Medifast (MED)
Q2 2012 Earnings Call
July 26, 2012 4:30 pm ET
Executives
Katie M. Turner - Senior Vice President
Michael C. MacDonald - Executive Chairman and Chief Executive Officer
Brendan N. Connors - Chief Financial Officer
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer, Director and Member of Executive Committee
Analysts
John P. San Marco - Janney Montgomery Scott LLC, Research Division
Michael Halen - Sidoti & Company, LLC
Kurt M. Frederick - Wedbush Securities Inc., Research Division
Scott Van Winkle - Canaccord Genuity, Research Division
Presentation
Operator
Greetings, and welcome to the Medifast Inc. Second Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce Katie Turner for opening remarks. Thank you. Ms. Turner, you may begin.
Katie M. Turner
Thank you. Good afternoon, and welcome to Medifast's Second Quarter Fiscal 2012 Earnings Conference Call. On the call with me today are Michael MacDonald, Executive Chairman of the Board of Directors and Chief Executive Officer; Meg Sheetz, President and Chief Operating Officer; as well as Brendan Connors, Chief Financial Officer.
By now, everyone should have access to the earnings release for the period ending June 30, 2012, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you've not received the release, it is available on the Investor Relations portion of Medifast's website at www.choosemedifast.com. This call is being webcast and a replay will be available on the company’s website.
Before we begin, we’d like to remind everyone that the prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance and, therefore, undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements. Medifast assumes no obligation to update any forward-looking projections that may be made in today’s release or posted on our call that is on our website.
Medifast does not comment on issues or items currently or potentially in litigation with adversarial third parties and/or under investigation by appropriate regulatory or law enforcement agencies of the state or federal government. All of the forward-looking statements contained herein speak only as of the date of today's call.
And with that, I'd like to turn the call over to Medifast's Executive Chairman and CEO, Michael MacDonald.
Michael C. MacDonald
Thank you, Katie. Good afternoon, everyone, and thank you for joining us. On today's call, I will provide you with an update on our business initiatives. I will also provide more color on areas of the business we are seeing improvement and discuss the areas that we plan to address to best position Medifast for future growth and profitability. Brendan will review the financial results for the second quarter in more detail, and discuss the second quarter 2012 revenue and EPS outlook. I will then provide some closing remarks. We will open up the call to take your questions.
I'm pleased to report we realized strong sales momentum across each of our primary distribution channels: Take Shape for Life, Direct Response Marketing, Medifast Weight Control Centers and Wholesale Physicians. As a result, we exceeded our expectations on the top line, as well as the bottom line after backing out a $3.7 million expense, which I will discuss in more detail in a few minutes.
In the quarter, our executive team remain focused on reviewing and optimizing our overall cost structure to further leverage our sales momentum, improve our margins and deliver improved earning results, while continuing to focus on enhancing the customer experience in each of our sales channels.
After just 1 quarter of implementing our Medifast Weight Control Center cost realignment, we were able to generate a profit in the segment. We believe this illustrates that we're taking the right steps to best position Medifast for increased earnings and strong cash flow generation, long-term.
Now I'll provide an overview of our second quarter results. The number of active health coaches was flat sequentially at 10,200 from the first quarter of 2012. In the quarter, we continue to work on improving our health coach client acquisition and retention. The average revenue per health coach per month increased to $1,683 from $1,615 in the second quarter of 2011, an increase of 4%. We're pleased with this acceleration in health coach productivity in the quarter, as we begin to see positive results from our efforts to improve overall performance in Take Shape for Life.
Take Shape for Life celebrated its 10th anniversary in Maryland last week, with 2,400 health coaches in attendance at the annual convention. I had the opportunity to attend it, and it was great to see some of your from the investment community there. The convention was a tremendous success, as our team, led by Meg Sheetz and Michelle Jones, continues to work diligently to provide our health coaches with the necessary education, tools and support to generate business outside of their circles of influence of world market, which often includes families and friends and their community. At these events, leaders are taught skills and techniques to help further develop their own team of health coaches that they mentor.
This year, we launched 11 new products including new Medifast to go! meal replacements, with our Mixed Berry and Cinnamon & Brown Sugar Cereal Crunch, Parmesan and Chili Nacho Cheese Puffs and a Mocha Ready-to-Drink Shake. We understand that our clients lead busy lives. And in listening to their needs, we saw that expanding our portable Medifast products is critical to their success, as we help support our clients' weight loss and health goals.
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