LifeMD, Inc. (LFMD) Earnings Call Transcript & Summary

Thank you, Operator, and hello everyone this afternoon. We released our third-quarter results and filed our Form 10-Q earlier today. I'll start with the figures. Revenue was $44.6 million, short of the guidance range we gave. Adjusted EBITDA was modestly negative, landing inside our guided range and marking a $3.1 million gain versus the second quarter. In addition, we're revising our fourth-quarter and full-year outlook. On last quarter's call, I said we anticipated finishing the year with a $250 million revenue run rate. That won't happen. Our current expectation is to finish at approximately a $200 million revenue run rate. Three factors caused the shortfall. To start, our forecast had anticipated that the branded GLP-1 fulfillment program would kick off sooner within the quarter. Getting those arrangements finalized and up and running required more time than we had anticipated, which meant a smaller portion of that revenue came through in the third quarter. This came down to timing rather than demand. Agreements with manufacturers are now finalized and the program is building momentum, which I'll get into shortly. Next, we opted for a cautious strategy on acquiring new patients. We reduced marketing spending by nearly a third compared with the prior quarter, while we enhanced our technology platform and patient experience to improve unit economics and patient retention. We also prioritized longer patient subscription commitments instead of upfront revenue. Those decisions resulted in lost revenue for this quarter. Third—and this ties into the second point—a number of the patient cohorts we onboarded earlier in the year underperformed relative to our expectations. That's a major reason we scaled back; we adjusted pricing and plans to fix it, and instead of ramping spend before confirming those adjustments were effective, we deliberately waited until our new cohorts... The initial results look promising, and I'll get to those in a moment. What matters most for shareholders is this: even with the business still somewhat soft, our liquidity is strong, and I'm confident we have an outstanding year of high-quality growth in front of us. I'll keep the remainder of my comments brief, since the point is straightforward. There are five key takeaways. First, our conviction has only grown that centering LifeMD's weight management program on branded GLP-1s was the right call. Over the past 30 days, we finalized agreements with Eli Lilly and Novo Nordisk, and those deals let us fold self-pay GLP-1 medications straight into our pharmacy operations, which widens access to these products by taking friction out of the patient journey. Second, our enterprise segment has begun strongly. Our AT&T partnership is now live, with 100 million customers and 110,000 employees currently eligible to obtain high-quality care and prescription medications through LifeMD. Third, the underlying economics of our main programs keep getting better, which moves us closer to the objective of durable profitability alongside robust revenue growth. Fourth, we are executing an initiative to reduce operating costs by 30% from the first quarter of 2026 through the first quarter of 2027. Considerable headway has been made, and we will hit the midpoint during this quarter. Fifth, at the start of next year, we anticipate starting the rollout of what we expect will be the biggest change to the LifeMD patient experience since we launched. Taking those in sequence: during the last 30 days, we signed agreements with Novo Nordisk and Eli Lilly that let LifeMD's pharmacy fulfill and ship virtually all branded GLP-1 medications available on the market — Wegovy, Wegovy Pill, Ozempic, Zepbound, and Foundayo — right to patients' homes. That represents a major milestone for our broader strategic