Medifast’s third quarter results met Wall Street’s revenue expectations, but the market responded negatively as sales continued to decline sharply year-over-year. Management attributed these results to ongoing headwinds in the weight loss industry—most notably, increased competition from GLP-1 medications and declines in the number of active earning coaches. CEO Dan Chard highlighted that the company’s evolving science-backed approach to metabolic health aims to differentiate Medifast in a changing landsca ...

Core Insights - A company experiencing a 90% drawdown over five years may not necessarily be due to management failures, indicating that external factors could be at play [1] - Various methods exist for sell-side analysts to determine a company's "fair" value, with some being more reliable than others [1] Valuation Methods - The DCF (Discounted Cash Flow) method requires precise assumptions, which can lead to biases such as overconfidence and anchoring [1] - The multiples approach, while seemingly simpler, relies on the assumption that peer companies are fairly priced, which is often not the case historically [1] - Reverse valuation starts from the market price and discount rate, revealing the free cash flow assumptions embedded in the price, providing a more straightforward assessment of market beliefs [1] Free Cash Flow Analysis - A Free Cash Flow to Equity (FCFE) model is utilized to determine what belongs to shareholders, calculated as Earnings + Amortization - CAPEX - average acquisition cost = FCFE [1] - The analysis disregards working capital and debt changes, focusing on core business metrics [1] - Key components for valuation include earnings, amortization, and investments [1] Forecasting Approach - The H-model is applied for forecasts, featuring a 10-year two-stage growth fade with terminal growth aligned to the risk-free rate, represented by the 10-year government bond yield [1] - All cash flows are discounted using the cost of equity, calculated as RFR × beta + 5% ERP, resulting in a clear picture of the business's true worth [1]

Core Insights - Medifast, Inc. reported third-quarter 2025 results with revenues exceeding estimates but a wider-than-expected loss per share, indicating a year-over-year decline in both metrics [1][11] - The company is transitioning its focus from weight loss to metabolic health, aiming to address underlying metabolic issues and tap into a larger market [1][11] Financial Performance - The company reported a quarterly loss of $0.21 per share, which was significantly worse than the Zacks Consensus Estimate of a loss of $0.01, marking a reversal from a profit of $0.10 per share in the same quarter last year [2][11] - Net revenues were $89.4 million, down 36.2% year over year, primarily due to a decrease in active earning OPTAVIA coaches, although this figure surpassed the consensus estimate of $86 million [3][11] - The average revenue per active earning OPTAVIA Coach decreased to $4,585 from $4,672, attributed to challenges in client acquisition linked to the rise of GLP-1 medications for weight loss [3][4] Operational Metrics - The number of active earning OPTAVIA coaches fell by 35% to 19,500 from 30,000 in the prior year, reflecting ongoing difficulties in client acquisition [4][11] - Gross profit was $62.2 million, down 41.2% year over year, with a gross margin of 69.5%, a decline of 590 basis points due to fixed cost leverage loss and product reformulation reserves [5][11] - Selling, general and administrative expenses (SG&A) decreased by 36% year over year to $66.2 million, driven by lower OPTAVIA coach compensation and reduced marketing costs [6][11] Margin Analysis - SG&A as a percentage of revenues increased by 20 basis points year over year to 74.1%, primarily due to fixed cost leverage loss [7][11] - The loss from operations was $4.1 million, representing a loss margin of 4.6% compared to an operating income of $2.1 million and a margin of 1.5% in the prior-year period [8][11] Financial Health - As of September 30, 2025, the company had cash, cash equivalents, and investment securities totaling $173.5 million, with no debt and total shareholders' equity of $214.7 million [9][11] Future Outlook - For the fourth quarter of 2025, Medifast expects revenues between $65 million and $80 million, with a projected loss per share ranging from $0.70 to $1.25 [12][11]

