Medifast reported financial results for the fourth quarter and full year ended December 31, 2018.
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For the fourth quarter of 2018, revenue increased 87.0% to $145.8 million from revenue of $78.0 million for the fourth quarter last year.
OPTAVIA-branded products represented 72% of consumable units sold for the fourth quarter of 2018 compared to 51% for the fourth quarter of last year.
The total number of active earning OPTAVIA Coaches for the fourth quarter of 2018 increased to 24,100, compared to 15,000 for the fourth quarter of 2017.
The average revenue per active earning OPTAVIA Coach for the fourth quarter of 2018 increased 26.2% to $5,756 compared to $4,562 for the fourth quarter last year.
Medifast's gross profit for the fourth quarter of 2018 increased to $109.1 million from $59.1 million for the fourth quarter of 2017.
Medifast's gross profit as a percentage of revenue decreased 100 basis points to 74.8% from 75.8% for the fourth quarter last year.
The decrease in gross margin percentage was driven by increased inventory reserves for a select group of products as well as higher freight costs to support year end customer demands.
Selling, general and administrative expenses ("SG&A") for the fourth quarter of 2018 increased $39.7 million to $89.3 million compared to $49.6 million for the fourth quarter of 2017, primarily as a result of higher OPTAVIA commissions expense, consulting costs related to information technology projects, and investments the Company is making in an upcoming International Leadership Advancement Trip ("ILAT") which is designed to reward qualifying business leaders with exclusive training and development opportunities.
As previously disclosed, the ILAT expense was recorded in the third and fourth quarters of 2018 and is expected to drive strong growth in 2019.
SG&A as a percentage of sales decreased 240 basis points to 61.2% of total revenue compared to 63.6% in the fourth quarter of 2017.
Operating income increased $10.3 million to $19.8 million from $9.5 million for the fourth quarter of 2018 primarily as a result of increased gross profit, partially offset by increased SG&A expenses.
Operating income as a percentage of revenue increased 140 basis points to 13.6% compared to 12.2% in the fourth quarter of 2017.
The fourth quarter 2018 effective tax rate was 22.4%, compared to 25.4% for the fourth quarter of 2017.
This decrease was primarily a result of the decrease in the Federal statutory rate pursuant to the Tax Cuts & Jobs Act rate of 14.0% offset by 2.1% due to the elimination of the Domestic Manufacturer Deduction, 5.0% due to a decrease in the windfall related to stock compensation and 3.0% due to a change in temporary differences resulting from the Tax Cuts & Jobs Act.
Net income for the fourth quarter of 2018 was $15.7 million, or $1.30 per diluted share, based on approximately 12.0 million shares outstanding.
Medifast's fourth quarter 2017 net income was $7.3 million, or $0.60 per diluted share based on approximately 12.1 million shares outstanding.
Fiscal 2018 results
For the fiscal year ended December 31, 2018, revenue increased 66.1% to $501.0 million compared to revenue of $301.6 million in 2017.
Net income for 2018 was $55.8 million, or $4.62 per diluted share based on approximately 12.1 million shares, compared to $27.7 million, or $2.29 per diluted share for the comparable period last year based on approximately 12.1 million shares outstanding.
The Company's balance sheet remains strong with stockholders' equity of $109.1 million and working capital of $85.2 million as of December 31, 2018.
Cash, cash equivalents, and investment securities increased $2.2 million to $101.0 million as of December 31, 2018 compared to $98.8 million at December 31, 2017.
Medifast remains free of interest bearing debt.
Inventory increased $19.6 million to $38.9 million as of December 31, 2018 compared to $19.3 million as the Company increased inventory levels to meet current and future customer demand.
Medifast declared a quarterly cash dividend of $9.1 million, or $0.75 per share, during the fourth quarter of 2018. ■