MEDIFAST INC

Greetings and welcome to the Medifast Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Stephen Zenker, Vice President, Investor Relations. Please go ahead.

Good afternoon. and welcome to Medifast's fourth quarter and full year 2024 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 fourth quarter and full year ended December 31, 2024, 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 MetaFast 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 under-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. MetaFast 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 MetaFast Chairman and Chief Executive Officer, Dan Chard.

Thank you, Steve, and good afternoon, everyone. We appreciate your taking time to join us today to review our fourth quarter and full year 2024 results, as well as our plans and priorities for 2025. This past year was a pivotal year for Medifast as we continued to transform our business to meet the changing nature of a health and wellness market that has been revolutionized by the rising acceptance of GLP-1 weight loss medications. Throughout the year, we worked as a team to adapt to the new realities of the market and ensure that Medifast can flourish as a health and wellness company in the GLP-1 world. That means offering solutions to meet the diverse needs of customers whether they are currently on GLP-1 medications, transitioning off of them, or pursuing weight loss only through our proven habit-based approach. Our differentiated solution combines scientifically developed products, clinically proven nutrition plans, the support of independent Optivia coaches, and, where appropriate, access to GLP-1 medications through our collaboration with LifeMD. Together, these elements create an integrated offering that reflects the reality of today's marketplace and provides a holistic approach that stays true to our over 40-year heritage. We've been encouraged by some of the sequential improvements within certain areas of our coach community. Our higher-performing coach teams have shown signs of increased productivity with more favorable recent trends. Revenue per active earning coach is a metric that we have consistently focused on as an indicator of coach progress in attracting and retaining customers. This metric reflects the productivity of our active base of coaches in attracting and supporting customers in a given quarter. This metric was the first disrupted by the changes in our business environment in 2022 and has been under significant pressure since then. In the fourth quarter of 2024, we saw a third consecutive quarter of moderating year-over-year declines in this metric at a negative 5.5% from a negative 22.2% during Q1 of 2024, which we believe indicates that our active earning coaches are making progress in transitioning to supporting customers that now include current and past GLP-1 medication users. The progress in this area has been demonstrated by retaining and reinforcing the practices being utilized by our higher productivity coaches who are tailoring their offer to those both on GLP-1 medications and those who have transitioned off of them. The percentage of our customers that have used GLP-1 medications in the prior 12 months rose to 17% at year end, up from just over 3% at the beginning of 2024. At year end, approximately 44% of coaches were supporting at least one customer on a GLP-1 medication, up from 12% at the start of 2024, which really validates our focus on the needs of GLP-1 customers. We certainly expect this number to grow as the GLP-1 market continues to expand and as our new product line, OPTAVIA Send, gains traction. OPTAVIA Send is another key highlight of the fourth quarter and the year as a whole. The product line, which we launched in December, is another tool for people using GLP-1 medications and also supports those looking for help keeping weight off, regardless of whether the weight loss was achieved by using GLP-1 medications or by using the OPTAVIA program. More than just the introduction of the new products, OPTAVIA Ascend is a demonstration of our commitment to addressing the full spectrum of consumer needs in today's weight loss market. Ascend features high-protein, fiber-rich mini-mills and daily nutrient packs that serve as the foundation for two new science-backed nutrition plans. The first is the GLP-1 Nutrition Support Plan, and it's designed to complement GLP-1 medications by promoting muscle, digestive, and bone health during an individual's weight loss journey. The second is the optimization plan, and it's tailored for those who have achieved a healthy weight as well as those who have lost weight during GLP-1 medications and who choose to transition off the medications. Both of these groups are seeking to support and manage their weight loss and build habits that support long-term health. These products meet an important need in a high-value, and high-growth GLP-1 market. Scientific research published by Medifast recently revealed that GLP-1 medications can cause muscle loss equivalent to a decade's worth of naturally occurring muscle loss within just 12 to 18 months. At the same time, while there can be no doubt that GLP-1 medications are effective for initiating weight loss, studies show that up to 74% of patients transition off the medications in the first 12 months of use. And studies also show that two-thirds of the weight lost on GLP-1 medications is typically regained within 12 months of stopping treatment, with cardiometabolic benefits often reversing. This underscores the importance of pairing GLP-1 medications with lifestyle modifications, including proper nutrition and resistance training. Our ASCEND plans address these needs with targeted nutrition solutions that help preserve lean muscle, promote metabolic health, and support weight management. Critically, when all of this is paired with the support of a coach, support from the OPTAVIA community, and our proprietary Habits of