Medifast, Inc. (MED) Bundle
Understanding Medifast, Inc. (MED) Revenue Streams
Understanding Medifast, Inc.’s Revenue Streams
The company’s revenue is primarily derived from product sales, which accounted for approximately 97% of total revenues for the three months ended September 30, 2024, and about 98% for the same period in 2023. For the nine months ended September 30, 2024, product sales also represented around 97% of total revenues, consistent with the previous year.
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, the company reported revenue of $140.2 million, down 40.6% from $235.9 million in the same quarter of 2023. For the nine months ended September 30, 2024, total revenue reached $483.5 million, a decrease of 45.1% from $881.0 million in the prior year.
| Period | Revenue ($ millions) | Year-over-Year Change (%) |
|---|---|---|
| Q3 2024 | 140.2 | -40.6 |
| Q3 2023 | 235.9 | N/A |
| 9M 2024 | 483.5 | -45.1 |
| 9M 2023 | 881.0 | N/A |
Contribution of Different Business Segments to Overall Revenue
The primary revenue source remains product sales through the OPTAVIA coaching program, which has seen a significant decline in the number of active earning coaches. As of September 30, 2024, there are 30,000 active earning OPTAVIA coaches, down 36.3% from 47,100 the previous year. This reduction has contributed to the overall decline in revenue.
Analysis of Significant Changes in Revenue Streams
The decline in revenue is attributed to several factors including a decrease in the number of active earning coaches and lower productivity per coach. The average revenue per active earning OPTAVIA coach was $4,672 for the three months ended September 30, 2024, representing a 6.7% decrease from $5,008 in the prior year. For the nine months ended September 30, 2024, the average revenue per active earning OPTAVIA coach was $4,754, down 14.3% from $5,545 in the same period of 2023.
Additionally, the company experienced a $9.1 million impact from changes in sales order terms and conditions in early 2023, further exacerbating the decline in revenue.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Active Coaches | 30,000 | 47,100 | -36.3 |
| Average Revenue per Coach ($) | 4,672 | 5,008 | -6.7 |
A Deep Dive into Medifast, Inc. (MED) Profitability
A Deep Dive into Medifast, Inc.'s Profitability
Gross Profit: For the nine months ended September 30, 2024, gross profit was $356.4 million, a decrease of $278.1 million or 43.8% compared to $634.5 million for the same period in 2023. The gross profit margin was 73.7% for 2024, up from 72.0% in 2023.
Operating Profit: Income from operations for the nine months ended September 30, 2024 was $2.2 million, a 98.2% decline from $117.7 million in 2023. The operating profit margin decreased to 0.4% from 13.4% year-over-year.
Net Profit: Net income for the nine months ended September 30, 2024 was $1.3 million, a significant drop of 98.6% from $93.4 million in 2023. The diluted earnings per share fell to $0.12 from $8.55 for the same period.
Trends in Profitability Over Time
The following table outlines the profitability metrics over the last two years:
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change | Percentage Change |
|---|---|---|---|---|
| Revenue | $483.5 million | $881.0 million | ($397.5 million) | (45.1%) |
| Gross Profit | $356.4 million | $634.5 million | ($278.1 million) | (43.8%) |
| Operating Income | $2.2 million | $117.7 million | ($115.5 million) | (98.2%) |
| Net Income | $1.3 million | $93.4 million | ($92.1 million) | (98.6%) |
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the profitability ratios for Medifast, Inc. are compared with industry averages below:
| Ratio | Medifast, Inc. | Industry Average |
|---|---|---|
| Gross Profit Margin | 73.7% | 60.0% |
| Operating Profit Margin | 0.4% | 10.0% |
| Net Profit Margin | 0.3% | 8.0% |
Analysis of Operational Efficiency
Cost Management: Selling, general and administrative (SG&A) expenses for the nine months ended September 30, 2024 were $354.2 million, a decrease of $162.5 million or 31.5% from $516.8 million in 2023. SG&A expenses as a percentage of revenue increased to 73.3% from 58.7%.
Gross Margin Trends: The gross margin improved slightly despite the decline in revenue, indicating better cost management strategies. The gross profit margin rose from 72.0% in 2023 to 73.7% in 2024.
Debt vs. Equity: How Medifast, Inc. (MED) Finances Its Growth
Debt vs. Equity: How Medifast, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, Medifast, Inc. reported total liabilities of $83.9 million, down from $108.4 million at December 31, 2023. The company's current liabilities stood at $72.4 million compared to $92.3 million the previous year. Long-term lease obligations were $11.5 million as of September 30, 2024, down from $16.1 million at the end of 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, was approximately 0.40, calculated using total liabilities of $83.9 million and total stockholders' equity of $207.3 million. This ratio indicates a conservative leverage position compared to the industry average, which typically ranges from 0.5 to 1.5.
