Amid a management shake-up, Medifast Inc. (MED—NYSE) posted fourth-quarter results that missed analysts’ estimates despite surprise gains in its Take Shape For Life direct selling business.
Net income for the quarter totaled $3.9 million, or 33 cents a share, compared with a net loss of $3.4 million, or 28 cents a share, a year ago. Analysts polled by Thomson Financial Network had expected 35 cents per share. In the fourth quarter of 2014, earnings were hurt by one-time charges as the company shut down its 34 corporate-owned Medifast Weight Control Centers.
The weight-loss company said revenue from continuing operations was $61.3 million, down 2 percent from the prior-year period. On average, analysts had predicted $63 million. With revenue up 5 percent at $48.0 million, Take Shape For Life, the company’s largest division, bucked downward trends across other units and logged its first quarter of positive year-over-year growth since Q3 2013. At the close of 2015, the number of active Health Coaches building businesses through Take Shape For Life—11,900 in all—was up 200 from year-end 2014.
Management said the growth is a result of pinpointing key business drivers, as well as marshaling resources on the corporate side. In the past year, as Medifast has been in talks with activist investor Engaged Capital LLC, the number of employees allocated to Take Shape For Life has approximately quadrupled, CFO Timothy Robinson said during a call with investors.
For the year, revenue from continuing operations dipped 4 percent to $272.8 million, versus $285.3 million in 2014. Net income was $20.1 million, or $1.68 per share, up from $13.2 million in 2014. Take Shape For Life accounted for 74 percent of annual revenue.
In April 2015, the company and its third-largest investor, Daniel Welling’s Engaged Capital fund, reached an agreement that included an overhaul of Medifast’s board of directors. Management said eight of the 12 board members would not stand for reelection, and five new directors—three nominated by Engaged and two jointly—would take their place. Among those who stepped down were Medifast President and COO Meg Sheetz, who also serves as CEO of Take Shape For Life, and Executive Vice President and General Counsel Jason L. Groves.
Days before releasing 2015 results, officials announced that Sheetz plans to resign her position on April 8, after 16 years with the company. Sheetz is the daughter of late Medifast CEO Bradley MacDonald and niece of current CEO Michael MacDonald. “Meg contributed in many ways throughout the organization and she will certainly be missed,” MacDonald told investors. “I will be taking some time to assess our leadership needs, so we won’t be immediately filling Meg’s position.”
During the call, officials disclosed that ongoing management changes extend beyond Sheetz. Three executive vice presidents exited the company in February, and some changes have been made at lower levels as Medifast pursues higher profits and efficiency.
