Medifast (NYSE:), a wellness firm identified for its OPTAVIA model, reported a big decline in first-quarter income and earnings after the shut on Monday, lacking Wall Avenue estimates and projecting weaker-than-expected steering for the second quarter. The corporate’s shares plummeted 25% as buyers reacted to the disappointing outcomes and outlook.
For the primary quarter ended March 31, 2024, Medifast’s income fell to $174.7 million, a pointy 49.9% lower from $349.0 million in the identical quarter final 12 months. This decline considerably missed the analyst consensus of $205.79 million. The corporate’s adjusted earnings per share (EPS) for the quarter was $0.66, falling in need of the anticipated $1.50 by analysts.
The stark income drop was attributed to a lower within the variety of lively incomes OPTAVIA Coaches, decrease Coach productiveness, and a $9.1 million impression from modifications within the firm’s gross sales order phrases and situations. The full variety of lively incomes OPTAVIA Coaches decreased by 35.6% to 37,800 in comparison with 58,700 within the first quarter of 2023.
Regardless of the income and revenue decline, the corporate’s gross revenue margin improved barely to 72.8% from 70.6% within the prior 12 months, benefiting from stock administration efficiencies and price financial savings initiatives. Nonetheless, promoting, basic, and administrative bills as a proportion of income elevated to 68.3%, up from 55.3% within the earlier 12 months, resulting from market analysis, funding prices, and company-led acquisition initiatives.
Medifast’s internet revenue additionally noticed a steep decline to $8.3 million from $40.0 million within the first quarter of 2023. Chairman & Chief Government Officer Dan Chard commented on the outcomes, “Whereas 2024 will probably be a 12 months of funding for future development, we imagine the initiatives we’re endeavor will probably be foundational in making a platform for sustained firm development within the years forward.”
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Trying forward, Medifast forecasts second-quarter 2024 income to be between $150 million and $170 million, with diluted EPS starting from $0.05 to $0.40. These figures fall beneath the analyst consensus, which anticipates an EPS of $0.67 and income of $175.1 million.
The corporate’s stability sheet stays strong with $156.4 million in money, money equivalents, and funding securities, sustaining a debt-free place. Regardless of this, the numerous earnings and income miss, coupled with a weak forward-looking steering, has led to a considerable decline in Medifast’s inventory worth, reflecting investor issues over the corporate’s near-term efficiency.
Reacting to the report, analysts at DA Davidson stated Impartial-rated MED reported a small 1Q24 gross sales beat in comparison with their estimate however they famous revenue missed consensus by 11% resulting from larger SG&A behind the brand new GLP-1 drug providing.
“We’re chopping our 2024E EPS to $0.75 from $1.86 as a result of: (1) whereas new purchasers could also be up sequentially in 3Q24, Coaches is not going to (there is a lag); and (2) MED books month-to-month gross sales/drug buyer of solely $217 vs. ~$400 for the unique 5-and-1 plan. If advert spend is $60M in 2025 somewhat than the $37M in our mannequin, EPS could be $0.65 somewhat than our estimate of $2.25,” stated analysts on the agency, which additionally lower its goal for the inventory to $25 from $40.