vision. Consider the patient experience: far too frequently, starting a branded GLP-1 involves a prescription from one source plus a visit to a pharmacy counter or a separate e-commerce platform, with nothing linking the two. With LifeMD, the entire process can take place inside a single connected ecosystem. Everyone involved—the prescriber, the pharmacy handling fulfillment and home delivery, plus the care and support staff who remain with patients across each refill and dosage adjustment—can work from one shared system. No outside transition is required, and continuity of care never breaks. Patients face less complexity, begin treatment faster, and remain on the regimen their prescriber chose. That produces improved patient outcomes, the central force behind every choice we make at LifeMD; consider next what that means for our economics. People who qualify for self-pay branded GLP-1 drugs and had their prescriptions filled only at outside pharmacies can now get those prescriptions filled through LifeMD Pharmacy. Since we now record that revenue on a gross basis, our gross margin percentage will decline. However, the revenue and gross profit dollars we generate per patient on a GLP-1 therapy will increase. Atul will take you through the details. Our pharmacy is the reason this is possible, and it is building momentum. Pharmacy orders were up 17% from the second quarter to the third, and September volume increased 58% year over year. We started fulfilling Novo Nordisk medicines in September, and October orders climbed another 27% from there. Beyond GLP-1s, the pharmacy plays a much wider role. It now creates customized compounded treatments outside the GLP-1 category that underpin our men's and women's health offerings. Orders for those treatments tripled between the second and third quarters; this quarter we're rolling out a refreshed storefront that lets patients easily browse and order these treatments directly, and we expect it to speed up that growth substantially. Our pharmacy was built so we own the patient experience. It has grown into one of our most significant strategic advantages and will remain a central element of our model going forward. Two years ago we made a choice that some investors disliked. We stopped pursuing mass-market GLP-1 compounding and instead put more emphasis on FDA-approved medications. That choice hurt our growth and profit in the near term; even so, this quarter demonstrates that it was the correct call. The timing really could not be better. Here is the reason. A new wave of branded obesity drugs is getting close to reaching the market. Novo Nordisk's CagriSema pairs semaglutide with an analog, cagrilintide, in one once-weekly injection. In pivotal trials, patients shed 22.7% of their body weight at 68 weeks, compared with 16.1% on semaglutide alone. Novo Nordisk submitted to the FDA last December, and a decision is anticipated within the next few months. For patients currently enrolled in or considering our women's health program for menopausal care, this is especially thrilling. Novo Nordisk just shared a post hoc analysis of REDEFINE 1: among women with obesity or who were overweight, body weight dropped by an average of 24.8% during perimenopause and 23.1% after menopause, and reductions in waist circumference were observed across menopausal stages. That highlights a distinctive synergy stemming from how broad our specialty care platform is. LifeMD can do what other providers cannot — bring women's health, weight management, labs, pharmacy, and continuous clinical care together into one connected experience — which makes the healthcare ecosystem we continue to build even more valuable. The place where metabolic treatment meets women's health is just one example showing why LifeMD places such high importance on the coming generation of GLP-1 therapies.