Health transformation system, we believe the program represents a comprehensive and effective approach to support those on GLP-1 medications or those managing their weight loss that is not widely available in the marketplace today. The Ascend line has been very well received by both customers and coaches since its December launch. Approximately 17% of customer orders placed in January included Ascend products, which was in line with our expectations. Feedback has been overwhelmingly positive, with coaches reporting that the products and new plans make it easier to engage with GLP-1 medication users and help them integrate healthy habits into their routines. Turning to our fourth quarter performance, Results were largely in line with our expectations, reflecting continued pressure on new customer acquisition, but showing very early signs of stabilization in certain areas. Revenue came in at the high end of our expectations, and earnings per share came in above our guidance. But both were still down from prior year levels. Importantly, we continued to benefit from our Fuel for the Future cost reduction initiatives, which have allowed us to resize our business while laying the groundwork for growth in the future. To support our coaches as they continue to expand into new customer segments, we continue to expand our education and training support. This includes online training modules, quarterly hands-on trainings in our manufacturing and product innovation facilities, and on-demand podcasts that address topics such as new customer acquisition and best practices for supporting new customer types. An early episode of the podcast series, focused on how to implement successful practices employed by our top performing coach groups in engaging GLP-1 medication users around our Habits of Health system. We believe that as more coaches adopt these practices and incorporate our programs into their offerings, we will see sustained improvement in certain metrics including coach productivity and the percentage of active earning coaches acquiring new customers. 2024 also marked the first year of company-led marketing initiatives to complement the traditional coach-driven model for customer acquisition. While initial efforts resulted in a higher than expected customer acquisition cost, we made some changes to our strategy in the fourth quarter to allow us to optimize our messaging, media mix, and targeting. These changes have begun improving our marketing efficiency and effectiveness in certain areas, such as email marketing, and we anticipate putting further focus on these areas in the future. The launch of resolution season in January provided the first opportunity to fully deploy our updated marketing approach, including campaigns that spotlight our traditional OPTAVIA and ASCEND lines. To further support new customer acquisition, and encourage deeper engagement, we recently introduced a two-week starter kit designed to lower barriers to entry for prospective customers. From this initiative, we have developed some important insights that we will use as we continue to streamline our offer. Our marketing efforts continue to focus on our expanded target that includes three population groups. Those who prefer a medication-free, habit-based approach to weight loss, those currently using GLP-1 medications, and those transitioning off medications. Our holistic weight management focus enables us to address the broad spectrum of customer needs across all three groups, emphasizing the importance of lifestyle modifications, whether using medications or not. Our recent surveys validate our approach with results showing that the majority of US adults trying to lose weight agree that lasting weight loss success depends on changes to diet, exercise, and overall habits. Our financial position remains strong, with no debt and a solid cash balance that provides the flexibility needed to invest in key growth initiatives. In 2024, Fuel for the Future delivered $21 million in cost savings, exceeding our initial targets. We anticipate additional savings of $15 to $20 million in 2025 as we continue to optimize our operations. Looking ahead, our priorities for 2025 include, first, accelerating customer acquisition. Through both company-led marketing and enhanced coach-driven efforts, we aim to attract new customers and reactivate last participants. Second priority, improving coach productivity. By scaling best practices from high-performing teams and leveraging new coach education resources, we look to drive sustained improvements in new customer acquisition across the coach community. Third priority, advancing clinical research. In 2025, we expect to initiate studies evaluating the outcomes for customers using Optivea programs alongside GLP-1 medications as well as those looking for help in long-term weight maintenance, while also focusing on areas such as lean muscle mass retention. Fourth priority, expanding product offerings. Beyond Ascend, we will continue to enhance our introductory product offer based on learnings from our two-week intro package. As a final priority, we are also evaluating the possibility of entering new categories, including women's health, to offer tailored solutions for different need states, thereby broadening our reach and impact. In summary, the rise of GLP-1 medications has reshaped the weight loss market, but it has also underscored the critical need for solutions that address the full picture of health. MetaFast is committed to moving with the market to meet changing needs and to providing offerings that help people achieve their health and wellness goals. Our focus on providing integrated solutions that combine lifestyle modifications, clinical guidance, and community support puts us in a strong position, and I'm confident in our team's ability to execute on the strategy to position the company for future growth. Now I'll turn the call over to Jim to discuss the financials in greater detail.