Greetings. And welcome to the Medifast First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Steven Zenker, Vice President, Investor Relations. Steven, please go ahead.

Good afternoon. And welcome to Medifast’s first quarter 2025 earnings conference call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer; and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the first quarter ended March 31, 2025. It went out this afternoon at approximately 4.05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast’s website at www.medifastinc.com. This call is being webcast and a replay will also be available on the company’s website. Before we begin, we would like to remind everyone that today’s prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate, and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statement. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast assumes no obligation to update any forward-looking statements that may be made in today’s release or call. Now, I would like to turn the call over to Medifast Chairman and Chief Executive Officer, Dan Chard.

Thank you, Steve. Good afternoon, everyone, and thank you for joining us today. There’s no question that we are operating in a time of tremendous opportunity. The health and wellness space, particularly around weight loss and weight management, is evolving rapidly, and we believe Medifast is well-positioned to take advantage. Scientific research has shown that use of GLP-1 medications can result in up to 40% of weight loss coming from muscle mass, equivalent to a decade’s worth of muscle loss within just 12 months to 18 months. Furthermore, for 88% of patients, GLP-1 medications do not fully support their achieving a healthy weight. We believe these findings reinforce the importance of supporting any health journey with a straightforward health and wellness lifestyle solution to achieve long-term health goals. This is relevant for those using weight loss medications, as well as for those pursuing weight loss and improved health without the use of medications. In either case, Medifast’s OPTAVIA program helps preserve lean muscle and delivers healthier outcomes through healthy habits, nutrition and coaching for those seeking lasting health outcomes. At the same time, independent research that we have commissioned indicated that 83% of people looking to lose weight lack confidence in transitioning to a long-term healthy lifestyle. This is precisely the strength of our OPTAVIA program, which offers a holistic approach to weight loss and healthier living. Our offering combines science-backed products, personalized nutrition plans, the support of a dedicated OPTAVIA coach and integration into a like-minded community. Additionally, where appropriate, we provide access to weight loss medications through our collaboration with LifeMD. This integrated solution gives people the tools, accountability and encouragement they need to learn how to make a healthy lifestyle second nature, lose weight, keep it off and simplify a complex health journey. Coaches play a vital…

Thank you, Dan. Good afternoon, everyone. As Dan mentioned, first quarter 2025 results for both revenue and EPS were within our guidance ranges. Revenue for the first quarter was $115.7 million, a decrease of 33.8% versus the year earlier, primarily due to a decrease in the number of active earning OPTAVIA coaches. We ended the quarter with approximately 25,400 active earning OPTAVIA coaches, a decrease of 32.8% from the first quarter of 2024. As Dan mentioned, we continue to see lower year-over-year declines in revenue per active earning coach. Average revenue per active earning OPTAVIA coach for the first quarter was $4,556, a year-over-year decrease of 1.4% compared to a year-over-year decrease of 22.8% during Q1 of 2024. This moderation is being driven in part by increased productivity of newer coach cohorts, which are exhibiting new customer growth ahead of last year. Gross profit decreased 33.8% year-over-year to $84.2 million, driven by lower sales volumes. Gross profit margin for the current quarter was 72.8%, which was consistent with the year-earlier period. SG&A expense was down 28.4% year-over-year to $85.5 million, primarily due to a $22.4 million decrease in OPTAVIA coach compensation on lower volume, $3 million on market research and investment costs related to medically supported weight loss, which were incurred during the first quarter of 2024 that did not occur in the current quarter, a $2.5 million decrease in employee compensation and a $1.3 million decrease in credit card fees. SG&A, as a percentage of revenue, increased 560 basis points, primarily due to approximately 440 basis points of loss of leverage of fixed costs due to lower sales volumes and 200 basis points of company-led marketing efforts, primarily due to lower sales volumes. These increases were partially offset by 170 basis points of market research and investment costs related…

Thank you. [Operator Instructions] Our first question is from Jim Salera from Stephens. Your line is now live.

