LifeMD shares plummeted Wednesday after the telehealth outlet acknowledged higher customer acquisition costs pressured its business during the June quarter.
The company spent 5% to 25% more to drive new customers to its RexMD platform in the second quarter compared to the first. RexMD is a telehealth platform focusing on men's health. LifeMD is facing steep competition in the telehealth space which is increasingly focused on obesity drugs.
KeyBanc Capital Markets analyst Scott Schoenhaus says LifeMD "took its eye off the ball" in managing customer acquisition costs for RexMD amid its "enormous transition" in the quarter into the weight management space.
The higher costs led LifeMD to pull back on the amount of volume it drove to the RexMD site. But the platform generates 40% to 50% of LifeMD's telehealth revenue. So, the move led to a bottom- and top-line miss.
In response, LifeMD shares crashed 44.9%, closing at 6.53.
LifeMD's Second-Quarter Miss
On an adjusted basis, LifeMD earned 16 cents per share and reported $62.2 million in sales for the June quarter. But analysts called for a steeper 18-cent per-share gain and $66.3 million in sales. LifeMD also missed its own guidance for $65 million to $67 million in sales.
Earnings grew 167% year over year, while sales climbed almost 23%.
The company also cut its full-year outlook. LifeMD expects $61 million to $63 million in sales. At the midpoint, that's down $4 million from the three-months-ago view. LifeMD also sees adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, landing between $6 million and $7 million, down from its previous call for $7 million to $9 million.
Weight Management In Focus
LifeMD is making a massive shift into the weight management and women's health spaces. It's also working to diversify its RexMD business to give it more places to allocate capital in the event of future disruption, KeyBanc's Scott Schoenhaus said.
But the new weight management space is also struggling. LifeMD offers refunds for some patients who don't lose at least 10% of their body weight within a year. During the second quarter, refund rates were higher than expected.
Chief Executive Justin Schreiber says LifeMD's refund policy is "extremely liberal." Many patients will request a refund if they later find a less expensive option elsewhere, he said on the call with analysts.
KeyBanc's Schoenhaus says many people want to pay around $200 a month vs. the $500-plus for branded drugs from Novo Nordisk and Eli Lilly.
"However, LFMD is currently working to enhance its real-time benefit verification, which should help to reduce its refund rate," he said.
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