Greetings, and welcome to the Medifast Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Steven Zenker, VP of Investor Relations. Thank you, Steven. You may begin.

Good afternoon, and welcome to Medifast's Second 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 second quarter ended June 30, 2025, that 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 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 statements. 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's Chairman and Chief Executive Officer, Dan Chard.

Thank you, Steve, and good afternoon, everyone. We're glad to be here with you today to share some updates on our progress over the second quarter of 2025. We continue to work diligently to transform our business and capitalize on the significant opportunities in helping people achieve their health goals, especially as it relates to weight loss and optimal metabolic health. We are also keenly focused on coach productivity and coach growth through targeted initiatives that aim to enhance our offer, support coach business success and help us maintain a strong balance sheet. The rapid adoption of GLP-1 medications has brought unprecedented attention to the issue of obesity and the critical role that weight plays in overall health. GLP-1s can be a powerful appetite suppressant, helping to turn down the food noise, but studies are in agreement that medication on its own does not help users develop the lifestyle changes necessary to achieve and sustain optimal metabolic health, which includes preserving lean mass. Research indicates that without adopting sustainable lifestyle changes, individuals who lose weight using GLP-1 medications often experience loss of lean mass, which includes muscle of up to 40% of total weight loss and tend to regain most of the weight back within a year after discontinuing use of the drug. This is where our programs are built to make a difference. Each program is developed to guide individuals in adopting and maintaining healthy habits that not only promote weight loss, but also maximize fat burn while preserving lean mass. In fact, a recent study of randomized clinical trial data showed that clients using the OPTAVIA 5 & 1 Plan maintained 98% of lean mass during weight loss. This is due to a holistic nutrition and lifestyle approach to ensure lean mass support during the active weight loss…

Thank you, Dan. Good afternoon, everyone. As Dan mentioned earlier, second quarter 2025 results for both revenue and EPS were above our guidance ranges. Revenue for the second quarter was $105.6 million, a decrease of 37.4% versus the year earlier period, primarily due to a decrease in the number of active earning OPTAVIA coaches. We ended the quarter with approximately 22,800 active earning OPTAVIA coaches, a decrease of 32.7% from the second quarter of 2024. Average revenue per active earning OPTAVIA Coach for the second quarter was $4,630, a year-over-year decrease of 6.9%, primarily driven by continued pressure on client acquisition and timing differences in promotional activity. In 2024, promotional activity occurred in late Q1 into early Q2, while in 2025, promotional activity only occurred in Q1. Coach productivity was actually up sequentially for the second consecutive quarter and the percentage decline improved year-over-year from Q2 2024, which decreased 10.9%. Gross profit decreased 37.9% year-over-year to $76.6 million driven by lower sales volumes. Gross profit margin for the current quarter was 72.6%, which decreased 60 basis points compared to the year earlier period. SG&A expense was down 40.8% year-over- year to $77.7 million, primarily due to $24.3 million decrease in OPTAVIA coach compensation on fewer active earning coaches and lower volumes. Additionally, the company incurred costs in the second quarter of 2024 that did not recur in the second quarter of 2025, including $12.5 million for supply chain optimization, $3 million for cancellation of OPTAVIA conventions in the future years and $2 million for the company's collaboration with LifeMD. SG&A as a percentage of revenue decreased 430 basis points primarily due to approximately 740 basis points for supply chain optimization initiatives, 180 basis points for cancellation of OPTAVIA Convention incurred in the second quarter of 2024 that did not recur…

[Operator Instructions] Our first question comes from the line of Jim Salera with Stephens.

I wanted to start off maybe just with some thoughts around the coach composition. Just as the landscape changes in your selling format, the value proposition for the OPTAVIA portfolio more aligns closely with GLP-1. Have you seen a significant change in your composition of coaches and kind of a different group of coaches replacing some of the old ones that are more focused on GLP-1 as the messaging? Or do you have kind of a split between legacy coaches that still focus on the traditional OPTAVIA messaging and then a new segment of coaches that focus on the more GLP-1? Just any thoughts on kind of how the coaches are adapting to this changing landscape.

