MEDIFAST INC

Good afternoon and welcome to MetaFast Third Quarter 2020 Earnings Conference Call.

On the call with me today are Dan Chard, Chief Executive Officer, and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the period in September 30, 2020, that went out this afternoon at approximately 4.05 p.m. Eastern Time. If you've not received the release, it is available on the Investor Relations portion of MetaFast's website at www.metafastinc.com. The call is being webcast, and a replay will be available on the company's website. Before we begin, we would like to remind everyone that the 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. MetaFast assumes no obligation to update any forward-looking projections that may be made in today's release or call. All the forward-looking statements contained herein speak only as of the date of this call. And with that, I'd like to turn the call over to MetaFast Chief Executive Officer, Dan Chard.

Thank you, Scott, and good afternoon to everyone joining us. Thank you for taking time to be with us today. On the call with me today is Jim Maloney, who is now a little more than three months into his role as our Chief Financial Officer. After I've provided some updates on our business performance over the course of the last quarter, Jim will review the Q3 financial results in more detail. We'll then open up the call to take your questions. I'm pleased to say that despite the wider issues felt by the retail sector during the global pandemic, Medifast has seen strong acceleration and growth during the third quarter. Revenue increased 42.8 percent to $271.5 million, and earnings per diluted share increased 120.5 percent to $2.91. This growth was driven by significant year-over-year and sequential improvements in the number of active earning coaches which grew to 42,100 independent OPTAVIA coaches in the third quarter, a new record level. Productivity proactive earning coach also increased sequentially to a record level of $6,329, driven by an increase in both the number of clients supported by each coach, as well as an increase in average client spend versus Q2. This important shift forward in coach productivity comes as a direct consequence of our continued focus on building tools, programs, and processes that allow coaches to be as efficient as possible, as well as the relevance of our health and wellness offer in an environment where consumers are looking for lasting solutions to their health and wellness needs. While the COVID-19 pandemic continues to cause economic and social uncertainty for businesses, we feel confident in our ability to drive long-term sustainable growth to deliver on our mission to offer the world lifelong transformation, one healthy habit at a time. Since the end of 2019, we have taken a number of important steps to accelerate the growth of our business. Coupled with some quick responses to the pandemic, these initiatives are now delivering meaningful progress, which is represented in the numbers we have announced today. Importantly, we feel that the adjustment we've made to our business over the last two quarters has created some important learnings which are now being used to further optimize our ability to deliver against our long-term growth vision. The company's focus continues to be on supporting our growing community of Optivia coaches as they develop and focus on the four competencies that drive our business success, namely attracting new clients, supporting clients on the optimal weight five-in-one plan, sponsoring new coaches, and developing coach leaders. The specific adjustments we made to our business during the second and third quarters consisted of supporting coach-led training, a compelling incentive structure, and a refined approach to how our coaches are leveraging social media. With the new programming in place, our community of coach leaders drove sustainable gains in both new clients and new coaches. A deep dive into this new cohort of clients shows us that we have tapped into a new group of consumers that may not have previously tried our products. but whose behavior is entirely consistent with our existing core client base as measured by retention and lifetime value. We're also very encouraged to see the higher levels of coach conversion from this new client cohort. We're excited by these trends and are looking forward to build on their success in the coming months ahead. The health and focus of our coaching client community remains strong. with our coaches highly engaged and enthusiastic about the opportunity that lies ahead for us all. We just returned from our Global Alignment Summit in Sundance, Utah, where we met with top leaders to discuss plans for the upcoming year. I believe that the company and the field is more aligned around our mission than at any point in our history, and I'm enthusiastic about the prospects of driving operational and transformational success in 2021. With a refined coach-initiated training structure, robust level of client acquisition, strong trends in coach conversion, and new insights around how to leverage new incentive and promotional structure, I believe we're well positioned to drive continued growth. As we look to take advantage of the opportunities to scale over the next few years, it's important that we continue to build our technology, our manufacturing and distribution operational platform, in order to give us the infrastructure to power our growth. With that in mind, We began taking deliberate steps earlier this year to ensure that we have the necessary runway to continue expansion. Like many similar businesses, we made some proactive moves at the start of the pandemic to ensure that we would be able to handle both changes in demand and changes in working practices. We prioritized production to our highest volume products, limiting our skew assortment to ensure that we would be able to meet the product demand across the core items and mitigate the risk of disruption to our supply chain. This