Medifast's Q3 2025 Earnings Call: Contradictions in Metabolic Focus, GLP-1 Impact, and Coach Productivity

Date of Call: November 3, 2025

Financials Results

• Revenue: $89.4M, down 36.2% YOY
• EPS: $0.21 loss per diluted share, compared to $0.10 income per diluted share in prior year
• Gross Margin: 69.5%, down 590 basis points YOY (450 bps loss of fixed-cost leverage; 180 bps reserve for Essential reformulation)
• Operating Margin: Loss from operations of 4.6% of revenue, compared to income from operations of 1.5% in prior year

Guidance:

• Q4 revenue expected to be $65M to $80M.
• Q4 loss per share expected in range of $0.70 to $1.25.
• Company expects improvement to begin with revenue-per-active-earning-coach stabilization, with coach growth typically following 6–9 months after that; management anticipates initial stabilization in Q4 or within the next six months.

Business Commentary:

* Revenue and Coach Productivity: - Medifast reported revenue of $89 million for Q3 2025, at the high end of their guidance range, with active earning coach productivity at $4,585, down just 2% year-over-year. - The decrease in revenue is attributed to a 35% decline in the number of active earning OPTAVIA coaches, primarily due to lower client acquisition.

• Gross and Operating Margins:
• Gross profit decreased by 41.2% year-over-year to $62.2 million, with a gross profit margin of 69.5%, down 590 basis points compared to the year earlier period.

• The decline in margins is due to lower sales volumes and a 180 basis points reserve for the reformulation of the Essential product line.

• SG&A Expenses and Loss from Operations:

• SG&A expenses were down 36% year-over-year to $66.2 million, primarily due to a $19.7 million decrease in coach compensation on fewer active earning coaches and lower volumes.

• The loss from operations was $4.1 million, compared to income from operations of $2.1 million in the prior year, reflecting the decline in revenue and increased costs.

• Metabolic Health Focus and Product Innovation:

• Medifast is shifting its focus to metabolic health, with a new product line incorporating next-generation ingredients for metabolic enhancement expected in 2026.

• This strategic pivot is driven by the recognition of metabolic dysfunction as a root cause of weight loss challenges and the desire to offer comprehensive solutions.

• Coach Training and Leadership Development:

• Medifast's Coach leaders have been trained on new clinical data and are cascading knowledge throughout their organizations to address metabolic dysfunction.
• The EDGE program is designed to improve coach productivity and stability by focusing on creating, duplicating, and multiplying Executive Directors.

Sentiment Analysis:

Overall Tone: Neutral

• Management emphasized strategy and product innovation and said Q3 revenue and EPS were at the high end of guidance, but reported revenue down 36.2% YOY and a net loss of $2.3M. Comments mixed optimism on clinical data and coach training with acknowledgement of near-term pressure and rightsizing actions.

Q&A:

• Question from James Salera (Stephens Inc., Research Division): I wanted to first start with the shifting focus towards metabolic dysfunction and how integrating that messaging with the coaches is going to work. Can you just maybe walk us through the process to make sure that you have consistent messaging among the coaches and that they're all kind of trained up on the new go-to-market or strategy around communicating the kind of holistic view that you guys are taking to weight loss moving forward?
  Response: Clinical study shows program reduces visceral fat and preserves 98% of lean mass; leadership was trained at a retreat and will cascade standardized metabolic-health messaging to coaches, with training to core ranks completed by year-end.

• Question from James Salera (Stephens Inc., Research Division): Great. That's very helpful. Can you speak to just the EDGE program and maybe the incentive structure as again, you kind of expand the aperture and the focus of what coaches are going to be communicating to potential clients. And I would imagine that kind of broadens the range of potential clients they can talk to.
  Response: EDGE concentrates on creating, duplicating and multiplying Executive Directors—highly productive coaches (~$6k revenue per ED)—to shift rank composition and drive higher overall coach productivity and revenue.

• Question from James Salera (Stephens Inc., Research Division): Okay. That's helpful. Maybe shifting gears a little bit, Jim, just a couple of questions on the guidance and then some of the results in the quarter. Maybe for starters, it looks like you closed the gap between the decline in SG&A and the decline in the top line. Those are much more kind of aligned than in previous quarters. And I appreciate you gave some detail around just maybe some onetime expenses there. But could you just give us some color around -- is there a way we should think about if the top line is down X percent, SG&A should underperform that by 100 basis points, 200 basis points, just as we think about kind of modeling that on a go-forward basis?
  Response: Q3 included a ~$1.5M one-time Essential reformulation charge; the company is rightsizing costs, expects the SG&A alignment to persist, and sees revenue-per-coach improvement as the precursor to coach and revenue growth (typically visible 6–9 months later), with initial stabilization expected in Q4 or within six months.

• Question from James Salera (Stephens Inc., Research Division): Okay. And maybe on the top line, can you just speak to any outside of, obviously, GLP-1 kind of well-covered trends just broader economic softness and softness we've seen in the consumer. Just any commentary you can offer on how that's been impacting likelihood of consumers to add an incremental monthly expense like OPTAVIA into their budget?
  Response: Management says consumers continue to prioritize health spend; high client satisfaction and program relevance (including for GLP-1 users and those transitioning off medications) supports demand despite broader economic softness.

