Wellness company Medifast (NYSE: MED) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 33.8% year on year to $115.7 million. Next quarter’s revenue guidance of $95 million underwhelmed, coming in 15.4% below analysts’ estimates. Its GAAP loss of $0.07 per share was 72% above analysts’ consensus estimates.

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StockStory’s Take

Medifast’s first quarter results reflected ongoing pressure on revenue, which management attributed to declines in the number of active earning OPTAVIA coaches and ongoing shifts in the weight loss industry. CEO Dan Chard emphasized the company’s response to disruption from GLP-1 weight loss medications, noting that new coach cohorts have adapted to this environment and are showing increased productivity. Chard highlighted, “These new cohorts are exhibiting new customer growth ahead of last year and are at levels we experienced back when the business was growing.”

Looking ahead, management’s guidance for the next quarter factors in fewer planned company-led promotions, which were a driver of coach acquisition in Q1. CFO Jim Maloney noted that the absence of similar promotional activity in Q2 is expected to result in a less favorable year-over-year revenue comparison. Management also signaled a shift in marketing investment back toward supporting the coach community, aiming to improve long-term productivity and retention. Despite acknowledging near-term headwinds, leadership expressed optimism that recent improvements in coach recruitment and productivity could contribute to stabilization later in the year.

Key Insights from Management’s Remarks

Management discussed several themes shaping Medifast's performance, especially the impact of GLP-1 medications and the company's evolving coach-centric strategy.

• GLP-1 Disruption and Adaptation: The rise of GLP-1 medications for weight loss has disrupted traditional customer behavior, prompting the company to retrain and support coaches in addressing new client needs, including those transitioning off GLP-1 drugs.
• Coach Productivity Initiatives: Efforts to streamline coach development, enhance digital tools, and provide targeted incentives have begun to yield results, with new coach cohorts showing improved productivity and customer acquisition compared to previous years.
• Product Line Expansion: Launches of OPTAVIA ACTIVE and ASCEND lines are designed to serve both traditional customers and those using or discontinuing GLP-1 medications, with the ASCEND line now accounting for a mid-teens percentage of orders.
• Shift Away from Company-Led Marketing: Management is reducing investment in company-driven marketing campaigns, finding that coach-led customer acquisition is more efficient and sustainable for long-term growth.
• Focus on Cost Management: SG&A reductions have been driven by lower coach compensation and cuts to marketing expenses, helping to maintain a strong balance sheet despite lower sales volumes.

Drivers of Future Performance

Management’s outlook centers on continued adaptation to industry changes, with the company prioritizing coach recruitment and retention, product variation, and cost control as the main levers for future performance.

• Coach Community Reinvestment: Emphasis will remain on empowering coaches with better training, digital tools, and incentives, as management believes this is key to reigniting new customer acquisition and improving retention.
• GLP-1 Market Integration: The company plans to further develop products and programs for customers using GLP-1 medications, as well as for those transitioning off, aiming to capture demand across all segments of the weight management market.
• Operational Efficiency Focus: Ongoing efforts to optimize spending and reduce less effective marketing activities are expected to support margins as the company works toward stabilization.

Top Analyst Questions

• Jim Salera (Stephens): Asked why Q2 guidance suggests a worsening year-over-year revenue decline. Management explained the impact of Q1 promotions and clarified that no major promotions are planned for Q2, which affects the comparison.
• Jim Salera (Stephens): Inquired about the focus shift from company-led marketing to coach-led investment and its effect on SG&A. CFO Jim Maloney said the reduction would not be dramatic, as coach compensation remains the largest expense.
• Jim Salera (Stephens): Sought an update on the ASCEND product line’s share of orders. Management stated ASCEND now accounts for the mid-teens percentage of orders, consistent with expectations.
• Doug Lane (Water Tower Research): Asked whether the introduction of GLP-1 medications has caused controversy among coaches. President Nick Johnson described it as a training opportunity rather than a controversy, requiring adaptation to new client segments.
• Doug Lane (Water Tower Research): Queried about the typical monthly cost for customers using both GLP-1 medications and OPTAVIA programs. CEO Dan Chard explained that most clients pay about $400 per month for OPTAVIA’s core program, with additional costs depending on insurance and physician arrangements for GLP-1s.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will monitor (1) whether recent increases in new coach recruitment and productivity translate into sustained improvements in customer acquisition, (2) the impact of product innovations like the ASCEND line on customer mix and revenue trends, and (3) the effectiveness of the company’s strategic shift away from company-led marketing toward coach-driven growth. We will also pay close attention to any signs that the evolving GLP-1 landscape is stabilizing and contributing positively to Medifast’s core business.

Medifast currently trades at a forward price-to-sales ratio of 0.4×. At this valuation, is it a buy or sell post earnings? See for yourself in our free research report.

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