Medifast Third Quarter 2024 Earnings: Beats Expectations

Medifast, Inc. (MED) reported its third-quarter 2024 earnings, surpassing analysts' expectations despite challenging market conditions. The health and wellness company, known for its habit-based and coach-guided lifestyle solution, OPTAVIA®, delivered strong financial results, driven by its strategic focus on customer acquisition and retention.

Medifast's adjusted earnings per share (EPS) for the third quarter of 2024 came in at $0.35, significantly higher than the Zacks Consensus Estimate of a loss of $0.15 per share. This earnings beat can be attributed to the company's successful efforts in driving customer acquisition and retention, as reflected in its revenue per active-earning OPTAVIA Coach, which increased to $4,672, up from $4,508 in the previous quarter. Additionally, the total number of active-earning OPTAVIA Coaches grew by 3.2% quarter-over-quarter, demonstrating the company's ability to attract and retain customers.

However, Medifast's net revenues for the third quarter of 2024 were $140.2 million, representing a 40.6% year-over-year decline from the $235.9 million reported in the same period in 2023. The decline in revenues was primarily driven by a decrease in the number of active-earning OPTAVIA coaches and lower coach productivity, which were partly attributed to increased competition from GLP-1 medications and shifting consumer spending behaviors.

Despite the revenue decline, Medifast's gross profit margin expanded to 75.4% from 75.2% in the year-ago quarter, indicating improved operational efficiency. This margin expansion suggests that Medifast is effectively managing its costs despite the revenue decline. The company's selling, general, and administrative expenses (SG&A) decreased by 31.8% to $103.6 million in the third quarter of 2024, compared to $151.9 million in the same period last year. This decline was primarily driven by a $38.2 million decrease in OPTAVIA coach compensation due to fewer active earning coaches and lower volumes, as well as a $5.0 million reduction in costs for coach-related events.

Medifast's strong cash position and termination of its credit facility, effective October 30, 2024, reflect its financial health and commitment to its growth strategy. The company's cash, cash equivalents, and investment securities stood at $170.0 million as of September 30, 2024, with no debt. This decision, part of the Fuel for the Future initiative, demonstrates Medifast's ability to manage its liquidity effectively, reducing reliance on external financing.

Looking ahead, Medifast expects fourth-quarter revenues to range between $100 million and $120 million, reflecting a continued decline in active-earning OPTAVIA Coaches driven by near-term challenges in customer acquisition due to the growing adoption of GLP-1 medications in the market. Management forecasts a loss per share for the quarter in the range of 10 to 65 cents. The company's guidance includes an expected $7 million in spending for company-led marketing during the quarter.

In conclusion, Medifast's third-quarter 2024 earnings beat expectations, driven by its strategic focus on customer acquisition and retention. Despite facing challenges in the market, the company's strong financial position and commitment to its growth strategy position it well for future success. Investors should monitor Medifast's progress as it navigates the competitive landscape and continues to innovate in the health and wellness sector.