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.

Thank you, Dan. Good afternoon, everyone. 2023 full-year results were in line with our guidance. As we begin to leverage the cost savings generated in the prior quarters to establish a foundation in new markets and take action on plan growth initiatives. Revenue for the full year of $1.07 billion was at the upper end of our guidance range of $1.05 to $1.07 billion but decreased 32.9% versus 2022, primarily driven by continued pressure on customer acquisition, which has led to a decline in the number of active earning OPTAVIA coaches and productivity per active earning OPTAVIA coach. Revenue for the fourth quarter of 2023 decreased 43.4% to $191 million, from $337.2 million in the fourth quarter of 2022, as customer acquisition continues to be pressured by growth in popularity of weight loss medications. We ended the quarter with approximately 41,100 active earning OPTAVIA coaches, a decrease of 32.5% from the fourth quarter of 2022. Average revenue per active earning OPTAVIA coach for the fourth quarter was $4,648, a year-over-year decline of 16.1%, reflecting the continued headwinds to customer acquisition. Gross profit decreased 39.5% to $141.4 million for the fourth quarter of 2023, driven by lower revenue. Gross profit margin improved 470 basis points to 74%, positively impacted by cost savings from the company's Fuel for the Future program, as well as the absence of restructuring cost of certain manufacturing agreements that occurred in the fourth quarter of 2022. On a non-GAAP adjusted basis, excluding one-time expenses related to the 2022 restructuring, gross profit decreased 42.5% to $141.4 million, and gross profit margin increased 110 basis points to 74%. SG&A expense was down 34% to $132.7 million for the fourth quarter of 2023, primarily due to decreased coach compensation on lower volume and fewer active earning coaches. progress on several cost reduction optimization initiatives, and the impact from the charitable donation made in 2022, partially offset by market research and investment costs related to medically supported weight loss. SG&A as a percentage of revenue increased 990 basis points as a result of loss of leverage of fixed costs due to lower sales volume and market research and investment costs related to medically supported weight loss activities, partially offset by progress on several cost reduction and optimization initiatives and the charitable donation impact in 2022. On a non-GAAP-adjusted basis, which excludes one-time costs to initiate the LifeMD collaboration and reorganize the IT and supply chain functions, SG&A decreased 35% to $125.1 million and moved 840 basis points higher as a percent of revenue to 65.5%. Income from operations was $8.7 million in the fourth quarter of 2023, down 73.4% versus the year earlier period, driven by lower gross profit, partially offset by lower SG&A as a percentage of revenue. Income from operations was 4.5% in the fourth quarter, a 510 basis point decline versus the year earlier level. On a non-GAAP adjusted basis, which excludes one-time expenses described previously, income from operations decreased 69.5% to $16.2 million as a percent of revenue. Non-GAAP adjusted income from operations was 8.5%, a decrease of 730 basis points from the year-ago period. The effective tax rate of 38.4% was higher than expected and higher than the 18.2% recorded in the prior year's fourth quarter due to inventory overhead adjustments for tax reporting purposes. which reduced the expected tax benefit for charitable donations of inventory. On a non-GAAP adjusted basis, the effective tax rate in the fourth quarter was 31.6%. Net income in the fourth quarter of 2023 was $6 million, or 55 cents per diluted share, compared to $26.5 million, or $2.41 per diluted share, in the year earlier period. On a non-GAAP adjusted basis, net income in the fourth quarter of 2023 was $11.9 million, or $1.09 per diluted share. Turning to our balance sheet and cash flow, our financial position remains strong with $150 million in cash, cash equivalents, and investments, and no interest-bearing debt as of December 31, 2023. Cash flow from operations continues to be strong at $147.7 million for the year ended December 31st, 2023. During the quarter, our board of directors made the decision to discontinue Medifast's dividend, redirecting the capital to invest in growth in technology initiatives to help drive growth in the years ahead. The bulk of those funds will be invested in initiatives designed to improve our customer acquisition and customer experience, which we believe will lead to greater long-term value for our stockholders. The LifeMD collaboration and our company-led customer acquisition initiative are just two examples of how we expect to use those funds. Now I'll turn to our guidance. We are expecting first quarter revenue to range from $155 to $175 million, reflecting continued near-term challenges in the face of changing dynamics in the weight loss business, impact from the growth of GLP-1 medications in the marketplace, as well as a deliberate change to our promotion strategy, which eliminated a customer promotion in January 2024 as compared to January 2023 are some of the factors that will negatively impact the results in the first quarter of this year versus last year. We expect our EPS for the quarter to range from 25 cents to 95 cents. The EPS range excludes the cost related to the initiation of the LifeMD collaboration and any gains or losses from changes in the market price of our LifeMD common stock. While the operating environment remains challenging, we continue to believe that meaningful spending on driving customer acquisition from two additional sources, company-led marketing and customer flow from LifeMD will lead to an improvement in customer acquisition trends beginning in the back half of 2024 as our growth initiatives begin to ramp up. This also means that we should start to see an increase in SG&A for the year beginning in Q2 that for the entire year will approximate 200 to 300 basis points of incremental spend as a percent of revenue based on 2023 revenues as we increase our marketing activities That elevated level is expected to continue into 2025. These increases in marketing spending as well as the leverage of fixed cost are expected to exceed the savings we expect from our Fuel for the Future initiative, which as a result will negatively impact our operating margin in EPS in 2024 and likely 2025 as well. Therefore, while we still are targeting 15% revenue growth and a 15% operating margin in the long term, it could take longer than previously discussed due to the factors I just mentioned. In summary, We are taking steps to help transform Medifast into a diversified health and wellness company. The reallocation of resources along with our expense reduction efforts are expected to help drive significant improvement in our operations as we move throughout the year and into 2025. And as we look to expand our market, pursue other growth opportunities and bring lasting value to the business. With that, let me turn the call to the operator for questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Thank you.

