MED Q3 Earnings Beat, Revenues Fall on Customer Acquisition Challenges

Core Viewpoint - Medifast, Inc. reported third-quarter 2024 results that exceeded Zacks Consensus Estimates for both earnings and revenues, although both metrics showed a year-over-year decline due to increased competition and changing consumer behaviors [1]. Financial Performance - Adjusted earnings for the third quarter were 35 cents per share, a significant drop from $2.12 in the same quarter last year, but still better than the Zacks Consensus Estimate of a loss of 15 cents per share [2]. - Net revenues totaled $140.2 million, reflecting a 40.6% decline year over year, attributed to fewer active-earning OPTAVIA Coaches and reduced productivity [3]. - The average revenue per active-earning OPTAVIA Coach decreased to $4,672 from $5,008, while the number of active-earning Coaches fell by 36.3% to 30,000 from 47,100 [3]. - Gross profit was reported at $105.7 million, down 40.4% year over year, with a gross profit margin of 75.4%, slightly up from 75.2% in the previous year [4]. Expenses and Margins - Selling, general, and administrative (SG&A) expenses decreased by 31.8% to $103.6 million, primarily due to lower compensation for OPTAVIA coaches and reduced event costs [5]. - SG&A expenses as a percentage of revenues increased by 950 basis points to 73.9%, driven by customer acquisition efforts and reduced leverage on fixed costs [6]. - Adjusted income from operations fell 85.3% to $3.8 million, with the adjusted operating margin decreasing by 810 basis points to 2.7% [6]. Financial Health - As of September 30, 2024, the company had cash, cash equivalents, and investments totaling $115.3 million, with no debt and total shareholders' equity of $207.3 million [7]. - The company held a $225 million credit facility but decided to terminate the credit agreement effective October 30, 2024, as part of its Fuel for the Future initiative [8]. Future Outlook - For the fourth quarter, Medifast expects revenues to range between $100 million and $120 million, anticipating continued challenges in customer acquisition due to the rise of GLP-1 medications [9]. - Management forecasts a loss per share for the quarter between 10 to 65 cents, including an expected $7 million in marketing spending [10].