CagriSema represents merely a single example among the major breakthroughs nearing commercialization. From where we sit, the next wave of GLP-1 drugs will drive continued expansion in the obesity sector — a market expected to reach $130 billion annually by 2030, making it among the largest ever seen in American healthcare. There's also a strategic consideration I want investors to keep in mind. These treatments do more than simply set a higher standard for losing weight. They could fundamentally alter the competitive structure of this market. The compounded GLP-1 segment emerged during temporary supply shortages, which enabled hundreds of direct marketing companies to offer copies of semaglutide and tirzepatide. The shortages have ended at this point, and we believe that same route will not exist for the coming generation of medicines. According to the FDA, some next-generation molecules are not permitted for use in compounding as things stand under federal law, and CagriSema is a proprietary combination of two peptides at a fixed dose. Consequently, we do not anticipate compounded forms of next-generation medicines being offered at scale. That difference matters, since much of the current virtual weight loss market arose from access to compounded GLP-1s. As treatment shifts toward next-generation branded medicines, anticipate a narrower competitive field. The businesses positioned to lead will possess brand equity, substantial clinical infrastructure, nationwide pharmacy capabilities, and significant strategic partnerships. This is the area in which LifeMD is distinct: by the end of the quarter we had about 104,000 patients in weight management, and the clinical infrastructure plus pharmacy capabilities required to deliver these medicines to patients at scale are already in place. With the category moving toward next-generation branded therapies, our view is that LifeMD will rank among the country's best-positioned virtual care and pharmacy platforms. Now, enterprise. On September 15 we announced our collaboration with AT&T, making it the first and only carrier offering its customers free access to a virtual healthcare platform. AT&T's 100 million wireless and fiber customers, along with its 110,000 U.S. employees, are eligible for a complimentary LifeMD membership — a $228 annual value. This initiative began across 11 states and touched about 29 million customers, with a nationwide rollout planned for this January. AT&T delivered its inaugural LifeMD-specific email to around 6 million customers on November 2. That marks the initial step in a series of planned communications to the AT&T customer base, which we anticipate rolling out in stages as our national expansion happens in January; it's still early, and we'll share results as the program grows. What makes this significant? Through AT&T, we can reach patients for a fraction of what paid media usually costs us to acquire them. That partnership places LifeMD before tens of millions of American households, and it gives our platform the endorsement of one of the nation's biggest and most trusted corporations. It demonstrates that LifeMD works both as a direct-to-consumer healthcare brand and as the healthcare infrastructure supporting major consumer and employee platforms; in AT&T we see a blueprint for a wider enterprise distribution model. Our direct-to-consumer business is not being replaced. We're adding a growth channel that is cheaper and more defensible. In the coming quarter, we will begin promoting our enterprise product to roughly six million companies. At present, approximately two-thirds of US employers do not provide coverage for GLP-1 drugs used for weight loss. Through LifeMD's enterprise offering, companies can extend access for their staff to LifeMD's self-pay healthcare and pharmacy platform, letting workers obtain reliable medications and care at a substantial savings relative to virtually every direct-to-consumer healthcare platform. Our view is that this delivers a straightforward, scalable option for employers, a more budget-friendly path to care for their staff, and a significant new channel of patient growth for LifeMD; we look forward to sharing early progress with you on our upcoming call. Third, unit economics. During the quarter just ended, we lowered the entry price for our weight management program down to $39. A few observers interpreted that as a defensive move. Actually, it was the opposite. We made the decision intentionally, aiming to boost conversion, draw in patients who remain longer, and enhance lifetime economics. Early results confirm this. Our customer acquisition cost has fallen 40% versus its June peak. The share of new patients selecting multi-month plans climbed from about 25% to about 85%. Those who enroll in longer plans stay on therapy longer, which yields better outcomes and greater lifetime value. We're monitoring retained cohorts carefully, and thus far they're delivering as intended. We wrapped up the quarter with roughly 350,000 active subscribers — a 13% increase year over year and essentially level with the second quarter — despite spending $9.5 million less on marketing. Our unit economics are healthy already, but we're very bullish on where they're going. The tech upgrades we're rolling out, a wider product lineup, and an improved patient experience ought to make each patient more valuable to us and less expensive to bring in. And I think that will produce substantially stronger unit economics in 2027. Fourth, operating expenses. We've been executing a plan to reduce operating expenses, excluding working marketing spend, by at least 25% between the first quarter of 2026 and the first quarter of 2027. When this quarter wraps up, roughly half of that reduction will be behind us, and we anticipate completing the entire cut by Q1 of 2027 at the latest. Our support operations have been reorganized, and AI-driven workflows are being rolled out company-wide, which lets a smaller staff get more done while preserving the care quality that is central to LifeMD. The bulk of the added expense goes toward building out the clinical capacity our recently discussed partnerships and growth channels require. To give you a sense of scale, we anticipate patient numbers and revenue rising by about 30% in 2027 while our fixed overhead stays close to current levels, and the platform we've built can handle far more than that without any significant increase in fixed costs. Fifth and last, product and technology. Over the past six months, our product and technology teams have concentrated on what we believe will be the most substantial shift in the LifeMD patient experience since the company began. Our vision from day one was never just a collection of standalone telehealth offerings — we set out to build something much bigger. What we want is for LifeMD to become the place patients turn to for ongoing care, where they can get quality clinical care, prescription meds, lab work, and tailored treatments all in one smooth, unified experience. The next chapter is about bringing those pieces together so the whole thing feels more intuitive, more personal, more effective, and easier for patients. On the business side, we expect this to be one of the biggest things driving retention, patient lifetime value, and margin expansion over the long run. Rollout of the new experience is slated to begin early next year. I’d rather wait to walk you through what we’ve built once it’s finished, so I’m not sharing specifics today. What I can say is that I’m very enthusiastic about what our team is preparing to introduce. Thanks, Justin, and good afternoon to all of you. Just a reminder that, unless stated otherwise, every year-over-year comparison reflects continuing operations and leaves out WorkSimpli, which we sold on November 4, 2025.