Our first question is from Jim Solera with Stephen Think. Please proceed with your question.

Hi, guys. Thanks for taking our question. If I take a look at the number of active earning coaches in the fourth quarter, at the end of the fourth quarter, I think if my math is correct, it's the biggest year-over-year decline of 2023. And I believe the first time quarterly revenue per coach was below – $5,000, at least as far back as I have the quarterly numbers, I think to 2017. Is that a trend that we're going to need to see reverse before the sales trend can stabilize? Or do you guys feel that when you turn on the marketing spend at a company level, that it's going to enable you to grow without relying as much on a return to growth in coaches as well?

Yeah, that's a great question. And I think part of the answer is tied to what we saw in the period going from 2016 to 2017 as we resumed growth based on our new model. So what we'd expect to see is as we complete the integration of the technology between MetaFast and LifeMD, That will give our client or our coaches the ability to have a seamless experience for clients and will expand our offer to include not only the new products that we've launched, but also a seamless experience as they are able to access life MDs, clinician services, as well as the medically supported weight loss products. At that point, what we'd expect to see is a little bit lower per order revenue number but an expanded ability to acquire new clients, returning to something closer to what we've seen in the past. The other thing that we expect to see, Steve, is that we will have a broader or a longer lifetime in terms of measured by months for each of these new clients. So those two things together should drive that productivity per, coach back up to historical levels.

As a follow-up, Dan, to your comment on LifeMD, should we think about the incremental sales lift from that partnership as kind of limited until the fully integrated offer is launched? I mean, does that prevent you guys from seeing much incrementality? Or should we still expect to continue that to ramp even before the integrated product is launched in the middle of the year?

Yeah, so this is Jim, Jim. So, you know, our Q1 guidance, you know, we believe we're going to continue to see pressure in revenue due to, you know, we're looking at that seamless offer. And in our prepared remarks, you know, we mentioned That's going to happen mid-year. So once that activity is finalized, then you're going to see incremental advertising, company advertising, pretty much in the range of about $20 to $30 million, which, you know, the company has, you know, really never spent that kind of money in this channel before. So we're expecting... you know, the channel regarding LifeMD for customers and the channel for company-led acquisition to be in the back half of 2024, you know, due to that seamless offer, getting the technology ready for that seamless offer.

