MEDIFAST INC

Greetings and welcome to the Medifast fourth quarter 2025 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. Should anyone 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 Zenker, Vice President, Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to Medifast's fourth quarter 2025 earnings conference call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer, Nick Johnson, President, and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the fourth quarter ended December 31st, 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 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. 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 you joining us today as we discuss our fourth quarter and full year 2025 results, and as we share an update on the progress we're making building the next chapter of MetaFast. Before I get into performance and strategy, I do want to briefly acknowledge a leadership update we communicated in January. I recently informed the board that I plan to step down as Chief Executive Officer, effective June 1, 2026. I've led this company for close to 10 years now, and it's no exaggeration to say that it has been one of the great privileges of my career. This decision was made thoughtfully and deliberately as part of a planned transition that I have been talking to the board about over recent months. I will continue to serve as Chairman following the transition, and will be fully engaged as CEO through the end of May as we execute against our priorities and support a smooth, intentional handoff. As part of the transition, the Board appointed Nick Johnson as President of Medifast, with the expectation that he will assume the CEO role following my departure. Nick has been a central leader in the work we've done over the past several years, strengthening our coach-led model helping reposition the company around metabolic health and working in tandem with our independent coaches. to build the operational discipline required to sustain change. He has been with us on recent earnings calls, and you'll have the opportunity to hear from him today about the progress we're seeing with the field and how that's translating into early and measurable progress. What made my decision easier is my absolute conviction in the direction that Medifast is heading, the strength of our leadership team, and the path we are on as a metabolic health company. Over the past two years, Medifast has been in a period of transformation. We've navigated fundamental disruption in the weight loss industry, driven by rapid adoption of GLP-1 medications and shifting consumer expectations. During the second half of 2025, we made a series of intentional choices to reposition the company. Not to abandon weight loss as a concept, but to put it in the right context, under the broader umbrella of metabolic health. At a fundamental level, many of the health challenges people struggle with today stem from poor metabolic health, often referred to as metabolic dysfunction. That dysfunction often shows up downstream as a whole set of symptoms. Weight gain is certainly one of the most visible of those, but it's far from the only health challenge. The problem is if we only focus on the symptoms, we are not fixing what's driving them. Improvement requires restoring metabolic health itself. At the center of our work in this space is a scientific approach we refer to as metabolic synchronization. Rather than just helping people with short-term weight loss, the science behind our clinically supported system works with the body to help reset key metabolic processes that have fallen out of balance over time. That approach allows us to reverse metabolic dysfunction and help create conditions for improvement in body composition, energy, and overall health. To better understand how Americans view metabolic health, we partnered with KRC Research on a national survey that found that nearly 94% of American adults express concern about at least one aspect of metabolic health. Importantly, 85% of respondents believe metabolic dysfunction can be reversed, and 84% view it as central to overall health and well-being. That combination of widespread concern and belief in reversibility highlights a large, underserved market and reinforces our view on why a clinically proven, coach-led approach is well-positioned to meet it. Clinical results show that our metabolic synchronization approach reverses metabolic dysfunction and can deliver a targeted metabolic reset of key metabolic processes that improves body composition in meaningful ways. Specifically, during a 16-week clinical study, participants using our 5-in-1 metabolic plan reduced harmful visceral fat by 14% while retaining 98% of lean mass and experienced clinically significant weight loss. These outcomes impact metabolic health, going beyond just weight loss. We're actively leveraging our metabolic synchronization science platform to develop a new product line designed to further support reduction of bad visceral fat and improve body composition, metabolic efficiency, and overall health. These products will utilize a proprietary formula of clinically studied ingredients and are designed to support metabolic health. In parallel, we are simplifying how we support clients across every phase of their metabolic health journey. While most clients will begin in a targeted reset phase, the science of metabolic synchronization now provides a clear roadmap to guide and support them through additional phases that aid in achieving optimal metabolic health. We'll share more as we move through the year, but this innovation is a direct extension of the foundation we've built. Rebuilding our core offer has taken time, but today we believe that process is largely complete. That does not mean that our work is finished, but we believe the foundational elements we needed to move forward are now in place. We have a clear, science-driven strategy that is supported by clinical research. We have strengthened our clinical and scientific foundation. And we've positioned the company to expand our claims over time. We have revitalized and simplified key parts of our commercial model and leadership systems in the coach-driven field structure. And we have taken disciplined steps to align our cost structure and operations with the realities of the market while preserving the resources we need to invest in growth. So as we enter 2026, we are moving from transformation to execution. And in the fourth quarter, we started to see early evidence that our strategy is impacting key metrics. This includes the emergence of a green shoot in coach productivity. along with bright spots developing across the business. While these early performance metrics are yet to have appreciable impact on our revenue, we believe they are nonetheless early signs of the improving performance of our coaches in support of our efforts to get back to growth and profitability. This quarter marks the first time since mid-2022 that quarterly coach productivity turned positive on a year-over-year basis, up 6% in the fourth quarter over the prior year. That's a meaningful milestone because productivity performance like this has historically been a leading indicator of broader improvement in client acquisition and coach growth. We are seeing a sharp increase in coach-led product and business opportunity meetings, with activity in January showing a significant rise compared to the same period last year. This is a clear sign of the energy and excitement that our coach base is bringing into 2026. We've talked about the importance of coach productivity, and the associated positive metrics like these in previous earnings calls, and the role that they could play in future growth. Their emergence now is consistent with the idea that the foundational work of the past two years is translating into measurable progress against our transformation objectives. While we continue to expect a decline in the overall active earning coach count through most of the current year, another positive early trend that we expect to see soon is a more favorable mix in coach tenure as a higher proportion of new coaches come in and longer tenured, less productive coaches transition off as part of the coach life cycle. This should create a younger tenured coach base, which is a sweet spot for productivity and the sponsoring of new coaches. We saw this in prior cycles, including in 2016 and 2017, and we are expecting to see some shift in the current year. Importantly, in this current environment, productivity is not being driven by price or business promotions, but by the new positioning of our coach-led program as a metabolic health solution, complemented with new tools and behavior changes inside our coach base, as they focus on the new business opportunity around the large and growing metabolic health market. Nick is now going to share more detail on what we're seeing from coaches and how programs including Premier Plus, EDGE, and our client referral activity are set up to drive coach productivity and engagement, and how the metabolic health story is energizing our coach base in a way we have not seen in some time.