Medifast (MED) shares ended the last trading session 5.9% higher at $36.61. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 32.8% loss over the past four weeks.Medifast’s shares have been gaining on optimism surrounding efforts to broaden its presence in the expansive health and wellness market. The company is foraying into popular medically supported weight management and sports nutrition segments. Medifast’s inve ...

Medifast, Inc. (MED) is actively advancing various initiatives to broaden its presence in the expansive health and wellness market. The company is on track with several key initiatives, which include product and program innovation, refinement of coach and client experiences and streamlining operational efficiency, among others. However, management is encountering difficulties in attracting customers, mainly due to macroeconomic elements.Let’s discuss on details.What’s Working in Medifast’s Favor?The Zacks R ...

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Medifast, Inc. (MED) delivered fourth-quarter 2023 results, with the top and bottom lines declining year over year. However, both earnings and net revenues beat the Zacks Consensus Estimate.Medifast is strategically adjusting its operations to meet the changing demands of the weight loss industry. This involves expanding its customer outreach through enhanced marketing efforts and entering the medically supported weight loss domain in partnership with LifeMD.These steps are designed to increase its market p ...

Financial Performance (Q4 2023) - Revenue for Q4 2023 was within the guidance range[2] - Gross margin for Q4 2023 was 740%[6] - Medifast had $150 million in cash and cash equivalents and investments[8, 25] - Revenue was $1072 million[9] - GAAP diluted EPS was $910, while adjusted diluted EPS was $964[9] Financial Performance (FY 2023) - Revenue was $191 million[26] - GAAP diluted EPS was $055, while adjusted diluted EPS was $109[26] - Gross profit as a percentage of sales was 724%[27] - Operating cash flow was $148 million[28] Strategic Initiatives - Dividend was discontinued to redirect capital to customer acquisition and experience through marketing and technology[11] - Collaboration with LifeMD to target the medically supported weight loss market[6]

Medifast (MED) came out with quarterly earnings of $1.09 per share, beating the Zacks Consensus Estimate of $0.99 per share. This compares to earnings of $3.70 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 10.10%. A quarter ago, it was expected that this weight-loss company would post earnings of $1.02 per share when it actually produced earnings of $2.12, delivering a surprise of 107.84%.Over the last four quarters, the com ...

PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) Medifast, known for its OPTAVIA brand, is a health and wellness company undergoing a business transformation by expanding into medically supported weight loss and sports nutrition markets [Summary](index=5&type=section&id=SUMMARY) Medifast is transforming its business by expanding into medically supported weight loss and sports nutrition markets - Medifast is transforming its business by expanding into medically supported weight loss and sports nutrition markets[21](index=21&type=chunk) - OPTAVIA has grown into a **billion-dollar** brand with over **41,100** active earning Coaches, impacting more than **3 million** customers[21](index=21&type=chunk)[23](index=23&type=chunk) - OPTAVIA's holistic lifestyle solution includes independent Coaches, community support, the Habits of Health Transformational System, and clinically proven products & plans[22](index=22&type=chunk)[24](index=24&type=chunk) - Through a collaboration with LifeMD, OPTAVIA customers gain access to board-certified affiliated clinicians and weight loss medications like GLP-1s[23](index=23&type=chunk) [Competition and Macroeconomic Conditions](index=6&type=section&id=Competition%20and%20Macroeconomic%20Conditions) Macroeconomic uncertainties and intense competition, including from GLP-1 medications, significantly impact Medifast's market position - Macroeconomic uncertainties, including inflation and adverse labor market conditions, impact Medifast's cost structure and consumer spending[28](index=28&type=chunk)[29](index=29&type=chunk) - The weight loss industry is highly competitive, with diverse offerings including commercial programs, pharmaceutical products (e.g., GLP-1s), surgical interventions, and digital tools[32](index=32&type=chunk) - GLP-1 medications pose a significant competitive threat, but Medifast integrates them into a tailored lifestyle plan that includes coaching, community, nutrition, and exercise[32](index=32&type=chunk)[33](index=33&type=chunk) - Medifast's competitive advantages include its holistic wellness focus, personalized coach support, proprietary habit development system, vibrant community, access to medical expertise via LifeMD, and a customer-centric direct-to-consumer model[35](index=35&type=chunk)[40](index=40&type=chunk) [Recent Initiatives](index=7&type=section&id=Recent%20Initiatives) The company is investing in new initiatives, including medically supported weight loss and sports nutrition, funded by existing capital and dividend discontinuation - The Company is focusing on broadening its customer base, increasing brand visibility, and significantly expanding its total addressable market[38](index=38&type=chunk) - In September **2023**, Medifast entered the **$30 billion** sports nutrition market with its OPTAVIA ACTIVE line of essential amino acids and whey protein powders[39](index=39&type=chunk) - Medifast expanded into the medically supported weight loss market in January **2024** through a collaboration with LifeMD, offering access to board-certified clinicians and GLP-1s alongside OPTAVIA's lifestyle program[42](index=42&type=chunk) - The Company discontinued its dividend payments effective December **7**, **2023**, to redirect capital towards growth initiatives, including marketing and technology, aimed at increasing customer acquisition and lifetime value[46](index=46&type=chunk) - **2024** is projected as an investment year, with significant impact on operations and revenue expected in late **2024** and into **2025** and beyond[47](index=47&type=chunk) [Markets](index=9&type=section&id=MARKETS) Medifast is expanding its market reach into sports nutrition and medically supported weight loss, addressing a large and growing population of overweight and obese individuals - The U.S. weight loss market is estimated at approximately **$20 billion** with a **6%** annual growth rate, and Medifast has expanded into the **$30 billion** sports nutrition market and the medically supported weight loss market, which is expected to reach up to **$100 billion** by **2030**[49](index=49&type=chunk) - Over two-thirds of the U.S. adult population is overweight or obese, with more than **30%** classified as obese in **2022**[48](index=48&type=chunk)[50](index=50&type=chunk) - **96%** of people recognize the need for lifestyle changes for weight loss and maintenance, but only **17%** are confident they can manage on their own, indicating a strong demand for support beyond prescriptions[50](index=50&type=chunk) - Medifast ceased operations in Hong Kong and Singapore in June **2023** to optimize spending and prioritize domestic growth initiatives, including expanding into new customer demographics domestically[56](index=56&type=chunk) [Products and Programs](index=13&type=section&id=PRODUCTS%20AND%20PROGRAMS) Medifast offers clinically proven, coach-supported weight management and healthy living products, including OPTAVIA Fuelings and OPTAVIA ACTIVE, complemented by the Habits of Health Transformational System - Medifast has a strong scientific heritage with over **66** peer-reviewed scientific abstracts and publications, and **28** completed research