Medartis
Annual Report 2018

Plain-text annual report

2018 ANNUAL REPORT At Medifast, we’re taking a holistic approach to health and wellness to deliver on our mission to offer the world Lifelong Transformation, One Healthy Habit at a Time™. With nearly 40 years of research and experience, we’re driving innovation in the development of products and programs that promote a healthy lifestyle. Our Community of independent OPTAVIA® Coaches provide individualized attention, support and encouragement to Clients, helping them successfully put healthy habits at the core of their everyday lives. We empower our Clients to adopt a new attitude to every aspect of their lifestyle, and help them change their approach to health and wellness for good. 1 Dear Fellow Stockholder: This has been another great year for Medifast, as we continue to build and grow our business for the long-term, and deliver on our mission to offer the world Lifelong Transformation, One Healthy Habit at a Time. Our Integrated Coach Model is at the core of our ability to drive this business forward, with Coach and Community support meaningfully contributing to the success of people seeking to transform their lifestyles. With this in mind, in 2017 we set the ambitious goal of more than doubling the size of our OPTAVIA Coach Community to 30,000 by the end of 2019, driving revenue to $500 million and generating a three- year compounded total stockholder return of 35% in the same timeframe. Thanks to the hard work of our teams and Coach Community, we reached our revenue target one year earlier than anticipated, increasing 66% year-over-year for a total of $501 million in 2018. Our goal of three-year total stockholder return of 35% was also achieved one year earlier than targeted. We ended the year with a record 24,100 active earning OPTAVIA Coaches, and are confident in our ability to reach and surpass our 30,000 active earning Coach target in 2019. As well as driving impressive financial results in 2018, we made significant progress in building an operational platform for continued growth. We invested time and resources in building our capacity and capabilities to improve our organizational effectiveness. Initiatives completed during 2018 include partnering with a global logistics company to open a new distribution center, optimizing our supply chain, expanding our Client support capacity and adding multilingual capabilities. There is a large and growing market opportunity in both the United States and around the world, as obesity levels rise and consumer spending on health and wellness increases. Having delivered on our existing goals, we have now set a new target of doubling the size of our business in the next three to four years while increasing our operating margin each year. We have the opportunity to grow revenue to $1 billion by the end of 2021, with an operating margin of at least 15%. These are challenging goals, but having exceeded even our own high expectations over the last two years, I feel confident that we have the team and strategy in place to continue to excel. Accelerating the success of our Coaches will be essential to our growth. We will aggressively seek to increase the number of active earning OPTAVIA Coaches to 50,000 by the end of 2021, and provide this Community with the tools to ensure best-in-class service and product experiences. By leveraging our brand and scientifically proven plans, we can significantly extend our impact, and deliver Lifelong Transformation, One Healthy Habit at a Time to even more people across the U.S. and around the world. Technology will be at the core of our ability to drive greater scale, and further improve efficiency. We are investing in mobile apps that leverage cloud technology platforms to create a better Coach and Client experience with enhanced data analytics. By leveraging technology, we will be able to accelerate our growth, and maintain margin while extending our reach. Dan Chard Chief Executive Officer 2 Though nutrition and weight-loss remain at the center of our business, we believe there is substantial opportunity in adjacent categories as part of our holistic approach to health and wellness. Our product development and marketing teams remain focused on delivering products that support healthy habit creation, working in tandem with our independent OPTAVIA Coaches to develop solutions that meet the needs of the Community. We also remain focused on expansion into new demographic segments and geographies. This includes tapping into underrepresented markets in the U.S., as well as expanding our international footprint. In 2018, we worked on our market preparation and development plan to expand into Hong Kong and Singapore, and have seen a strong response to product and brand testing in-market. We are actively engaging our U.S. Coaches to open these markets, and will use our experience and learnings in these gateway markets to drive further regional growth in the future. With a solid strategy in place, and an experienced team with a proven track record of growth, I am excited by Medifast’s prospects over the coming years. We are well positioned as an innovator in health and wellness, with differentiated products that can enable us to address a large and increasing market opportunity around the world. We have robust cash flow, a strong balance sheet, and we have created the operational rigor and consistency that will provide us with a solid platform for growth. More than this, we have an opportunity ahead of us to change the lives of so many people around the world. While success in the public markets is naturally driven by financial metrics, at Medifast we also gauge our progress by the lives we impact. Every day, we change the lives of our Coaches, our Clients and their families. We empower lifelong transformations that help Clients break the generational cycles of obesity and poor health. We will work tirelessly to reach more people with our proven programs, and continue to grow Medifast for the benefit of all stakeholders for many years to come. Sincerely, Dan Chard Chief Executive Officer FORWARD-LOOKING STATEMENTS Certain information included in this Annual Report, such as descriptions of Medifast’s objectives, goals or targets, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond the Company’s control and are difficult to predict. Although Medifast believes that the expectations, statements, and assumptions reflected in these forward-looking statements are reasonable, actual results could differ materially from those expressed or implied in the forward-looking statements. Risks, uncertainties, and other factors that might cause such differences include, among others, Medifast’s inability to attract and retain independent OPTAVIA Coaches, increases in competition, litigation, regulatory changes, and its planned growth into new domestic and international markets and new channels of distribution and other risks, uncertainties and factors identified in Medifast’s filings with the U.S. Securities and Exchange Commission. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Medifast undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. 3 6 2018 10-K 7 100 International Drive, 18th Floor Baltimore, MD 21202 

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