Recent Debt Issuances and Refinancing Activity
The company had no borrowings under its $225 million senior secured revolving credit facility as of September 30, 2024. The credit agreement was amended in May 2022 to increase borrowing capacity and switch the interest rate basis to SOFR from LIBOR. However, on October 30, 2024, Medifast terminated this credit agreement without any outstanding borrowings.
Equity Structure
Medifast's stockholders' equity increased to $207.3 million by September 30, 2024, from $201.5 million at the end of 2023. The company reported 10.94 million shares issued and outstanding as of September 30, 2024. The additional paid-in capital rose to $31.0 million from $26.6 million during the same period.
Balance Between Debt Financing and Equity Funding
Medifast maintains a balanced approach, relying primarily on equity financing for growth while strategically utilizing debt when necessary. The company's cash and cash equivalents increased from $94.4 million at December 31, 2023, to $115.3 million by September 30, 2024, indicating strong liquidity.
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Liabilities | $83.9 million | $108.4 million |
| Current Liabilities | $72.4 million | $92.3 million |
| Long-term Lease Obligations | $11.5 million | $16.1 million |
| Debt-to-Equity Ratio | 0.40 | 0.54 |
| Total Stockholders' Equity | $207.3 million | $201.5 million |
| Cash and Cash Equivalents | $115.3 million | $94.4 million |
Assessing Medifast, Inc. (MED) Liquidity
Assessing Medifast, Inc. (MED) Liquidity and Solvency
Current and Quick Ratios
The current ratio for Medifast, Inc. as of September 30, 2024, is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $224,975,000 | $72,376,000 | 3.11 |
The quick ratio, which excludes inventories from current assets, is as follows:
| Current Assets (excluding inventories) | Current Liabilities | Quick Ratio |
|---|---|---|
| $184,880,000 | $72,376,000 | 2.55 |
Analysis of Working Capital Trends
Working capital at September 30, 2024, stands at:
| Working Capital | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Working Capital | $152,599,000 | $131,724,000 |
This reflects a net increase of $20,875,000 in working capital year-over-year.
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
| Cash Flow Activity | Amount |
|---|---|
| Net cash provided by operating activities | $29,423,000 |
| Net cash used in investing activities | ($7,089,000) |
| Net cash used in financing activities | ($1,514,000) |
| Increase in cash and cash equivalents | $20,867,000 |
Potential Liquidity Concerns or Strengths
The company had cash, cash equivalents, and investment securities totaling $170,000,000 as of September 30, 2024, an increase from $150,000,000 at December 31, 2023. There are no borrowings under the credit facility as of September 30, 2024, indicating a strong liquidity position.
The company’s debt covenants are in compliance, which further strengthens its liquidity outlook. However, the significant decrease in net income from $93,380,000 for the nine months ended September 30, 2023, to $1,290,000 for the same period in 2024 may raise concerns regarding operational efficiency and future cash flows .
Is Medifast, Inc. (MED) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company involves assessing its financial metrics to determine whether it is overvalued or undervalued. This includes examining key ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA).
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio is a key valuation metric that compares a company's current share price to its earnings per share (EPS). As of the latest data:
- Current Stock Price: $6.66
- Trailing Twelve Months (TTM) EPS: $0.12
- P/E Ratio: 55.5
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio compares a company's market value to its book value. As of September 30, 2024:
- Current Stock Price: $6.66
- Book Value per Share: $1.89
- P/B Ratio: 3.52
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA ratio provides a valuation metric that compares the company's total value to its earnings before interest, taxes, depreciation, and amortization. The calculation uses:
- Market Capitalization: $73.0 million
- Total Debt: $0
- Cash and Cash Equivalents: $115.3 million
- EBITDA (TTM): $2.2 million
- Enterprise Value (EV): $73.0 million - $115.3 million = -$42.3 million
- EV/EBITDA Ratio: Not applicable (negative EV)
Stock Price Trends
Over the past 12 months, the stock price has exhibited significant volatility:
- 1-Year High: $25.00
- 1-Year Low: $5.00
- Current Price: $6.66
Dividend Yield and Payout Ratios
The company has recently suspended its dividend payments:
- Dividend Yield: 0% (no dividends paid)
- Payout Ratio: 0% (no earnings distributed as dividends)
Analyst Consensus on Stock Valuation
Analyst opinions vary widely, with a consensus rating reflecting a cautious outlook:
- Buy: 0
- Hold: 5
- Sell: 2
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 55.5 |
| P/B Ratio | 3.52 |
| EV/EBITDA Ratio | N/A |
| 1-Year High | $25.00 |
| 1-Year Low | $5.00 |
| Current Price | $6.66 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus - Buy | 0 |
| Analyst Consensus - Hold | 5 |
| Analyst Consensus - Sell | 2 |
Key Risks Facing Medifast, Inc. (MED)
Key Risks Facing Medifast, Inc.
