LifeMD, Inc. Common Stock 2026 Q2 Earnings Call

Justin? Thank you, operator, and good afternoon, everyone.

After the market closed today, we issued our second quarter earnings release and filed our Form 10-Q. We've also posted an updated investor presentation on our investor relations website. I encourage everyone to review those materials. I want to begin by addressing the quarter directly. Revenue was $47.3 million, within the guidance range we provided. Adjusted EBITDA was a loss of approximately $3.5 million, reflecting elevated customer acquisition costs earlier in the quarter and a new $39 introductory offer. While elevated media costs were transient and adjusted EBITDA improved throughout the quarter, we missed our own target, and I want to be direct about why. This quarter, we restructured our customer acquisition model. We transformed our leadership team. We advanced our transition toward branded GLP-1 therapies and longer duration members. We launched an important pharmaceutical collaboration with Halozyme.

We continued to scale our pharmacy, women's health, insurance, Medicare, enterprise, and technology capabilities, and we took tangible steps to reduce our reliance on paid media as the principal engine of growth. We knew these changes would carry near-term costs. What we underestimated was the near-term pressure those changes on profitability, and that's a miss we own. I have said before that our model is simple: quality care, quality products, and quality revenue. Our objective is not merely to grow. It is to build a healthcare and pharmacy business that generates increasing profits from a base of long-term patient relationships, one that benefits both our patients and our shareholders. That standard drove our decisions in the second quarter, and it is the lens through which I will discuss this today.

Before I do that, I want to explain the strategic choice underneath these numbers because it accounts for both the near-term pressure and how we expect the business to evolve and grow from here. There is a well-worn playbook for growing a direct-to-consumer healthcare company quickly. Chase the lowest priced medication, maximize promotional volume, concentrate spend on a single advertising channel, and optimize for immediate cash collection. That approach can produce attractive results for a period of time, but it also produces shallow patient relationships, volatile acquisition economics, regulatory exposure, and revenue that must constantly be replaced. We are deliberately not running that playbook. We are building for the patients who use LifeMD for more of their healthcare over time, not as a website they visit for a single prescription.

In practice, this means employing and training high-quality affiliated providers, supporting patients between visits, integrating labs and pharmacy, expanding insurance access, and building programs that address multiple related conditions across a patient's life. When we do that well, it shows up in the numbers. Patients stay longer, engage with more of the platform, and refer friends and family. Pharmacy attachment increases and retention improves. This generates revenue that recurs instead of needing to be reacquired. That is what we mean by quality revenue. This quarter gives specific evidence that the model is working as designed. Recurring bill revenue represented approximately 84% of total revenue. That installed base is increasingly the economic engine of LifeMD. It generates high contribution margin revenue, funds continued patient acquisition and product investment, and gives us a foundation on which to build new care and pharmacy offerings.

Our gross margin also expanded to approximately 89%, and gross profit was essentially flat despite lower year-over-year revenue. This is important because it demonstrates that the composition and economics of the business are improving beneath the headline numbers. We also followed through on the expense actions discussed last quarter. Advertising and marketing declined by approximately $1.8 million sequentially, and G&A declined by approximately $1.5 million. Those reductions began to show up progressively during the quarter, and we expect the benefit to become more visible in the second half. The way to read the quarter is this: The bottom line missed, but the drivers that determine future profitability, recurring revenue mix, gross margin, and operating costs, each moved in the right direction. With that context, I want to walk through the most important decisions we made this quarter and what they mean for the business from here.

First, the most important strategic transition we made this quarter is how we acquire and retain patients. Paid search and digital media built this company, and they will remain valuable channels. We have deep expertise in performance marketing, and we continue to see attractive returns when we deploy capital selectively. Auction pricing in those channels is outside our control. We saw this early in the quarter, and no durable healthcare platform should have to purchase substantially all of its growth at whatever price the media market sets. We are shifting the mix. Over time, we expect a larger share of demand to come from channels we don't have to bid for, including pharmaceutical manufacturers, employers, insurers, Medicare, national strategic partners, patient referrals, and cross-care offerings to our existing population. This shift is already underway.

The XYOSTED collaboration reflects how pharmaceutical manufacturers are beginning to use LifeMD as infrastructure. We combine national patient acquisition, affiliated clinical care, benefits navigation, pharmacy fulfillment, and ongoing patient support in a single platform. Employers are looking to us to provide high-quality specialty care with transparent economics. Insurance allows patients to use benefits they already value, and each additional service we make available to an existing patient gives us an opportunity to grow without paying to reacquire that relationship from scratch. I want to be realistic about pace. Paid media will remain our largest acquisition channel in the near term. The acquisition pressure we experienced early in the quarter reinforced the importance of moving faster in this direction. Early results support that decision.

Since mid-June, acquisition costs have moderated across the business, and the unit economics in Rex MD are among the strongest we have seen in a long time. In our weight management business, recent customer acquisition costs are approximately 50% lower than their peak in June of this year. We will continue to use paid media, but selectively and only where the returns justify it. Our goal is not to eliminate performance marketing. It is to surround it with multiple additional demand channels so that growth becomes more diversified, less volatile, and more valuable. Now I'll turn to our weight management business. Weight management remains one of the largest opportunities in healthcare and one of the most important businesses inside LifeMD. The second quarter was highly competitive, particularly in the market for branded GLP-1 care. Early in the quarter, acquisition costs were elevated.

We also saw major competitors reduce introductory pricing, which affected conversion and made our offering less competitive at the top of the funnel. We responded by lowering the introductory price of our branded GLP-1 program to $39. That decision reduced upfront cash collection and contributed to the EBITDA shortfall in the quarter. It also materially improved the attraction of the program and changed the composition of the patients entering the program. Before the pricing change, approximately 25% of new weight management patients year to date were selecting multi-month packages. Following the change, approximately 85% selected multi-month packages. That matters because longer duration patients generally provide more time to deliver meaningful clinical outcomes, demonstrate stronger retention, and create higher lifetime value.

Our internal models currently indicate that the return on advertising investment from these cohorts can exceed that of the prior higher upfront price offering, despite the lower first-month cash collection. We are also deliberately building around branded FDA-approved therapies and the clinical care surrounding them. I have been candid that the regulatory environment for compounded GLP-1 medications evolved differently than I initially expected. I remain completely convinced that building around branded medicines, serious longitudinal care, insurance access, and manufacturer relationships is the right long-term strategy. The branded market is difficult today because patients can still find lower-priced, mass-compounded alternatives from hundreds of direct marketing companies. We believe that market structure will continue to evolve and that the platforms that endure will be those that offer trusted, FDA-approved medications, appropriate clinical oversight, affordable access, benefit support, and ongoing cardiometabolic care, not simply the lowest promotional price.

That is the future LifeMD is built for. We ended the quarter with approximately 108,000 weight management patients. We have deep integrations with LillyDirect and NovoCare, a growing insurance and Medicare footprint, a national affiliated medical group, pharmacy capabilities, and the infrastructure to support patients as the therapeutic market expands into oral formulations and next generation medicines such as CagriSema and Retatrutide. We believe the GLP-1 category remains in its early stages. The opportunity is large, and it will continue to evolve, and we are building LifeMD to participate across that broader market rather than around any single product. The philosophy behind our weight management business, longitudinal care, rather than a single transaction, applies across our platform. Nowhere is that more evident than in women's health, which remains one of the programs I am most proud of and most excited about.