• Question from James Salera (Stephens Inc., Research Division): Got it. And then maybe just one housekeeping question. Jim, I think you had mentioned when you were kind of breaking down the SG&A expenses that you guys were cycling. There's a $2 million -- I think you said $2 million for collaboration with LifeMD. I just want to make sure, is that something that was a onetime expense last year that we're lapping or are you guys sunsetting the LifeMD partnership and that's like on a go-forward basis that's coming out of SG&A?
  Response: The ~$2M in Q3 2024 was the final amortization from the LifeMD collaboration investment; the collaboration continues but no further amortization remains.

Contradiction Point 1

Focus on Metabolic Dysfunction and Coach Training

It involves a shift in focus towards metabolic dysfunction and the training of coaches, which are critical for the company's messaging and sales strategy.

Can you explain how the shift to metabolic dysfunction is being integrated with coaches and ensure consistent messaging through their training on the new holistic weight loss strategy? - James Salera(Stephens Inc., Research Division)

2025Q3: Dan Chard: Most weight loss challenges are rooted in metabolic health. Coaches are aware of this. A study shows Medifast's program targets bad visceral fat, maintains lean mass, and improves body composition. With 90% of Americans metabolically unhealthy, this is a relevant story. Nick Johnson: Leaders are trained and will cascade training to the entire coach network by year-end, ensuring consistent messaging. - Daniel Chard(CEO), Nicholas Johnson(CFO)

Can you clarify the cadence of the company's marketing efforts for ASCEND products? - James Salera(Stephens)

2024Q4: We are seeing improved productivity from new coaches who are better equipped to support customers in all market segments, including those on GLP-1 drugs. The trend is shifting with a more efficient coach community, which is reflected in the improving productivity metrics. - Dan Chard(CEO)

Contradiction Point 2

GLP-1 Impact on Coaching Community

It highlights differing assessments of the impact of GLP-1 on the coaching community, which could influence the company's approach to training and messaging.

Could you explain the shift to metabolic dysfunction and how integrating messaging with coaches will work? - James Salera(Stephens Inc., Research Division)

2025Q3: Dan Chard: With 90% of Americans metabolically unhealthy, this is a relevant story. Nick Johnson: Leaders are trained and will cascade training to the entire coach network by year-end, ensuring consistent messaging. - Daniel Chard(CEO), Nicholas Johnson(CFO)

How has GLP-1 affected your coaching community, and is it controversial? - Doug Lane(Water Tower Research)

2025Q1: Nick Johnson: GLP-1 has created a training opportunity, requiring adaptation to a new environment. New coaches are familiar with GLP-1, reducing controversy. - Nicholas Johnson(CFO)

Contradiction Point 3

Coach Productivity and Training

It involves differing perspectives on the impact of training and incentives on coach productivity, which directly affects revenue growth and overall business performance.

Can you discuss the EDGE program and its incentive structure as the scope and focus of coaches' communication to potential clients expand? - James Salera(Stephens Inc., Research Division)

2025Q3: Nick Johnson: New coach productivity is strong, driven by updated training and new incentives, aligning with past high-growth periods. - Nicholas Johnson(CFO)

Regarding the second-quarter revenue guidance, the midpoint suggests an accelerated year-over-year decline. Can you explain what's driving this and why this acceleration won't continue the prior four quarters' trend? - Jim Salera(Stephens)

2025Q1: Nick Johnson: New coach productivity is strong, driven by updated training and new incentives, aligning with past high-growth periods. - Nicholas Johnson(CFO)

Contradiction Point 4

Economic Softness and Consumer Spending

It demonstrates differing perspectives on the impact of economic softness and consumer spending on the likelihood of consumers adding an incremental monthly expense like OPTAVIA.

How are broader economic and consumer softness, excluding GLP-1-related trends, impacting consumers' likelihood to add OPTAVIA as an incremental monthly expense? - James Salera(Stephens Inc., Research Division)

2025Q3: Dan Chard: Consumers prioritize health spending despite economic challenges. High client satisfaction rates support this. Medifast's program is valuable and relevant for various client needs, including GLP-1 drug users. - Daniel Chard(CEO)

Can you share insights on consumer behavior trends and how they might impact the year ahead? - Securities Analyst

2025Q1: Dan Chard: Consumers are more likely to prioritize spending on healthcare and wellness programs during challenging economic times. - Daniel Chard(CEO)

Contradiction Point 5

Coach Productivity and Retention

It involves the company's expectations and strategies regarding coach productivity and retention, which are crucial for revenue growth.

How does the EDGE program's incentive structure support expanding the focus of coaches' communication and the range of potential clients? - James Salera(Stephens Inc., Research Division)

2025Q3: Nick Johnson: EDGE program focuses on creating, duplicating, and multiplying Executive Directors. These highly productive coaches ($6,000 revenue per ED) drive revenue growth as the rank composition improves. - Nicholas Johnson(CFO)

Why might we not see revenue growth in Q1 despite the ASCEND launch and marketing efforts, and what are the key factors influencing Q1? - James Salera(Stephens)

2024Q4: We expect continued pressure on the number of active earning coaches due to the need for coaches to transition to supporting customers in new market segments. However, we are seeing stabilization in productivity, which we anticipate will turn positive in 2025. - Jim Maloney(CFO)