MEDIFAST INC

Greetings and welcome to the MetaFast fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stephen Zanker, Vice President, Investor Relations. Thank you, Stephen. You may begin.

Good afternoon, and welcome to Medifast's fourth quarter 2023 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 quarter ended December 31st, 2023 that went out this afternoon at approximately 4.05 Eastern Time. If you have not received the release, It is available on the investor relations portion of MetaFast's website at www.metafastinc.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. And with that, I would like to turn the call over to Medifast's Chairman and Chief Executive Officer, Dan Chard.

Thanks, Steve, and thanks to everyone for joining us on today's call. With me is Jim Maloney, Medifast's Chief Financial Officer. I'll kick off with some comments on the company's work to drive business transformation and empower sustainable growth at Medifast and an update on how we are delivering against our objectives. I'll then hand things over to Jim to walk through our Q4 and full year financials. Over the course of the past 40 years, Medifast has established itself as an important player in the U.S. health and wellness landscape. The company is consistently adapted to shifting consumer behavior, maintaining and building its relevance to ensure that it stays at the heart of the wellness journey of customers everywhere. Now, Medifest is embarking on its biggest and most important transformation to date, taking bold steps to forge a new future as a diversified health and wellness company with significantly increased growth opportunities. While we historically focused on the $8 billion structured weight management segment of the total $230 billion health and wellness market, Our new focus includes the medically supported weight management and sports nutrition segments. Together, we expect these to more than quadruple the size of our target base. The weight loss market is expected to grow significantly over the next six years, with GLP-1 medications alone projected to reach up to $100 billion by 2030, according to several Wall Street firms. Several factors are driving this significant growth projection, including further clinical development that improves efficacy and ease of administration, increasing insurance coverage, and changes in pricing. At the end of last year, we announced a new strategic collaboration with leading telehealth provider, LifeMD. Through this collaboration, our customers will have access to both our personalized habit-based coach-guided approach along with the medical expertise of board-certified affiliated LifeMD clinicians. This offering extends beyond the initial effort to lose weight, creating a pathway to a healthy lifestyle as a permanent part of each individual's health and wellness journey. This comprehensive wellness solution will be available to all people in the United States looking to make a healthy lifestyle second nature. Independent research commissioned by Medifast last year clearly showed that people who are interested in medical weight loss solutions are also looking for support to establish an overall healthy lifestyle. 96% of those surveys recognized that lifestyle changes are needed for weight loss and maintenance, yet only 17% are confident that they can manage on their own. More than half of those surveyed indicated that they are very concerned with the prospect of being on a weight loss medication for the rest of their lives. GLP-1 products are not seen as a lifelong commitment by most, but instead viewed as providing a catalyst to establish long-term health and well-being. With GLP-1 medications being prescribed for weight loss alongside lifestyle modifications as mandated by FDA requirements, and some health plans requiring a period of lifestyle modification prior to coverage of these medications, OPTAVIA programs are well positioned to meet these needs. They provide a holistic solution to achieving and maintaining a healthy lifestyle. While this initiative is a transformative step for our model of care, what is not changing is the role and importance of our incredible coach community. Coaches remain firmly at the center of our efforts. All of our customers, work with coaches to make a healthy lifestyle second nature, whether they are just starting their health journey with the support of GLP-1 medications, transitioning off those medications, or focusing on a medication-free wellness journey. A three-pronged approach, which brings together customer, coach, and clinician, markedly differentiates Optivea in the health and wellness landscape. Independent clinical studies conducted by Medifest show that Optivea's structured programs with one-on-one coach support are 10 times more effective for weight loss than a self-directed reduced calorie diet alone. The decision to collaborate with LifeMD follows a successful six-month pilot. LifeMD delivers high-quality virtual healthcare thanks to their affiliated medical group anchored by full-time providers who are credentialed to treat patients in all 50 states. They already service over 200 different conditions, have conducted 800,000 virtual consults, and continue to grow their business by adding 750 patients a day. The LifeMD collaboration went live in early January, giving all of our coaches and customers the ability to work with clinicians. Early results are encouraging and meeting our expectations. By mid-year, we anticipate launching a more seamlessly integrated solution with LifeMD. offering deeper interaction, coordination, and more seamless activities. We've already developed two new product bundles for those on GLP-1 medications based on independent research that showed people were creating their own bundled nutrition solutions by assembling disparate pieces and spending about the same amount as the price of our initial bundles. As previously indicated, we are investing in customer acquisition and customer experience to drive long-term growth. We're currently building out a new comprehensive company-led international marketing campaign to complement the existing outreach effort of our coaches and to broaden awareness of the