I appreciate everyone's patience over the past few days—we required additional time to verify that our financial results were complete and accurate for the Form 10-Q filing. While the filing itself includes far more detailed disclosure, the short version is that we identified certain immaterial errors in how net revenues were recorded under some arrangements with third-party pharmacy providers; those errors were primarily tied to 2024 and 2025, and after completing our review we concluded they are immaterial to the financial statements we previously issued and that cash was not affected in any period presented. Next, third-quarter revenue was $44.6 million. That fell below the $48 million to $51 million range we had guided to, and it was down about 7% from $47.7 million in the prior-year period. Two factors drove the shortfall against guidance. First, as Justin mentioned earlier, we deliberately reduced marketing spending beyond what our guidance had assumed. Second, our larger collaboration arrangements went live later than anticipated. On a year-over-year basis, this quarter includes the full effect of our weight management pricing changes, among them the reduction of the introductory month for new patients from $75 to $39. The pricing update is pushing customers toward 3-, 6-, and 12-month subscriptions, which moves our patient base into groups that have historically retained better and carried higher LTV — making them higher quality. At the close of the quarter, active subscribers were roughly 350,000, up 13% year over year and nearly unchanged from the previous quarter, despite the big reduction in marketing spend. Gross profit totaled $36.4 million, down from $40.7 million a year earlier. Gross margin was about 82%, versus roughly 89% in the second quarter and 85% in the year-ago period. Note that this decline is mostly due to a presentation change rather than underlying economics. With our new branded pharmaceutical arrangements, we act as principal, so revenue gets recognized on a gross basis. Inventory is purchased and orders are fulfilled via our wholly owned affiliated pharmacy. Investors should anticipate a reduced gross margin percentage, together with greater revenue and gross profit dollars, as those branded pharmaceutical arrangements scale. Overall, we're very happy with this development, since it enables us to capture additional gross profit moving forward from dispensing branded drugs. Selling and marketing expense came in at $18.5 million, down $9.5 million, or 34%, versus the second quarter, and 18% lower year over year. G&A costs came in at $14.7 million, up 6% from a year earlier, driven by clinical capacity added for our new collaborations and partially offset by gains in efficiency across non-clinical areas. On a GAAP basis, net loss from continuing operations attributable to common stockholders totaled $5.2 million, or $0.11 per share, compared with $7.9 million, or $0.16 per share, in the second quarter. Adjusted EBITDA — a non-GAAP figure we define as income or loss attributable to common stockholders before the various items laid out in today's news release — was essentially break-even, posting a loss of $0.4 million and landing inside our guidance range. We ended the quarter with $21.9 million in cash and no debt. Once the quarter wrapped up, we're happy to report that we finalized a $12.5 million non-convertible senior secured term loan with Avenue Capital. This new facility takes the place of the revolving credit facility we previously had with Citizens Bank, and it provides us with significantly greater flexibility to fund whatever working capital our direct sourcing arrangements might need. When weighing various financing alternatives, we chose to proceed with Avenue—despite having other, larger options available—since we believe this facility delivers the appropriate amount of capital for the foreseeable future. Moving to our Q4 outlook, our approach mirrors last quarter, though we're incorporating an even narrower definition. We are reflecting the effects of a marketing budget that was intentionally reduced, an ongoing shift in our mix toward weight management plans spanning multiple months, and a cost base that keeps getting better. None of our guidance assumes any contribution from AT&T, from our wider enterprise program, or from new proprietary products launched through the pharmacy in the fourth quarter. Yet each of these opportunities amounts to meaningful potential upside for 2027. How much they will affect the quarter remains unclear, and in certain cases the timing is not fully within our control. Lastly, we plan to announce 2027 guidance early in Q1 and anticipate that by then these opportunities will be far better understood and therefore factored into next year's guidance. Building off that foundation for Q4, our guidance calls for revenue between $46 million and $49 million, with adjusted EBITDA landing somewhere from -$4 million to -$2 million. Across all of 2026, that works out to $188 million to $191 million in revenue and adjusted EBITDA ranging from negative $12.6 million to negative $10.6 million, which compares against our earlier outlook of $205.5 million to $212.5 million and negative $6 million to break even. To wrap up, our cost base is considerably leaner today than when the year began, and further gains are still ahead. The fresh term loan provides a more adaptable capital structure to support upcoming growth, and our pharmacy infrastructure leaves us strongly placed as we keep moving toward filling FDA-approved branded medications directly. Thank you — I'll now turn things back to Justin. Thanks, Atul. Two years back, we picked branded medicine rather than GLP-1 compounding, long-term care rather than one-off transactions, and patients rather than clicks. During this quarter, that approach started to become visible. Our pharmacy today dispenses branded GLP-1s made by both Lilly and Novo, and our whole clinical platform stands well positioned while the space keeps moving toward FDA-approved branded medicines. AT&T offers us a cheaper route to tens of millions of American households plus a template for wider enterprise distribution. Meanwhile, our selling and marketing expense fell 34% quarter over quarter, which brings us close to the halfway mark on the plan to cut operating expenses by 25%, and adjusted EBITDA went from a $3.5 million loss to roughly break even within just one quarter. Quality care, quality products, quality revenue—that's been the model all along. What's changed now is that the infrastructure, distribution, unit economics, and cost base needed to make that model profitable are finally coming together. You should see that reflected over the next several quarters. I want to thank our providers and employees, our patients for entrusting their care to us, and our shareholders for their ongoing support.