Guys, good afternoon. Thanks for taking our question. I’m going to start off on the second quarter topline guidance. If we look at where the kind of the rate of decline for the topline over the past four quarters, it’s been improving every quarter and that the rate of the year-over-year sales decline has slowed. But then if I just take the midpoint of the guidance, it’s right around 95% [ph], that would actually imply an acceleration in the year-over-year rate of decline. So get any color around what’s going on there in the second quarter and why that shouldn’t continue the trend we’ve seen over the prior four quarters?

Thanks Jim. I -- to address that question right on, when you look at the midpoint of the range and looking at what you’re exactly talking about, it could indicate an acceleration. However, you have to take into consideration the timing of promotions that that the company has done over Q1 of this year versus Q1 what we’re planning on doing and what we did last year. So in Q1 of this year, we did run a promotion that did quite well. Dan mentioned it in in the prepared remarks, it is the first time we saw new coaches actually see a year-over-year improvement and we haven’t seen that in about three years. And that was due to -- that was really the first time we’ve seen those improvements in the business when we ran a promotion and it really incentivized the field to focus on acquiring new customers and also acquiring and sponsoring new coaches. So that worked very well. So when you run a promotion like that in a quarter, it does have impacts to the next quarter. So last year, we ran a -- we had a promotion in Q2, and in this year, in our guidance, we’re not really planning on having a promotion. That’s not to say that we could not change our minds, but what our guidance is showing is that we’re not going to be doing such things in this year. So hopefully that addresses your question. That -- and I guess the last thing I wanted to say on that is, that doesn’t mean the following quarters would have that same accelerated trend like you’re referring to.

Hey, Jim. Let me just...

Okay.

Oh! Go ahead and finish your question, then I just have a couple comments.

No. No. Go ahead.

No. Finish asking your question to Jim, and then I have just a couple points to make.

So essentially, we should see Q2 as the low point in terms of year-over-year rate of decline, like it should be the highest year-over-year rate of decline for the year, if I’m interpreting what you’re saying correctly?

Well, I can’t really go into that since we’re not providing guidance, but that’s the impact, what you’re seeing in Q2. But that -- I wouldn’t lead that into, if you’re modeling it, that that trend will continue. That’s really all I can say on that point.

Okay. That’s fair.

And, Jim, I wanted to make you aware, as well as anyone else who’s joining the call for Q&A, that we have joining us today for the Q&A session, Nick Johnson, as well. Some of you have met Nick before, but Nick is our Chief Field Operations Officer and President of OPTAVIA. And Nick is the one who works closely with our now 25,000 coaches across the country. And we wanted specifically for him to be here so he could respond to any specific questions you have about progress and programs that we’re making, the progress with the programs we’re making that with that -- we’re introducing to our coaches, as well as client acquisition productivity. Jim already touched on one of the important bright spots that we’re talking about, that we’re seeing in the field, which is year-over-year improvement in new coaches. I think the other thing we’ve talked about over the past several quarters, which continues to be an important trend, is the improvement of productivity, which continues to moderate to this most recent quarter being down 1.4% year-over-year. But that, as we’ve said before, is a reflection of what we believe is a trend in improving ability for our coaches to acquire new clients. And also, a key indicator, which has been in the past, as we’ve analyzed the business for the last 15 years, has been correlated with what typically has been an improvement in year-over-year active earning coach numbers. So, I’ll let you ask any specific questions, but I want to make sure that we’ll give a few minutes or not -- just a brief opportunity for Nick to talk about some of these programs that are helping us see that improvement in year-over-year -- improvement in coach productivity. So, Nick, just take a minute to reflect on what’s happening in the field.

Yeah. Thanks, Dan, and thanks, Jim. So, if we look at those new cohorts as a bright spot that we’ve been talking about in the prepared remarks, it really comes down to four factors. Number one, coach leaders have evolved their trainings to the new environment, which is key. Those new coaches that have been brought in in the first quarter really only have experienced the GLP-1 environment. And as Dan said before, they’re experiencing productivity rates that are consistent with even high growth periods in the past. Second point here is the training has included support for those on and off GLP-1s. Half of our coaches, in fact, have supported someone on a GLP-1 already. 25% of our coaches have been on a GLP-1 medication. So and the third point here is growth in new coaches and growth in that new coach productivity, looking at it year-over-year. A lot of that has to do with some of the programming that we enacted in the first quarter. So these are incentives that are designed to both drive client acquisition, which improves productivity and it drives coach sponsoring. So as they’re getting activated in their first few months acquiring new clients, then they’re on to the next step, which is sponsoring coaches and becoming a mentoring coach or a business coach. So those incentives for coach leaders to help their new clients and coaches win in their early months is key to their progress through the compensation plan As we talked about before, we did continue to pulse the client acquisition side through promotions and we did that through our Spring into Health program, which assisted in driving productivity for new coaches as well, pulling up those averages as we look year-over-year.