OPTAVIA brand among key demographics. Investment in this important initiative will ramp up significantly as we move through the year and launch our integrated solution with LifeMD. We'll also work closely with LifeMD to ensure that we provide their existing patients with access to our own lifestyle programs, including a dedicated coach. The LifeMD collaboration, as well as our company-led marketing activities, will give us two incremental channels for new customer growth, and we expect to begin to see their impact on revenues as we approach the end of 2024 and into 2025 and beyond. Our strong balance sheet, with significant cash and liquid investments, and no debt, provides us with the liquidity to aggressively pursue these new customer acquisition initiatives, and our capacity is further enhanced by our Board of Directors' decision to discontinue the quarterly dividend, as we announced in December, to prioritize our capital for growth initiatives in the years ahead. Our fuel for the future cost efficiency program is also a significant contributor to that effort with expense savings ahead of schedule. Expectations are now at the high end of the 200 to 300 basis point target savings previously indicated. This has been achieved by empowering our procurement organization to negotiate additional savings and by utilizing value engineering in key areas such as R&D. We're also working hard to shift customer support to more of a self-service model in order to power substantial additional savings. Staying flexible and agile is imperative in this fast-changing environment, and by taking actions to optimize our operations, we're able to shift resources to areas that present the greatest opportunity for revenue and profit growth. One recent area of investment that ties neatly into our work in the medically supported weight loss space has been our entrance into the sports nutrition market with the launch of our new Optivia Active product line in the second half of last year. This premium line of products is scientifically designed to help those looking to add an exercise component to their routine. It is also an important part of programs developed for medically supported weight loss customers, helping retain lean muscle mass. Aging and weight loss are two common causes of reduced muscle mass, and up to 50% of weight loss from medication could come from lean muscle mass and not fat. Our active products help provide reassurance that weight loss is focused on fat burning while minimizing muscle loss. Almost a third of our new customers placed an order with at least one active product since the launch of the active product line to customers in mid-September. All this work dovetails together to drive transformative effects across the business. Expansion of our addressable market and our customer facing offer enables us to power increases in customer acquisition. We expect that our newly acquired customers using medically supported weight loss products will have a lower order size, but we'll use our OPTAVIA coaching services and nutritional support products for longer. as we expand our reach beyond weight loss into maintenance and other healthy habits such as exercise and sports nutrition. We've seen strong retention for our pilot customers who have been on a LifeMD program since last summer. It's a small sample size, but it gives us helpful insight and confidence as we move forward with our 2024 plans. Turning now to performance in the fourth quarter. Typically, the fourth quarter is a slower one for health and wellness companies. Medifast did hit the high end of its revenue guidance and met its EPS guidance as well. Results were down over the prior year quarter as we continue to see challenges from the impact of macro factors and GLP-1 medications. Customer acquisition and coach numbers continue to see pressure from headwinds that have impacted us over the last 18 months. However, we believe that the investments made during 2024 will help ensure that coaches benefit not only from their own traditional recruitment efforts, but also from new customer sources, from the LifeMD collaboration, and from company-led marketing initiatives as we seek to tap into the sizable and fast-growing medically supported weight loss opportunity. MetaFast's commitment to helping people make a healthy lifestyle second nature includes actively supporting communities in need. I'm proud of the impact we've made through our corporate social responsibility initiative, Healthy Habits for All, which advances our mission by providing the education and access necessary to create healthy habits. We've now impacted more than 100,000 students with lessons designed to equip students with the skills, knowledge, and confidence to build healthy habits from a young age. Together with our coach and client community in 2023, we also increased access to nutritious food through a continued partnership with the national nonprofit No Kid Hungry. To date, we've helped provide nearly 14 million healthy meals to deserving kids. Transformation is at the heart of this business and always has been. Throughout our history, we have helped our customers and coaches transform their lives, and we have consistently adapted our own business approach to drive growth and adjust to changing dynamics in the marketplace. Today, the new realities of the weight loss and health and wellness environment present yet another transformative opportunity, one that we intend to seize. Our management team and all of our remarkable team members are focused and working diligently to enable meaningful change in every aspect of our work. What is clear to us is that our business model is as relevant as ever in helping individuals lose weight and live a healthier lifestyle. There is still much to be done, but we have a differentiated strategy, ample liquidity and investment firepower, and a motivated and enthusiastic coach community that is excited about the opportunities that lie ahead. We have an important year ahead of us, and I'm confident in our team's ability to navigate our transformation as we execute on our long-term growth strategy. With that, I'll turn it over to Jim to go over the specifics of our financials.