multi-currency. it the on and this this X as of multilingual, for complete is what made capable we’ve

So We're essentially a rich. at elements office, their more for our new much way and we're a to look them information also that most manage and simple giving business those updating. so back the are much important more coaches

also their effectively there So those social more them the will stories are share on media. elements are help -- that other number a of

will this the most introduction the year, forward. most, to in systems as our sure kind we but expectations the go to So the make last invest we allow be do important continue to and going businesses forward our technology in technology of that coachmen again, meet of our of how business we'll we leverage we how

Operator

question Doug be will next Lane with The from Research. Lane

Doug Lane

the and at the a top nice beat top of the Looking quarter, we line year came revenue the full down little a third estimate on range bit. had

lower did little So you a the bit? fourth quarter

Timothy Robinson

Yeah.

we're with momentum So of the pleased out have. very we the quarter coming third

in momentum factored in. which seasonal exactly some historically because the Our very fourth I've our we little modeling, implies don't quarter blow Historically softer, can growth to and the in as coming have the Doug, through is looking fourth be year-over-year primarily of that whether seasonality looked we we've strong XX% has quarter, seasonality, late little off so in back, been seen we XX.X%. quarter based for right a we a on is but now, holidays as that what guidance the have know so long of we’ll XX% fourth quarter,

Doug Lane

to thing not that seems out there and a so you and really out a wondering, it out quarter was finding we not sure third the that that but only, year starting are the mean, to number that like I'm why but kind really you’re but then only that's things pretty you raising -- we had put looks also really a get I are of you full traction, solid, Yeah. in the stuck with knit, convention it's come ointment, very strong doable. the quarter a because numbers want to not understand

business. think So away takes I in the don't obvious from the it strength

gears the about opportunity new expansion there shifting about bit, little IT Just and the Dan thinking US. and then a to talk from outside platform the

you know management high or you or I more a about there been year, we you are. sit see from sort the look undertaking profile talk next life should a where and we can today, moving wonder or a I big towards you as from year one infrastructure, mean, your of hires from as two it’s in You’ve previous overseas. where so

Daniel Chard

expect and to determine as we're go. We to exactly going that, Yeah. finalize should see we where

As get of it typical making announcements and opening, plans out, advance in to fairly work a it's those start makes in pointing do of to of an lot to any you're certainly advance there.

Doug Lane

just you feeling it’s here Yeah. about there out -- talking are the to what and to just I’m I'm know and and will? a trying hurdles there, get trying been for we've it if between we

Daniel Chard

Yeah.

major have multi-language, ones this on the first talking that technology, were we multi-country, have a with sure just that will think I that focused been making that's about. think -- thing capable we rollout complete supporting the of I be platform multi-currency a is we’ve platform

and people that's other phase need I countries. been getting right the that way to to -- our the potential next happening concept; testing and last thing that looking portion about our the too do at out it message the what completed that's The that manage products; as and that's is sequence thinking a received pricing; well. we're pointing the of the we and That's to our think in well you're our target ensure are is thing

Operator

and this back turn like question-and-answer session. I Chard our conference Dan the to over for closing any gentlemen, remarks. would concludes Ladies to

Daniel Chard

participation today's evening. We forward full with the results to Great. in as we nice and XXXX a report to look fourth We year have in and you again call. our speaking would your quarter for like and Medifast interest appreciate everyone thank

Operator

today's The for Thank attending presentation. conference concluded. is you now

You may now disconnect.

Medifast (MED) 7 Nov 172017 Q3 Earnings call transcript