I appreciate that. Maybe one question for you and then either Jim or Dan. So do you have a sense of the new coaches, how many of them personally have utilized GLP-1 and is that new cohort one that are kind of over-indexing to the portion of your coaches that utilize GLP-1? And then maybe a tag-on question to that. I think you guys said on the last call in January, the ASCEND product line was just under like 20% of orders. Is there any update on that and how that progressed through the quarter and where we are today?

I can comment on that specific question with respect to how we’re looking at those new coaches coming in. We haven’t necessarily done that segmentation, but that is something that we could likely provide through Jim following the call. And then I’ll let Jim respond to the ASCEND question.

Yes. So on the ASCEND question, Jim is, we mentioned last call that we were right in line with our expectations with the ASCEND line and it continues -- that trend continued all the way through Q1. And we’re at -- at the end of Q1 we’re basically in the mid-teens for the ASCEND line for, as the number of orders as a percent. So it’s right in line with our expectations.

Okay. And then maybe one last question for me. If I think about the shift in focus on the company-led marketing and kind of pulling back on the company-led marketing and investing back into the coaches, how should we think about that as impacting SG&A? I mean, does that mean that you’re pulling, do you say pulling back like you’re not doing any company-led marketing anymore or it’s just a reduction in the amount of, kind of help us size up what that impact might look like on SG&A as we think about the progression there through the remainder of the year?

Yeah. So, when you’re doing your modeling, Jim, look, we’re doing things with the company-led, as we mentioned in our prepared remarks. But remember that’s, as a percent of revenue, that was not that large of a percent as compared to the compensation we pay our coaches. And we look at those and we look at the driver of which one is, has the better customer acquisition cost. We looked at that, when we first started piloting it through Q1 and what we’ve determined is reactivation works quite well with company-led. So, we will continue to do that. So there will be some pullback, but it’s not going to be that dramatic in your modeling.

Okay. Sounds good. I will pass it on.

Thank you. Next question is coming from Doug Lane from Water Tower Research. Your line is now live.

Thanks. Good afternoon, everybody. Nick, glad you could be on the call. I think what I’d like to get maybe from you, if I could, is some perspective on the impact that GLP-1 has had on your coaching community. I mean, I get all the opportunities that you mentioned with the weight loss and gaining it back after you go off the drug, but it also makes it controversial. So, I wondered if the controversy of adding GLP-1 into the equation has had an impact on your coaching community?

Well, thanks, Doug, for the question. Certainly, the impact of the GLP-1 environment has been reflected in what we’ve been seeing throughout the last couple of years. It really, for us, is a training opportunity. It’s not necessarily a controversial topic in and of itself. It’s simply a disruption that causes us to have to retrain around the new environment specifically. And as you know, it takes time for a training around a new way of looking at the market and looking at your offering, as it takes time to take hold and start to duplicate its scale inside of the network. So, the disruption really has an effect on the training approach and adjusting our sales to what the environment is giving us. But also, we continue to see bright spots, as we said in the prepared remarks, as Dan said in the prepared remarks, around what our new coaches are experiencing today. They only know the GLP-1 environment. They only know that the GLP-1s do exist. So, it’s not controversial for them. They’re still offering what we’ve historically offered in our core and then delivering beyond that from a lifestyle transformation perspective. So, that’s how I would respond to that question, Doug. Dan, anything from your side?

