Company Overview - Medifast, Inc. operates the Optavia wellness brand, providing weight loss and management plans through supplements, meals, and coaching services [1] - As of the end of 2024, Medifast has 27.1 thousand active earning coaches [1] Investment Philosophy - The investment philosophy focuses on identifying mispriced securities by understanding the drivers behind a company's financials, often revealed through a DCF model valuation [1] - This approach allows for flexibility beyond traditional value, dividend, or growth investing, considering all prospects of a stock to assess risk-to-reward [1]

Core Insights - Medifast, Inc. reported a decline in both earnings and net revenues for the fourth quarter of 2024, but both metrics exceeded the Zacks Consensus Estimate [1][4][5] Financial Performance - Adjusted earnings per share (EPS) were 10 cents, down from $1.09 in the same quarter last year, surpassing the Zacks Consensus Estimate of an adjusted loss of 27 cents [4] - Net revenues totaled $119 million, a decrease of 37.7% year over year, attributed to fewer active earning OPTAVIA Coaches and reduced productivity per Coach, but exceeded the Zacks Consensus estimate of $111 million [5] - The average revenue per active earning OPTAVIA Coach was $4,391, down 5.5% from $4,648, with the total number of active earning Coaches falling 34.1% to 27,100 from 41,000 [5] Margin and Cost Analysis - Gross profit was $88.2 million, down 37.6% year over year, with a gross margin of 74.1%, which is an increase of 10 basis points year over year [7] - Adjusted selling, general and administrative expenses (SG&A) decreased by 30.1% year over year to $87.5 million, primarily due to reductions in coach compensation and nonrecurring costs [8] - Adjusted SG&A expenses as a percentage of revenues increased by 800 basis points to 73.5%, driven by higher marketing expenditures and reduced leverage on fixed expenses [9] Operational Insights - Adjusted income from operations declined 95.6% to $0.7 million, with the adjusted operating margin decreasing by 790 basis points year over year to 0.6% [10] - The company ended the quarter with cash, cash equivalents, and investments of $162.3 million, with no interest-bearing debt and total shareholders' equity of $210.1 million [11] Future Outlook - For the first quarter of 2025, Medifast expects revenues between $100 million and $120 million, with EPS ranging from a loss of 50 cents to break-even [12]

Financial Data and Key Metrics Changes - Revenue for Q4 2024 was $119 million, a decrease of 37.7% year-over-year, primarily due to a decrease in the number of active earning OPTAVIA coaches and lower coach productivity [30] - Earnings per share (EPS) for Q4 2024 was $0.07, down from $0.55 in the prior year [34] - Gross profit decreased 37.6% year-over-year to $88.2 million, while gross profit margin improved by 10 basis points to 74.1% [31] - SG&A expenses decreased 34.1% year-over-year to $87.5 million, reflecting a significant reduction in OPTAVIA coach compensation and other costs [32] Business Line Data and Key Metrics Changes - The number of active earning OPTAVIA coaches decreased by 34.1% year-over-year to approximately 27,100 [30] - Average revenue per active earning OPTAVIA coach was $4,391, a year-over-year decline of 5.5%, but an improvement from a decline of 22.2% in Q1 2024 [31][10] - The percentage of customers using GLP-1 medications rose to 17% at year-end, up from just over 3% at the beginning of 2024 [11] Market Data and Key Metrics Changes - Approximately 44% of coaches were supporting at least one customer on a GLP-1 medication at year-end, up from 12% at the start of 2024 [11] - The ASCEND product line, launched in December, has been well received, with 17% of customer orders in January including ASCEND products [16] Company Strategy and Development Direction - The company is focusing on adapting to the health and wellness market influenced by the rising acceptance of GLP-1 weight loss medications [7] - Priorities for 2025 include accelerating customer acquisition, improving coach productivity, advancing clinical research, expanding product offerings, and evaluating entry into new categories [24][26] - The company aims to provide integrated solutions that combine lifestyle modifications, clinical guidance, and community support to meet diverse customer needs [27] Management's Comments on Operating Environment and Future Outlook - Management noted continued pressure on new customer acquisition but indicated early signs of stabilization in certain areas [17] - The company expects challenges in customer acquisition to persist through at least the first half of 2025, with hopes for positive comparisons in the second half [36] - Management emphasized the importance of transitioning to support customers on GLP-1 medications and those managing weight loss without medications [55] Other Important Information - The company ended the year with $162.3 million in cash and no debt, providing flexibility for growth initiatives [35] - The "Fuel for the Future" cost reduction initiatives delivered $21 million in savings in 2024, with expectations for an additional $15 million to $20 million in 2025 [23] Q&A Session Summary Question: Thoughts on Q1 guidance and ASCEND launch impact - Management indicated that coach productivity will be an early indicator of return to growth, with expectations for improvement in 2025 [41][42] Question: Marketing efforts and ASCEND product visibility - Management plans to optimize marketing spend and focus on coach compensation to drive customer acquisition [46][47] Question: Retention rates for customers transitioning off GLP-1 - Management noted mixed retention rates, with a portion of customers using coaching to maintain weight loss after transitioning off GLP-1 [60][62] Question: Operating cash flow and capital spending for 2024 - Operating cash flow for 2024 was approximately $24.5 million, with capital expenditures at $7.5 million [67] Question: Marketing spend for 2025 - Management indicated that marketing spend in 2025 will likely be lower than in 2024 due to less non-working marketing [71] Question: Sequential uptick in coaches expected in Q1 2025 - Management expects continued pressure on the number of coaches until coach productivity improves [91][94]