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Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $89.4 million, a decrease of 36.2% year-over-year, primarily due to a decrease in the number of active earning OPTAVIA coaches [16][21] - Gross profit decreased 41.2% year-over-year to $62.2 million, with a gross profit margin of 69.5%, down 590 basis points compared to the prior year [16][17] - Net loss for Q3 2025 was $2.3 million, or $0.21 loss per diluted share, compared to net income of $1.1 million, or $0.10 per share in the year earlier period [21] Business Line Data and Key Metrics Changes - Active earning OPTAVIA coaches decreased by 35% year-over-year, ending the quarter with approximately 19,500 coaches [16] - Average revenue per active earning OPTAVIA coach was $4,585, a year-over-year decrease of 1.9% [16] Market Data and Key Metrics Changes - The weight loss and wellness industry is experiencing a shift due to the rise of GLP-1 medications, which has changed consumer conversations around obesity and health [4][6] - Over 90% of US adults are metabolically unhealthy, presenting a significant opportunity for the company to redefine wellness [6] Company Strategy and Development Direction - The company is evolving from a weight loss focus to a broader emphasis on metabolic health, aiming to help clients not only lose weight but also improve their metabolic health [9][10] - Plans to launch significant product innovations using metabolic synchronization science and next-generation ingredients are underway, with expectations to bring new products to market next year [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's direction, highlighting a strong balance sheet with no debt and over $170 million in cash and investments [14][15] - The company anticipates a return to growth in 2025, with expectations for improved revenue per active earning coach in Q4 2025 [33][35] Other Important Information - The company is investing in digital platforms to enhance the coaching and client experience, providing better visibility into client progress and coach performance [12][13] - The Edge Leadership Development Program aims to improve coach productivity and stability, focusing on creating and duplicating high-performing Executive Directors [12][29] Q&A Session Summary Question: How will the company ensure consistent messaging among coaches regarding the new focus on metabolic dysfunction? - The company has conducted studies to show how its program can reverse metabolic dysfunction and is training coaches to communicate this effectively [23][24] Question: Can you elaborate on the Edge program and its incentive structure? - The Edge program focuses on creating and duplicating Executive Directors to improve productivity and revenue [29] Question: How does the company view the impact of economic softness on consumer spending for health programs? - Management noted that consumers continue to prioritize health spending, despite economic challenges, and the program remains relevant for those using GLP-1 drugs [36][37]