Okay, that's helpful. And then if I can maybe sneak in one other question for you, Jim, you know, you guys saw a solid gross margin uplift in 4Q and I believe in the slide deck, you mentioned 45 million in fuel for savings for the year for 2023. Maybe just size up what the opportunity for that is in 2024, given the Edwin that you're going to see from the, the increase in company led marketing.

Yeah. I mean, we're, you know, the 110 basis point is, improvement on a non-GAAP basis in gross margin. We are, you know, that was mainly from the price increase that we took at the end of Q4 of 2024, and it's really just lapping that price increase. What I'm expecting, you know, the fuel for the future, you know, program that generated about 45 million dollars to operating income you know that that benefited both cost of sales and sgna and that will continue those cost savings will continue into um into uh 2024 we haven't presented a target for that so we're not you know we didn't provide any target for that but we are going to get additional savings But we do expect that all the cost savings from the Fuel for the Future will be spent back on investment for growth opportunities. You know, the one you mentioned is the marketing, you know, the company-led marketing activity. That'll be about $20 to $30 million on a full-year basis that really, won't start until later on this year once we get the seamless offer ready. Also, we're spending funds on market research, technology, and other activities regarding medically supported weight loss. In Q4, just to give you a feel, those investments for about 690 basis points. And that did not even include the $5 million of the initial payment that we paid LifeMD. So we're going to continue to invest in these growth opportunities for the next year. And you're going to see pressure on not just our gross margin. It's going to be more really looking at our operating income margin is really where that's going to be impacted the most. So it's going to be included mostly in SG&A where it was in Q4. Got it.

Great. Let's hope we'll call it, guys. Thank you. I'll hop back into Q. Thanks, Jim.

As a reminder, if you'd like to ask a question, please press star 1. Our next question is from Linda Bolton-Weiser with DA Davidson. Please proceed with your question.

Linda Bolton- Hi, thank you. So just so I understand the comments you made about the incremental costs and expenses, the 200 to 300 basis points of incremental spending, which I think you said would all be in SG&A, is that in addition to Is that in addition to and separate from the advertising spending that you're talking about?

No, that's the same. So the 200 to 300 basis points, which really equates to approximately $20 to $30 million, we're going to start spending that in the coming months as we get the seamless offer completed by mid-year. So you're going to see that type of spend start to happen probably towards the end of Q2 and then into Q3 and beyond. So that's our expectations at this point, Linda.

Right. But I'm trying to clarify, like, is that advertising spending to draw people into the seamless offering?

Yes, it is. Correct.

Okay. Then you should have the seamless offering all ready to go at the time you start turning on that advertising spend. Is that the way to think about it?

That's exactly right. Yes. And we're thinking that's going to happen mid-year, and that's when you're going to see that type of incremental advertising happening. And that will be recorded in SG&A.

okay I gotcha so that means that well I guess I guess here's the thing I mean are you working in conjunction in a collaborative effort with life MD to put forth an advertising message and are they spending the same amount or are you spending like what's the combined spending on the advertising front

I think what LifeMD spends is something for them to announce. The message they're putting out is to draw, is to say their traditional message, which ties to their primary care physician services. What we do know, though, and, you know, we mentioned this in the comments, you know, if you look, if you step back and you say, well, what is it really that, uh, we're doing as a, as a company? Um, and it's first, we're giving the mess, a new message to our coaches, which means that, uh, coaches can now offer the support of the clinician, um, for the OptaVIA programs. So that's a modified message for them. And they they'll continue to use that message, um, over in both in their communities and using, um, social media platforms. The second channel for client acquisition is the one that Jim just described and you asked the question on, which is company-led acquisition. That's done in coordination with our coaches, and it's providing coaches within that message, the coach offer within that message. The third is the one that you're asking about now, which is, client acquisition through our partner, LifeMD. So they have a very specific formula to drive the best results for their patient acquisition. What they also know is that once their patients are in and using their product, they've surveyed them and they know that a significant portion, so I'll describe that as about 50% of the patients they bring in are looking for additional support for lifestyle programs. And they're the type of lifestyle programs that we offer through Optivea. So the intention is to support those patients who want to have that kind of support. And so we're at the very beginning of this. This was part of the reason they were excited and enthusiastic about partnering with us through this collaboration agreement. And we believe that through these three new client acquisition channels, we have an important and meaningful way to impact our client acquisition capabilities as we move through the year.