Company Performance - Medifast reported quarterly earnings of $0.10 per share, exceeding the Zacks Consensus Estimate of a loss of $0.27 per share, compared to earnings of $1.09 per share a year ago, representing an earnings surprise of 137.04% [1] - The company posted revenues of $119 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 7.70%, but down from $191.02 million year-over-year [2] - Over the last four quarters, Medifast has surpassed consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Outlook - Medifast shares have declined approximately 8% since the beginning of the year, while the S&P 500 has gained 4% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.10 on revenues of $148.21 million, and for the current fiscal year, it is $0.51 on revenues of $566.19 million [7] Industry Context - The Zacks Industry Rank for Food - Miscellaneous, which includes Medifast, is currently in the bottom 27% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Medifast's stock performance [5]

Market Overview - The GLP-1 support market is projected to be worth $50 billion or more by 2030, with over 95% of OPTAVIA coach leaders trained in GLP-1 based support [25]. - The addressable market for weight loss is estimated to exceed $30 billion, with approximately 200 million people in the U.S. looking to lose weight [42]. - The weight loss industry is highly competitive, with medical weight loss solutions like GLP-1 medications becoming increasingly significant [37]. - Nearly 75% of U.S. adults are classified as overweight or obese, with over 40% classified as obese between August 2021 and August 2023 [50]. - Recent research indicates that about one-third of GLP-1 medication users discontinue use after six months, with two-thirds of weight lost typically regained within 12 months [25]. Company Impact and Community - Medifast's lifestyle brand, OPTAVIA, has impacted over 3 million lives and operates with approximately 27,100 active earning coaches [20]. - The company has impacted over 3 million lives through its scientifically designed products and programs, which are developed by physicians and dietitians [57]. - The OPTAVIA community offers a holistic wellness program, with about 90% of coaches being former customers, enhancing relatability and support [52]. - OPTAVIA's coaching model has shown that customers who engage in at least 75% of their coaching calls lost an average of 15.2 lbs, compared to 6.7 lbs for those who participated less [60]. Product and Service Offerings - Medifast introduced the OPTAVIA ASCEND product line, featuring high-protein, fiber-rich mini meals and a daily nutrient pack, to support weight management for GLP-1 users [26]. - OPTAVIA offers a range of nutrition plans tailored to individual goals, supported by a mobile app with healthy recipes and habit trackers [63]. - The company's integrated approach combines lifestyle coaching, community support, and access to medical solutions, positioning it to meet diverse customer needs [31]. - Medifast's innovative model emphasizes holistic wellness and personalized support, promoting lifelong habit development through the Habits of Health Transformational System [44]. Marketing and Customer Engagement - The company incurred approximately $22.9 million in marketing expenses for the year ended December 31, 2024, as part of its efforts to increase brand awareness and customer adoption [71]. - The company has introduced new marketing campaigns in 2024 to reach new audiences and deepen engagement with existing customers [71]. - The effectiveness of the company's advertising and marketing programs, particularly through social media, is critical for attracting and retaining customers [131]. Operational Challenges and Compliance - The company is subject to extensive federal, state, and local regulations governing its operations, including those related to food and beverage sales [73]. - Regulatory compliance issues, including those from the FDA and FTC, could result in legal actions that may harm the company's financial condition [130]. - The company faces potential legal and regulatory challenges