Yeah. I think it’s important, Doug, and I think you’re kind of getting at this. I mean, it’s now been a little over two years since we’ve started to see GLP-1 drugs have a big impact across the country and specifically among what had been a pretty stable group of clients who were using OPTAVIA for their solution. But, initially, the GLP-1 drugs were positioned as a solution to a problem that had been challenging for people who are struggling with overweightness or obesity. And what has turned out and increasingly clear is that it’s a tool to help, but not a solution for it. I mean, consistently, the drugs were prescribed by physicians along with lifestyle, but most either didn’t know how to pursue a healthy lifestyle or what that actually meant or chose to take the easy route and just use them as an appetite suppressant. In both cases, the challenges that were created with the GLP-1 drugs have become more apparent today than they were two years ago or at the time in between, which is when somebody uses a GLP-1 drug without modifying their lifestyle, it has a very dramatic impact on their lean muscle mass. So you can lose up to 40% of your lean muscle mass or the weight lost in lean muscle mass. And the other thing that -- the other part of the GLP-1 regimen that was not understood until more recently is that most are not interested in staying on a drug for the rest of their lives. And as a result, 74% of GLP weight -- GLP-1 patients stop taking the drug after one year and that those who stop taking it unless they engage in a lifestyle modification regain the weight back within the first year. And so what we are seeing with our coaches now that they have an understanding of that is an ability to bring in some of those what we refer to as off -- GLP off-ramp prospective clients and have them engage in the OPTAVIA program. And that’s what’s driving some of those statistics that we mentioned in the prepared remarks, which are that roughly 50% of our coaches now have had experience in coaching a GLP-1 client, so someone who is on or who has been on a GLP-1 drug. And also 25% of our coaches themselves have either tried or are using a GLP-1 drug. So we’re seeing this as a changing environment with an increasing opportunity for our coaches to support three segments, those who don’t want a GLP-1 drug to be part of their weight loss or health regimen, those who are transitioning off, so that’s 74%, and those who are on and want support with their lifestyle program that works with it. So it’s a less kind of, there are fewer questions now and more answers than we had previously, and our coaches are starting to perform accordingly.

It’s very helpful. That’s good color. I mean, I get it. The landscape shifted dramatically with the introduction of GLP-1s, and so you’ve adopted, and so now you’re coaching. Your coaches are shifting as well in their ability to sell to all three of those clientele. But this is a lot of products now. Just out of curiosity, how much is a monthly cost of being fully on the GLP-1 and the supporting nutritional programs?

Well, actually, the majority of the clients who are on a GLP-1 drug or have transitioned off and want to continue their weight loss, the majority are using our 5-in-1 programs or Classic programs. Some of them also add the ACTIVE line, which is not a significant cost, but think about the monthly cost of being on the 5-in-1 program is roughly $400. If you break that down into how much it is per meal, it’s actually quite reasonable, because that’s feeding them 80% of their food in a given day. So five out of their six meals is enough to be a program. So the change has not been dramatic, and the impact and the benefits of adding either the ACTIVE product or transitioning to the ASCEND line is actually very much in line with what they have paid in the past.

Okay. Have you talked about what LifeMD charges for the GLP-1 monthly?

LifeMD is going, there’s a subscription cost to use their telehealth service, which is less than $20, I think.

Yes. A month, yeah.

A month, yeah.

Yeah.

And then they have a variety of price plans for their products, but the majority of people now, and I think this is true of our coaches who use them as well, are covered through their insurance. And most of our coaches or the clients of our coaches who are using a GLP-1 drug are using their primary care physician and their own insurance. So we have about -- we’ll just say a majority who are using their own physician services. But we have a complete offer that allows us to use LifeMD where necessary.

Okay. That’s helpful. Well, it’s good to hear about the new coach cohorts and hopefully that bodes well for 2026 and beyond. Thank you.

Thanks, Doug.

Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over for any further closing comments.

Thank you. I just wanted to say that we appreciate your questions and for the opportunity to further discuss the progress in our business transformation. And as we adjust our model and train our coaches and continue to refine our offer, we focus -- we’re focusing on better meeting the needs of customers in this changing environment, but continue to emphasize that today we understand in a far deeper way how our lifestyle program integrates with those who are on GLP-1 drugs transitioning off or those who choose not to use them. So we look forward to continuing our efforts to improve productivity as we move forward and we’ll provide you with additional details regarding our progress in our next call or for those of you who are participating in investor conferences that we’ll be on, we will see you there as well. Thank you, everyone, and have a great day.

Thank you. That does conclude today’s teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.