So as you go forward in time over the long term, do you expect to continue to ramp up the pull marketing spend? So you're saying it's going to be, you know, 20 to 30 million, so that's 2 to 3% of sales. Like, does that go higher over time to 5% of sales, or does it go lower as your coach network becomes used to marketing that message?

Yeah, I don't know if we know that answer right now, and there'll be more to come on that as we learn more information on this. You know, this is the early stages of this. But what I can say on that is we're going to look to see what the return on investment of that marketing spend is to that particular channel and determine the profitability of that channel to make additional adjustments within that channel on marketing spend. So there's going to be more to come on that. There's really, I can't give you a full answer on that for you to model out 2025. But, you know, we wanted to give what 2024 will look like, you know, to investors at this point.

Okay. And then I'm just curious, are you making any changes to your commission structure to help fund the advertising spend, or are you making no changes at this time to the commission structure?

No changes at this time to the commission structure.

Okay.

And maybe you could share with us what you're learning from LifeMD about, like what are they saying about the availability of the branded drugs versus compounded? I know they work with a compounder or compounders for the drug, to get their drugs to their customers, to their patients. Are they seeing more availability of the branded drug or like kind of what are they saying on that front?

I think their access is the same as everyone else's to the branded. I think there have been some supply shortages that I think you're referencing. And they have a reliable supplier for the compounded version. of the active GLP-1 ingredients. So they're able to offer both solutions for their patients. But like I said, their access to the branded product is through the same pharmacies that everybody else is using.

Okay.

Can you just remind us, in terms of what they provide to patients, do they help them with insurance navigation? And if so, what percentage of their GLP-1 patients have insurance coverage for that?

They do offer assistance with navigating the insurance question and provide solutions for those who are not insured or underinsured. We don't report on their specific metrics, so I'll leave that question to them to answer in terms of what percentage are insured versus uninsured. But I do think, and I think you're getting at this, and I mentioned this earlier, they have a unique offering during a time of scarcity and some supply constraints to provide those who are looking for an answer through alternative means other than through their compounded pharmacy to have a viable way to achieve the benefits of medically supported weight loss. And so I think that was one of the attractive offers that they have along with their very specific type of primary care physician support through their robust platform. So I think I would say at this stage we are very pleased with the collaboration that we're seeing, as we said, where our IT, respective IT teams are actively working as we speak to achieve this integration. And all of that is meant to provide an excellent client experience on our side or patient experience on their side. to achieve this lifestyle component that's becoming more and more relevant as we learn more about what people are looking for and how to achieve the best outcomes while using GLP-1 medications.

Okay.

And then finally, the range for EPS for the first quarter, it seems a little bit wide, is the variability of you know, getting to the low end versus the high end of EPS. Is that just variability around how revenue comes out, or is it that you're unsure of gross margin or the SG&A spending level? What's the variability there?

Yeah, it's mainly the SG&A spending, and it depends on the investments that I spoke about earlier, how much of it is actually spent in Q1.

That's the majority of the variability.

Okay. All right. Thanks a lot. I appreciate it.

Thank you. Thanks, Linda.

Thank you. There are no questions. There are no further questions at this time. I'd like to hand the floor back to Dan Chard for any closing comments.

I'd like to thank you both for your questions and for the opportunity to further expand on our transformative vision on today's call. Today we stand at the start of an important shift in this company's proud and successful history. as we broaden our approach and position ourselves to be ever more central to the health and wellness journeys of people across the United States and beyond. We have a remarkable platform built on deep experience, strong collaborations, investment, firepower, and talented and passionate coaches and employees who can help us deliver on our goals. And our mission to make healthy habits second nature has never been more important in a world where obesity remains a significant and growing problem. I'm excited about the opportunity that MetaFast has to become an ever more important part of the solution, and I look forward to updating you further on our progress on our next call. Thanks, everyone, and have a great day.

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