Industry Competition: The company faces intense competition in the health and wellness sector, particularly from other weight loss and nutritional companies. The number of active earning OPTAVIA coaches decreased to 30,000 as of September 30, 2024, down 36.3% from 47,100 a year earlier.
Regulatory Changes: The company operates in a highly regulated environment, which can impact its operations and profitability. Changes in health and safety regulations or dietary supplement laws could impose additional compliance costs or limit product offerings.
Market Conditions: Economic downturns can affect consumer spending on health and wellness products. The company reported a 40.6% decrease in revenue for the three months ended September 30, 2024, amounting to $140.2 million compared to $235.9 million in the same period in 2023.
Operational Risks: The company's operational performance is vulnerable to supply chain disruptions. The cost of sales decreased 41.0% to $34.5 million for the three months ended September 30, 2024, primarily due to lower sales volumes.
Financial Risks: The company’s financial health is affected by fluctuations in interest rates and the effectiveness of its capital management strategies. The net income for the three months ended September 30, 2024, was only $1.1 million, a stark contrast to $23.1 million in the same period in 2023, marking a 95.1% decline.
Strategic Risks: The company is investing in new growth initiatives, which, while potentially beneficial, could also strain resources. The total stockholders’ equity increased to $207.3 million as of September 30, 2024, from $201.5 million at December 31, 2023.
Mitigation Strategies: The company is focusing on enhancing its customer acquisition initiatives and optimizing its supply chain to mitigate risks. SG&A expenses for the three months ended September 30, 2024, were $103.6 million, down 31.8% from $151.9 million in the prior year.
| Risk Type | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Increased competition leading to decreased active coaches | Revenue decreased 40.6% to $140.2 million |
| Regulatory Changes | Potential for increased compliance costs | Impact on product offerings and sales |
| Market Conditions | Economic downturn affecting consumer spending | Revenue decreased 45.1% for nine months to $483.5 million |
| Operational Risks | Supply chain disruptions affecting costs | Cost of sales down 41.0% to $34.5 million |
| Financial Risks | Fluctuations in interest rates | Net income fell to $1.1 million |
| Strategic Risks | Investment in growth initiatives | Stockholders' equity increased to $207.3 million |
Future Growth Prospects for Medifast, Inc. (MED)
Future Growth Prospects for Medifast, Inc.
Analysis of Key Growth Drivers
The company is focusing on several growth drivers, including product innovations, market expansions, and strategic partnerships. In 2024, the company has continued to invest in research and development, with R&D expenses of $1.1 million for the three months ended September 30, 2024, down from $1.3 million in the same period in 2023. This reduction reflects a strategic realignment of resources towards more impactful initiatives.
Additionally, the company has engaged in partnerships, notably with LifeMD, which involves a collaboration aimed at enhancing its weight loss programs. The collaboration has involved milestone payments totaling $10 million.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, revenue decreased by 45.1% year-over-year, totaling $483.5 million, down from $881 million in the same period of 2023. The decline in revenue was largely attributed to a decrease in the number of active earning coaches, which fell by 36.3% to 30,000. However, strategic initiatives are expected to stabilize and potentially increase revenue in the coming years, with a focus on enhancing customer acquisition strategies.
Strategic Initiatives or Partnerships that May Drive Future Growth
The partnership with LifeMD is pivotal for future growth. This collaboration is intended to leverage LifeMD's telehealth capabilities, enhancing service offerings and potentially increasing customer base and engagement. The company is also focusing on customer acquisition initiatives, which accounted for an increase in SG&A expenses by $16.4 million for the nine months ended September 30, 2024.
Competitive Advantages that Position the Company for Growth
The company maintains competitive advantages through its established brand and customer loyalty. The OPTAVIA program remains a key differentiator in the weight loss market. Additionally, the company's recent improvements in inventory management have led to a decrease in cost of sales by 48.5% to $127.1 million for the nine months ended September 30, 2024. This efficiency allows for better pricing strategies and margin management.
| Growth Driver | 2024 Figures | 2023 Figures | Change |
|---|---|---|---|
| Revenue | $483.5 million | $881 million | -45.1% |
| Cost of Sales | $127.1 million | $246.6 million | -48.5% |
| R&D Expenses | $1.1 million | $1.3 million | -15.4% |
| Active Earning Coaches | 30,000 | 47,100 | -36.3% |
| SG&A Expenses | $354.2 million | $516.8 million | -31.5% |
These strategic initiatives and partnerships, coupled with a focus on operational efficiency and cost management, position the company well for potential recovery and growth in the competitive landscape. The company is also actively evaluating potential acquisitions that could complement its business model, although no specific agreements are currently in place.
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Resources:
- Medifast, Inc. (MED) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Medifast, Inc. (MED)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Medifast, Inc. (MED)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.