studies[60](index=60&type=chunk) - A clinical study showed that customers who participated in at least **75%** of their OPTAVIA Coaching calls lost up to twice as much weight[60](index=60&type=chunk) - Products include OPTAVIA Fuelings (nutrient-dense, portion-controlled, with probiotics) and OPTAVIA ACTIVE (essential amino acids and whey protein powders for muscle health)[64](index=64&type=chunk) - Lifestyle plans include Optimal Weight **5** & **1** Plan, Optimal Weight **4** & **2** & **1** Plan, and Optimal Health **3** & **3** Plan, all supported by the Habits of Health Transformational System[67](index=67&type=chunk)[68](index=68&type=chunk) - New product bundles, the OPTAVIA Nutrition Kit and OPTAVIA Muscle Health Kit, are designed to support customers on medically supported weight loss journeys by addressing nutrition and lean muscle retention[43](index=43&type=chunk)[67](index=67&type=chunk) [Incentives](index=16&type=section&id=INCENTIVES) Medifast provides economic incentives to support OPTAVIA Coaches' long-term success and customer acquisition - Medifast offers economic incentives to support OPTAVIA Coaches' long-term success and financial wellness[24](index=24&type=chunk)[69](index=69&type=chunk) - A "Client Support Bonus+" incentive was introduced in March **2023** to encourage and incentivize Coaches to acquire new and reactivated customers[70](index=70&type=chunk) [Customers](index=16&type=section&id=CUSTOMERS) No single customer accounted for a significant portion of Medifast's consolidated revenue in **2023** - No single customer accounted for **10%** or more of Medifast's consolidated revenue for the year ended December **31**, **2023**[72](index=72&type=chunk) [Seasonality](index=16&type=section&id=SEASONALITY) Medifast's sales patterns are primarily driven by the growth of its OPTAVIA Coach network, rather than typical industry seasonality - While the weight management industry typically experiences seasonality (lower sales in Q4, increases in Jan/Feb), Medifast believes its sales pattern is primarily driven by the growth of its OPTAVIA Coach network[73](index=73&type=chunk) [Scientific Advisory Board](index=16&type=section&id=SCIENTIFIC%20ADVISORY%20BOARD) The Scientific Advisory Board provides objective insights and guidance for product, plan, and program development based on scientific advancements - The Scientific Advisory Board, established in **2008** and comprising seven multi-disciplinary experts, provides objective insights and guidance for product, plan, and program development based on scientific advancements[74](index=74&type=chunk)[75](index=75&type=chunk) [Marketing](index=16&type=section&id=MARKETING) Medifast employs diverse marketing strategies and plans significant investments in technology and new campaigns to enhance customer acquisition and experience - Medifast employs multiple marketing strategies, including word-of-mouth, digital marketing, public relations, social media, and email, to attract and retain customers[76](index=76&type=chunk) - The Company plans to invest in technology and growth initiatives, including a new Company-led marketing campaign and digital advertising in **2024**, to improve customer acquisition and experience[77](index=77&type=chunk) [Manufacturing](index=18&type=section&id=MANUFACTURING) Medifast manufactures approximately **25%** of its products internally at its FDA and USDA-regulated facility, with the remaining **75%** produced by co-manufacturers - Jason Pharmaceuticals, a wholly-owned subsidiary, manufactures approximately **25%** of Medifast's total unit sales at its FDA and USDA-regulated facility in Owings Mills, Maryland[78](index=78&type=chunk) - The remaining **75%** of products are manufactured by co-manufacturers according to Medifast's proprietary formulas and standards[78](index=78&type=chunk) [Governmental Regulation](index=18&type=section&id=GOVERNMENTAL%20REGULATION) Medifast is subject to extensive federal, state, and local regulations concerning food, advertising, direct selling, and, with its LifeMD collaboration, healthcare laws - Medifast is subject to extensive federal, state, and local laws and regulations concerning food preparation and sale, advertising, direct selling, and relationships with employees and independent contractors[79](index=79&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Direct selling regulations are subject to discretionary interpretation by regulators, and changes or new industry standards (e.g., from FTC settlements) could require modifications to Medifast's compensation and business models[81](index=81&type=chunk)[85](index=85&type=chunk) - The FTC has increased scrutiny on testimonials and endorsements, and past consent decrees have required compliance with specific advertising procedures and disclosures[84](index=84&type=chunk)[92](index=92&type=chunk) - The collaboration with LifeMD may subject Medifast to additional federal and state healthcare regulatory laws, including anti-kickback, false claims, and other healthcare fraud and abuse laws[93](index=93&type=chunk)[94](index=94&type=chunk) [Product Liability and Insurance](index=21&type=section&id=PRODUCT%20LIABILITY%20

