• Revenue: $140.2 million, a decrease of 40.6% year-over-year.
• Gross Profit: $105.7 million, a decrease of 40.4% year-over-year.
• Gross Profit Margin: Improved by 20 basis points to 75.4%.
• SG&A Expense: $103.6 million, down 31.8% year-over-year.
• Net Income: $1.1 million or $0.10 per diluted share.
• Adjusted Net Income: $3.9 million or $0.35 per diluted share.
• Active Earning Optavia Coaches: Approximately 30,000, a decrease of 36.3% from the prior year.
• Average Revenue per Active Earning Coach: $4,672, a decline of 6.7% year-over-year.
• Cash and Investments: $170 million with no interest-bearing debt.
• Fourth Quarter Revenue Guidance: Expected to range from $100 to $120 million.
• Fourth Quarter Loss per Share Guidance: Expected to range from $0.10 to $0.65.

• Warning! GuruFocus has detected 4 Warning Signs with MED.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Medifast Inc (NYSE:MED) is actively adapting to the changing weight loss market by developing new programs tailored for individuals using GLP-1 medications.
• The company has expanded training for Optavia coaches, with over 95% of coach leaders completing specialized training to support clients on GLP-1 medications.
• Medifast Inc (NYSE:MED) plans to launch new products under the Optavia Ascend brand, specifically designed for those on GLP-1 medications, in early 2025.
• The company maintains a strong balance sheet with $170 million in cash and no interest-bearing debt, providing financial flexibility for future investments.
• Medifast Inc (NYSE:MED) is optimizing its marketing strategy, focusing on channels that yield the highest return on investment, and plans to continue this approach into 2025.

Negative Points

• Revenue for the third quarter of 2024 decreased by 40.6% year-over-year, primarily due to a decline in the number of active earning Optavia coaches and lower productivity per coach.
• The number of active earning Optavia coaches decreased by 36.3% from the third quarter of 2023, impacting customer acquisition.
• Medifast Inc (NYSE:MED) faces significant competition from GLP-1 medications, affecting customer acquisition and spending patterns.
• The company expects a loss per share for the fourth quarter of 2024, ranging from 10 to 65, indicating continued financial pressure.
• SG&A expenses as a percentage of revenue increased by 950 basis points to 73.9%, reflecting a loss of leverage due to lower sales volumes.

Q & A Highlights

Q: Can you provide more details on the marketing spend, particularly the areas where you've scaled back and the response from the areas you are still investing in? A: James Maloney, CFO: We spent $7 million in Q3 and plan to spend another $7 million in Q4, totaling $17 million year-to-date. We've optimized our marketing efforts, focusing on channels that yield the highest return on investment. Social media has been effective, and we've seen success in capturing emails from website interactions. However, 90% of our client acquisition still comes through our coach channel. We plan to continue this spend into 2025, especially during resolution season.

Q: Are there any particular advertising channels that have shown more or less success? A: Daniel Chard, CEO: Social media channels have been highly effective. We've also seen success in capturing emails from website interactions. Despite the new company-led acquisition strategy, 90% of our client acquisition still comes through our coach channel. We've trained 95% of our coach leaders to support GLP-1 medications, and 40% of our coaches now support at least one client on these drugs.

Q: Why does the guidance for Q4 imply a deceleration in revenue, given the sequential improvement seen throughout the year? A: James Maloney, CFO: We continue to face pressure on client acquisition, impacting the number of coaches. Q4 is typically more challenging due to seasonality, as people are less focused on health and wellness. We've scaled back some company-led acquisition efforts in Q4, aligning our guidance with these seasonal trends.

Q: Of the 12% of clients on GLP-1 drugs, what portion received their prescriptions through LifeMD? A: Daniel Chard, CEO: We haven't disclosed specific numbers, but it's a mix. Some clients transition off GLP-1 drugs and find us through various channels. We have successful coach groups working closely with LifeMD physicians, and we expect this integration to improve over time.

Q: What are the expected costs for the clinical studies, and when will this spending occur? A: James Maloney, CFO: Most of the costs for the clinical studies will occur in 2025 and beyond, with initial estimates being less than $2 million. Very little will be spent in Q4. The studies aim to assess the health outcomes of integrating Optavia nutrition and lifestyle programs with medications.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.