approach resulted in uncharacteristic out-of-stocks in our less-prominent SKUs. While this created some headwinds to our client experience, this move also accelerated some of our long-term efforts to consolidate our MetaFast brand and products to create deeper focus around our OptaVIA brand. Concurrently, we have been accelerating our long-term supply chain initiatives to ensure that we create the bandwidth to handle our anticipated growth over the next several years. Specifically, we have bolstered our management capabilities in the space with the addition of Lauren Walker as our new head of global supply chain operations. Lauren is a seasoned supply chain executive with critical experience in driving long-term sustainable growth in both direct sales and fast-moving consumer goods businesses. She most recently served as chief supply chain officers at Young Living Essential Oils, overseeing the company's integrated supply chain, as well as engineering, enterprise project management, and new market expansion. Prior to Young Living, she held several roles with Amway Corporation, most recently serving as vice president manufacturing and technical support organization. She also held various positions at industry-leading companies, including Church & Dwight, Johnson & Johnson, and Procter & Gamble. Lauren is an exciting addition to the team, and we are already seeing meaningful benefits from her involvement within the first two months of her tenure. Next, we have made intentional moves to increase our capacity in both powder and bar manufacturing as well as distribution. We have done this through relationships with an expanding network of co-manufacturers whose facilities have been qualified to manufacture our products. This new manufacturing capability came online in October and will continue to scale as we move into the next year, ultimately more than doubling our current manufacturing capacity by the end of 2021. We're also scaling our distribution capability to match our manufacturing capacity. In addition to our supply chain enhancements, we continue to focus on our technology investment and capability. At the beginning of the year, we announced the opening of our new technology center in Utah, to further enhance our coaching client support capabilities and strengthen our growth platform. We have now occupied the new space and are building out our capabilities amidst the challenges of the pandemic. The key initiatives from our technology team have included the alpha testing of two new apps focused on coaches and clients. The first, OPTAVIA Coach Connect, is an app designed to further increase the productivity of our coaches by giving them access customized tools to manage their Optivia coaching business. Testing is now complete, and we will launch the beta version of the app in the United States in the first quarter of 2021. The second is the Optivia Client App, which is focused on creating easy access to meal planning tools to help improve the client's experience on the optimal weight 5-in-1 plan. Alpha testing is also complete, and we will launch the beta version of this app in the United States in the first quarter. During the quarter, we also completed the deployment of a new cloud-based telephony system designed to allow us to quickly scale our call center capability around the world to support our growing community of coaches and clients. As a reminder, we currently contract with a partner to provide call center support through the call centers in the United States, the Philippines, and Colombia. Each of these recent technology enhancements followed the successful implementation of our new ERP system during the second quarter of this year. Whether in supply chain, technology, programming, or people, we're consistently investing in future growth, all while driving strong momentum and margin improvement despite the inherent challenges of the COVID-19 pandemic. Our team, including our loyal independent coaches and clients, continue to successfully adapt to the ever-changing environment, and we're proud to be successfully helping clients achieve lifelong transformation, one healthy habit at a time, during this unique period in society as a whole. Our focus continues to be on growing the number of individuals who are seeking greater health and wellness and providing a holistic approach to achieving greater health in their daily lives. We believe we can effectively and efficiently reach our target audience through our community of Optivea coaches, who are increasingly leveraging social media channels to relate their success with the OPTAVIA Habits of Health system. We benefit from an increased societal focus on the importance of health and wellness and a powerful coach-powered system that is clinically proven to drive improved results. Our growth vision is to achieve long-term sustainable growth in our revenue in the mid-teens by penetrating the large addressable market in the United States and then continuing our expansion in Asia Pacific markets and ultimately developing other large markets throughout the world in the years to come. Before I turn the call over to Jim, let me know that our commitment to lifelong transformation is not just in our work with coaches and clients, but also through our active support of the communities in which we live and work. We recently executed our week of service program, supporting living classrooms and their work to help young people achieve their full potential. and also continue to support No Kid Hungry, particularly through an initiative at our recent OPTAVIA Together Live event. This is a business that is focused on changing the lives of the many, not the few, and I'm proud of the work that the company, our employees, and our coach community are doing to create opportunities for people from all walks of life to deliver the best possible version of themselves in whatever way possible. Let me now turn the call over to Jim Maloney, who will walk you through the financial results. Jim?