regarding its direct selling model, which could adversely impact its business operations [136]. - The company must monitor compliance with evolving advertising regulations, particularly in relation to social media marketing, to avoid fines and penalties [135]. Financial Performance and Strategy - The company announced the discontinuation of its quarterly cash dividend as of December 13, 2023, following a thorough review of its capital allocation priorities [176]. - The company’s future revenue and operating results are at risk due to a decline in the number of active earning OPTAVIA coaches since Q3 2022 [119]. - Revenue is primarily derived from point of sale transactions on an e-commerce platform for weight loss and healthy living products [214]. - Revenue recognition changed in Q1 2023; now recognized upon delivery to the shipping carrier [214]. Employee Engagement and Corporate Culture - The company achieved a 93% activation rate in its AcedIt recognition program, with 65% of team members actively using the tool monthly [103]. - In 2024, over 85% of employees engaged with the LiveWell wellness program, which incentivizes health and wellness activities [103]. - The company conducted two cycles of its listening initiative, The Loop, in 2024 to promote communication transparency and improve employee engagement [104]. Technology and Cybersecurity - The company has established processes for assessing and managing cybersecurity risks, integrating them into the overall risk management system [183]. - The Board of Directors receives quarterly updates on cybersecurity risks and strategies from senior executives [191]. - The cybersecurity incident response team (CIRT) oversees the incident response strategy and remediation efforts [194]. Supply Chain and Manufacturing - Jason Pharmaceuticals, Inc. manufactures approximately 40% of the company's total unit sales at its FDA-regulated facility in Owings Mills, Maryland [72]. - The company relies on third-party manufacturers for the majority of its products, with approximately 40% of total unit sales produced in-house at its Maryland facility [144]. - Disruptions in the supply chain, including ingredient shortages or transportation issues, could materially affect the company's business and financial results [146]. Legal and Regulatory Risks - The company may face scrutiny regarding the qualifications of its OPTAVIA coaches, which could lead to claims and lawsuits [151]. - The company may be subject to health-related claims from customers, which could lead to lawsuits and damage its reputation [152]. - The company’s brand and intellectual property rights are at risk of infringement, which could diminish brand value and competitive position if not adequately protected [162].

Medifast® Q4 2024 Earnings Supplement © 2025 Medifast, Inc. All Rights Reserved. 2 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 phrases or terminology such as "intend," "anticipate," "expect" or other similar ...

Medifast Announces Fourth Quarter and Full Year 2024 Financial Results February 18, 2025 BALTIMORE--(BUSINESS WIRE)--Medifast (NYSE: MED), the health and wellness company known for its habit-based and coach-guided lifestyle solution, OPTAVIA®, today reported results for the fourth quarter and full year ended December 31, 2024. Fourth Quarter 2024 Full Year 2024 "This past year was a pivotal year for Medifast, as we continued to transform our business to meet the changing nature of a health and wellness mark ...

Medifast, Inc. (MED) has introduced a high-protein product line, OPTAVIA ASCEND, designed to support individuals using GLP-1 medications and those seeking help to maintain weight loss. The new line features fiber-rich mini meals and daily nutrient packs, which aim to boost muscle health, digestive function and bone strength.OPTAVIA ASCEND is integrated into two new science-backed nutrition plans, complementing OPTAVIA's comprehensive approach to fill a critical gap in the weight management sector. This laun ...

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metr ...

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