Financial Performance - Revenue for Q3 2025 decreased to $89.4 million, down 36.2% from $140.2 million in Q3 2024[12] - Gross profit for Q3 2025 was $62.2 million, a decline of 41.2% compared to $105.7 million in Q3 2024[12] - Net loss for Q3 2025 was $2.3 million, compared to a net income of $1.1 million in Q3 2024[12] - For the three months ended September 30, 2025, the company reported a net loss of $2.261 million, resulting in a basic and diluted earnings per share (EPS) of $(0.21) compared to a net income of $1.129 million and an EPS of $0.10 for the same period in 2024[40] - For the nine months ended September 30, 2025, the Company reported revenue of $310,692,000, a decrease of 35.7% from $483,460,000 in 2024[74] - The segment net income for the nine months ended September 30, 2025, was a loss of $553,000, compared to a net income of $1,290,000 in 2024[74] Assets and Liabilities - Total current assets as of September 30, 2025, were $207.8 million, a decrease from $214.4 million at the end of 2024[17] - Cash and cash equivalents increased to $99.5 million as of September 30, 2025, from $90.9 million at the end of 2024[17] - Total liabilities decreased to $53.5 million as of September 30, 2025, down from $74.1 million at the end of 2024[17] - Total assets decreased from $284,213 million on December 31, 2024, to $268,209 million on September 30, 2025, a decline of approximately 5.6%[17] - The company’s retained earnings as of September 30, 2025, were $176.2 million, slightly down from $176.8 million at the end of 2024[17] Cash Flow - Operating cash flow for the nine months ended September 30, 2025, was $12.1 million, down from $29.4 million in the same period of 2024[18] - Operating activities generated a net cash flow of $12,141 million for the nine months ended September 30, 2025, down from $29,423 million in 2024, a decrease of 58.8%[18] - Cash and cash equivalents increased from $90,928 million at the beginning of the period to $99,526 million at the end of the period, representing an increase of 9.1%[18] Expenses - Selling, general, and administrative expenses for the three months ended September 30, 2025, were $66,240,000, down 36.1% from $103,568,000 in 2024[12] - Advertising expenses for the three months ended September 30, 2025, were $0.7 million, a significant decrease of 84.9% from $4.6 million in the same period of 2024[28] - Advertising expenses for the nine months ended September 30, 2025, were $6.8 million, down from $9.9 million in 2024, a decrease of 31.3%[28] - The company reported a loss on disposal of property, plant, and equipment amounting to $1,001 million for the nine months ended September 30, 2025, compared to $51 million in 2024[18] Taxation - The effective tax rate for the three months ended September 30, 2025, was 14.9%, a decrease from 28.5% in the same period of 2024, primarily due to a reduction in research and development tax credits[29] - The effective tax rate for the nine months ended September 30, 2025, was 174.4%, compared to 48.6% for the same period in 2024, indicating a significant increase in tax burden[29] - The company recorded an income tax expense of $1.3 million for the nine months ended September 30, 2025, with an effective tax rate of 174.4%, up from $1.2 million and 48.6% in the same period of 2024[29] Inventory and Stock - The total inventory as of September 30, 2025, was $23.205 million, down 45.0% from $42.421 million as of December 31, 2024[38] - The allowance for obsolete inventory increased to $3.993 million as of September 30, 2025, compared to $1.445 million as of December 31, 2024[38] - The company’s inventories decreased from $42,421 million on December 31, 2024, to $23,205 million on September 30, 2025, a decline of approximately 45.4%[17] - The total fair value of restricted stock awards vested during the nine months ended September 30, 2025, was $1.1 million, compared to $1.3 million for the same period in 2024[46] - The total share-based compensation expense for the three months ended September 30, 2025, was $1.219 million, an increase from $910 thousand in 2024[50] - The company did not grant any stock options for the nine months ended September 30, 2025, and 2024, maintaining 22 outstanding stock options with a weighted-average exercise price of $66.68[44] Segment Performance - Total revenue for the OPTAVIA segment was $89.4 million for the three months ended September 30, 2025, down from $140.2 million in the same period of 2024, representing a decrease of approximately 36.2%[72] - OPTAVIA segment revenue for the nine months ended September 30, 2025, was $310.7 million, a decrease of 35.7% compared to $483.5 million in the same period of 2024[74] - Cost of sales for the OPTAVIA segment decreased to $87.6 million in 2025 from $127.1 million in 2024, representing a reduction of 30.9%[74] - Distribution expenses for the OPTAVIA segment decreased to $13.6 million in 2025 from $32.2 million in 2024, a reduction of 57.8%[74] - Selling, marketing, and after sales support expenses decreased to $151.9 million in 2025 from $242.6 million in 2024, a decline of 37.4%[74] Lease and Office Space - The Company entered into a lease agreement for new office space with a term of 8 years and 7 months, expected to commence in March 2026[58] - The total lease payments due as of September 30, 2025, amounted to $12.671 million, with a total liability of $12.261 million after accounting for imputed interest[58] - The weighted average remaining lease term was 3.10 years with a weighted average discount rate of 2.30% as of September 30, 2025[57] - The operating lease expense was $1.2 million for both the three months ended September 30, 2025, and 2024, and $3.7 million for both the nine months ended September 30, 2025, and 2024[56]

Medifast® Q3 2025 Earnings Supplement © 2025 Medifast, Inc. All Rights Reserved. 2 Medifast® Q3 2025 Highlights Revenue and EPS at upper end of guidance range Safe Harbor Statement This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by use of phras ...

Medifast Announces Third Quarter 2025 Financial Results November 3, 2025 BALTIMORE – (BUSINESS WIRE) — Medifast (NYSE: MED), the health and wellness company known for its science-backed, coach-guided lifestyle system, today reported results for the third quarter ended September 30, 2025. Third Quarter 2025 "We're transforming Medifast from a weight-loss company into a leader in promoting metabolic health," said Dan Chard, Chairman and Chief Executive Officer of Medifast. "Our clinically proven, coach-guided ...

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