Thanks — and I really appreciate the thorough detail you gave us today. I'm wondering: as you look at revenue getting back to faster growth from this point, what would drive that? Is the AT&T partnership the main factor, or enterprise adoption picking up, or does it take stepping up marketing spend again to hit the Q4 revenue that's implied?

Hi, Sarah — this is Justin. I'll start us off, and then Atul can chime in with anything further. What I'd point to is 4 big items that we believe will truly reshape the business over the near term and fuel growth on both the top and bottom line. The first is continued improvement in unit economics. Much of that comes from what we mentioned on the call — namely major improvements to our technology platform and patient experience, which does a lot of amazing things for patients and is also a big driver of lifetime value and helps improve unit economics; so that's the number 1 thing we feel really optimistic about. Second, CagriSema, the launch of CagriSema later this year, as we mentioned on the call. And as you know, there are plenty of next-generation therapies in the pipeline. We believe the competitive landscape is going to be much better for us. You're going to see a lot less compounding. There should be far less competition out there. We believe our positioning is quite strong for a number of those launches, and that has us very enthusiastic. Next, expansion within the enterprise segment — a area we'll begin disclosing in upcoming quarters. The AT&T collaboration announced during this quarter has us genuinely pleased, so that's exciting for us. And clearly, the unit economics of that segment are highly appealing. Customer acquisition costs run considerably lower under that kind of model compared with a direct-to-consumer approach. Last, we're likewise enthusiastic about pharmacy growth. Month after month, the figures in the pharmacy keep rising, and I look forward to sharing formal guidance on this for the coming year. I think this will end up being a significant contributor to EBITDA, and I genuinely believe we're on track to create one of the largest pharmacies in America. Right now we're in active talks with quite a few third-party virtual care platforms — more than 10 of them, I'd say — that are also interested in tapping into our pharmacy. This part of the business has me really excited. Yeah, let me just tack one thing onto that, Justin, building on your pharmacy point: I think we've got some new products in the pipeline. We purposely left that out of the Q4 guidance, since it needs FDA approval, so the timing remains somewhat uncertain. Still, that opportunity is genuinely exciting to me, and I view it as something that will help drive revenue together with all these other factors, plus some quite appealing margin characteristics. So I believe that combination is really what leaves us feeling a great deal of optimism regarding the business.

Great. If I could squeeze in one more, just about how the branded GLP-1s get booked on a gross basis now. Could you help us understand how we ought to think about where gross margin ends up settling as the branded mix increases? And then what should we expect for the effect on working capital? I know we saw a bit of that this quarter, but what's the timeline for how long you get to pay on that inventory compared with how quickly you collect?

Yeah, good question. Let me take the first part. I think, looking ahead, and you saw there's a gross margin reduction that we mentioned earlier. So that's probably going to keep going as revenue recognition on a gross basis for this particular component of revenue grows, and we expect it to grow very rapidly going forward. You will see a reduction, sort of, in the gross margin. Where and when, and the exact timing, is a little unclear, because they're going to see some things that offset it. For example, some of the new drugs that I was just mentioning; but by the time we reach the end of 2027, let's say, when things settle out, I wouldn't be surprised. I think investors should expect something kind of in the mid- to low 60s and potentially even down into the high 50s. That's not necessarily a sign of a diminishing economic return. That is just the percentage margin and a reflection of the revenue recognition. We expect that to be a growing gross profit line over the course of next year. Overall, in total, we see that as kind of an outsize component. The margin on the fulfillment, as you probably know, isn't as high as some of the other products and services that we offer. So that is going to compress that.

When you say 50s to 60s, does that refer only to the weight loss business, or to the whole company?

The whole company — a blended expectation across the board of how that will shape up.

Then regarding working capital, could you walk us through how the timeline is shaping up.

So I'd say we aren't necessarily going to reveal every precise detail of these arrangements, and they do differ. That said, the working capital has been structured to be fairly modest when it comes to how much investment is needed from us; and we still anticipate some changes before the year is out regarding the precise terms. Still, with the new capital raise, the message I want to get across to investors is that we'll have enough capital on hand and available to handle all of our working capital requirements.

Could you discuss the revenue model for Novo and Lilly? In what way are you generating money from those arrangements? Teams have mentioned that their gross profit dollars are the same under the branded GLP-1s as they were for compounded scripts. Could you just address that a little, please? Thank you.

Sure, why don't I begin and Justin can come in at the end of this. But I think the way to think about the revenue, Dave, is that we will be booking on a gross basis. So as patient pay amounts get collected, they will be recorded as revenue. The offset will be on the COGS side and that offset will be offset by the amount we are paid for fulfillment fees and services that we provide. So what's left in the gross margin line will be essentially the fulfillment fees that we earn on any dispensation. So I think that's fairly typical of the way they work; and then going forward, the way we look at it is right now in Q2, we were making zero on any of the branded dispenses on the branded fulfillment. So going forward, this is all purely incremental EBITDA and gross profit margin for us on these products.

Could you discuss the 30% top-line growth that you're expecting for 2027 and what's driving it? Thanks.