Medifast, Inc. (MED) is likely to register a top-and-bottom-line decline when it reports fourth-quarter 2023 earnings on Feb 20. The Zacks Consensus Estimate for revenues is pegged at nearly $174 million, suggesting a decrease of 48.4% from the prior-year quarter’s reported figure.The consensus mark for quarterly earnings has remained unchanged in the past 30 days at 99 cents per share, which indicates a decline of 73.2% from the year-ago quarter’s reported figure. MED has a trailing four-quarter earnings s ...

Financial Data and Key Metrics Changes - Revenues for Q3 2023 were $235.9 million, down 39.6% year-over-year, but at the high end of guidance [17][49] - Gross profit decreased 37.3% year-over-year to $177.4 million, while gross profit margin improved by 270 basis points to 75.2% due to efficiencies in inventory management and lower supply chain costs [24][43] - Net income for Q3 2023 was $23.1 million, or $2.12 per diluted share, compared to $36.2 million, or $3.27 per diluted share, in the prior year [76] Business Line Data and Key Metrics Changes - The average revenue per active earning OPTAVIA Coach for Q3 was $5,008, a decline of 15.1% year-over-year, reflecting challenges in customer acquisition [50] - The number of active earning OPTAVIA Coaches decreased by 28.9% from the previous year, impacting overall revenue [23] Market Data and Key Metrics Changes - The company is focusing on expanding its customer base, particularly in the U.S. Hispanic market, with over 70% of core materials translated into Spanish [18][44] - The entry into the sports nutrition market with the OPTAVIA ACTIVE line aims to attract a new demographic and expand the addressable market significantly [41] Company Strategy and Development Direction - The company is transitioning into a total lifestyle company, integrating medical weight loss solutions with lifestyle modifications [16] - The launch of the OPTAVIA ACTIVE product line is part of a strategy to enhance customer lifetime value and attract new demographics [15][41] - The company is exploring partnerships and acquisitions in the telehealth space to incorporate weight loss medications into its offerings [12][36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in customer acquisition due to macroeconomic factors, including inflation and interest rates [21][23] - The company expects to see improvements in customer acquisition and revenue trends in 2024, driven by new initiatives and product offerings [17][21] Other Important Information - The effective tax rate for Q3 was 12.9%, significantly lower than the previous year's 24.5%, due to various tax benefits [25] - The company has a strong financial position with $157.8 million in cash and no interest-bearing debt as of September 30, 2023 [52] Q&A Session Summary Question: What is the sustainability of the gross margin level? - Management indicated that while the gross margin improvement is notable, lower revenues will impact gross margin due to fixed costs [55] Question: What trends are observed in October regarding customer acquisition? - Customer acquisition metrics are below historical norms, but retention and average revenue per order have remained steady [58] Question: What is the guidance for the tax rate in Q4? - The projected tax rate for Q4 is expected to be closer to 20%, following a one-time adjustment in Q3 [59] Question: What are the reasons for consumer hesitation towards medically-supported weight loss? - Consumers may feel confident in their ability to lose weight independently, with interest in medical solutions increasing as weight loss needs grow [65][86] Question: How is the company testing digital marketing methods? - The company is in the early stages of testing digital marketing to generate prospects, which may complement the existing coach-driven model [80][81]

Financial Performance - Medifast reported revenue of $236 million[2] - The company holds $158 million in cash and cash equivalents and investments[2] - Revenue per active earning coach is $5,008[8] - Operating income is $26 million[21] Strategic Initiatives - Medifast is actively exploring the medical weight loss (MSWL) market, analyzing pilot results[9] - The company is continuing to invest in growth initiatives expected to benefit results in 2024 and beyond[3] - Medifast aims to reduce expenses through the Fuel for the Future (4F4) initiative[22] - OPTAVIA ACTIVE™ was launched in September 2023[4] Market Expansion - The total addressable market for lifestyle products is $30 billion, over 3 times the size of the structured weight loss market[4] - Medifast is broadening its customer base, focusing on increased engagement of Hispanic coaches and customers[4] - The company is targeting the large and growing Hispanic population in the U S, which is approximately 62 million people[32] Market Trends - The medical weight loss market was $9 billion in 2022 and is estimated to grow up to 10 times by 2030[11] - The sports nutrition market in the US is approximately $30 billion[49] - Approximately 60% of adults trying to lose weight are interested in trying a weight-loss prescription drug[24]