Yes, Jim, let me take that one. And also, I'll introduce Nick Johnson, who has been on this call before, who's our Chief Field Operations Officer. I'll make a couple of comments and then ask him to address that point specifically because I think one of the announcements we made kind of drives towards an important part of what we're -- how we're working with our coaches and how we're changing the business to help operate in this new environment. So -- you heard us talk a little bit about the new study on clinical research that we're increasing our focus on metabolic health because it's an upstream driver of many of the age-related health conditions, including overweight and obesity. So this is an important move for us, which partly because it addresses something that affects over 90% of Americans who are experiencing some kind of metabolic dysfunction. So when metabolic health is out of balance, it can trigger a cascade of challenges, that's millions of adults face today. And it's an important thing because it's tied also to one of the things that is becoming more challenged in an environment that has a growing number of people who are using GLP-1 drugs. We now have 60% of our coaches who are supporting at least one client who has used the GLP-1 drug and roughly 23% of our client base also reflects people who have either used or are using GLP-1 drugs. But most importantly, and then I'll turn it over to Nick to ask the question that you asked is that as we go forward, we'll be announcing some additional findings related to that new research to further reinforce this direction. And that will affect both product and the way our coaches approach clients in terms of reversing the impact of metabolic dysfunction. But I'll turn it to Nick to answer the specific question that you asked.

Thanks, Dan. And thanks, Jim, for the question. Yes, an important one. I mean productivity for our new coaches is important because this leads to the creation of the next generation of leaders and ultimately reigniting the flywheel of our business. So we've done a lot to focus specifically on supporting those folks over the last couple of quarters. Important to note, I mean, this kind of is obvious, but coach leaders have evolved their training to the new environment. So new coaches only know a world with GLP-1s in them. So they're very familiar with it. Coach leadership talks about it, trains to it, understands them and understands what they do and do not do, understands where they fall short in the realm of metabolic health, specifically around some of those outages that Dan alluded to that we'll be talking about more. The training specifically includes those who are on GLP-1s currently and also those who are coming off of GLP-1s, how do they transition. So half of our coaches have supported someone on GLP-1 medication, and like Dan said earlier, 25% of coaches have used a GLP-1 medication themselves. So we see that transition happening.

And if I can ask a follow-up just on ASCEND. In the past, you guys have talked about that as being particularly targeted towards the kind of GLP-1 use case, pairing with somebody who's utilizing GLP-1 drugs. Can you give us an update on if you're able to share ASCEND sales as a percentage of total or just what you're seeing there in terms of engagement and how that's been rolling out.

Yes, it continues to meet expectations. The product as it was developed, as you pointed out, was to perform 2 functions. One was to support clients who are using a GLP-1 drug. And the other very important role is to help those who are transitioning off the 5 & 1 program to into a maintenance phase. So it supports both of those roles. What we're seeing with our coaches and their clients is there's a lot of success in actually having them clients use the 501 program while they're on a GLP-1 regimen. And then transitioning to ASCEND later on. And that's true largely because the 5 & 1 provides a little bit more protein and to overall calories at a time when GLP-1 clients need to have support in maintaining that lean body mass that clinical research, that I mentioned earlier, is related to that critical number. But overall, we see both the ASCEND line and its continued performance as well as the ACTIVE line, which is tied to clients who are exercising and need to maintain muscle as critical parts to our overall programs.

Great. And then maybe just one last one. I know in the past, we had tested some company-supported marketing outside of the traditional coach-led client acquisition we [ pared ] that back a little bit. Just any thoughts on how company-supported marketing is going to play in kind of driving consumer engagement going forward?

Yes. This has been an important part of what we've been doing. What we found is those programs are highly effective at bringing back customers or clients who have been on the OPTAVIA program before. But we've found consistently that our coaches sharing their own personal messages is much more effective in bringing on new clients. It's also far more efficient for the company. So while we'll continue to strategically use advertising dollars, largely to effect and influence search engine management, search engine optimization. We will continue to look to our coaches to share their personal stories of health transformation and as we go forward in the future and have a more pared back budget related to company-led acquisition.

Thank you. There are no further questions at this time. I'd like to pass the call back over to Dan Chard for any closing remarks.

I'd like to thank everyone for your time today. This is an important moment for our business as we continue to transform to meet the pressing need of today's health and wellness landscape, with 93% of adults facing some form of metabolic dysfunction, the opportunity to help millions of people protect their health and sustain their weight loss has never been greater. We're building this business for the long term with a science-backed approach, a community of experienced coaches and an offering that is designed to meet clients wherever they are in their journey. We'll be participating in several investor conferences this fall, including the Canaccord Genuity Annual Growth Conference on August 13. We look forward to continuing the conversation. Thanks again, and we appreciate your continued interest in Medifast.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.