Earnings Transcript for MED - Q4 Fiscal Year 2024

Operator: 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. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Steven Zenker, Vice President, Investor Relations. Please go ahead.

Steven Zenker: 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 31st, 2024 that went out this afternoon at approximately 4

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 continue 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 OPTAVIA 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 ASCEND, gains traction. OPTAVIA ASCEND 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 meals 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 is 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 loss 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 continue 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 e-mail 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 validated 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 million 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 lapsed 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 OPTAVIA 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 needs 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. Medifast 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.

Jim Maloney: Thank you, Dan. Good afternoon, everyone. Our fourth quarter 2024 revenue was at the upper end of our guidance range and EPS was above the range. Revenue for the fourth quarter was $119 million a decrease of 37.7% versus the year earlier period, primarily driven by a decrease in the number of active earning OPTAVIA coaches and lower coach productivity. Customer acquisition continues to be impacted by the growing adoption of GLP-1 medications. We ended the quarter with approximately 27,100 active earning OPTAVIA coaches, a decrease of 34.1% from the fourth quarter of 2023. Average revenue per active earning OPTAVIA coach for the fourth quarter was $4,391 a year-over-year decline of 5.5%, reflecting the continued headwinds to customer acquisition, but an improvement from where the metric was down 22.2% in Q1 2024, as Dan mentioned earlier. Gross profit decreased 37.6% year-over-year to $88.2 million driven by lower sales volumes. Gross profit margin improved 10 basis points to 74.1%. SG&A expense was down 34.1% year-over-year to $87.5 million primarily due to a $27.4 million decrease in OPTAVIA coach compensation, a $7.1 million decrease in employee compensation, a $5.8 million decrease to non-recurring costs incurred in the fourth quarter of 2023 to establish the company's medically supported weight loss initiative, which includes collaboration costs with LifeMD and a $3 million decrease in cost for coach related events. These decreases were partially offset by the $6.5 million of costs for the company-led marketing efforts in the quarter. SG&A as a percentage of revenue increased 400 basis points, primarily reflecting 550 basis points of the company-led marketing spend and 210 basis points of loss of leverage on fixed cost, partially offset by a 300 basis point decrease due to non-recurring cost incurred in the fourth quarter of 2023 to establish the company's medically supported weight loss initiative as well as 100 basis points decrease for coach related events. On a non-GAAP adjusted basis, which excludes non-GAAP adjustments in the prior comparable period for IT and supply chain optimization and the LifeMD collaboration cost, SG&A decreased 30.1% and moved 800 basis points higher as a percentage of revenue. Income from operations was $700,000 in the fourth quarter of 2024, down 91.8% 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 0.6% in the fourth quarter, a 390 basis point decline versus the year earlier level. On a non-GAAP adjusted basis, which excludes one-time expenses in the prior year period, as described previously, income from operations decreased 95.6% and as a percentage of revenue decreased 790 basis points from the year ago period. Other income decreased 49.7% year-over-year to $600,000 primarily due to the unrealized losses on our investment in LifeMD common stock. On a non-GAAP adjusted basis, which excludes those unrealized losses on the LifeMD common stock, our income decreased 18.2%, primarily due to the write-off of unamortized debt issuance cost. The effective tax rate of 37.3% was slightly lower than the 38.4% recorded in the prior year's fourth quarter. On a non-GAAP adjusted basis, the effective tax rate in the fourth quarter was 34.6% compared to 36.1% in the prior year period. Net income in the fourth quarter of 2024 was $800,000 or $0.07 per diluted share compared to $6 million or $0.55 per diluted share in the year earlier period. On a non-GAAP adjusted basis, net income in the fourth quarter of 2024 was $1.1 million or $0.10 per diluted share. With respect to our balance sheet, we ended the year with $162.3 million in cash, cash equivalents and investment securities and no debt. Now I'll turn to guidance. We are expecting our first quarter revenue to range from $100 million to $120 million reflecting continued customer acquisition challenges that we expect will continue through at least the first half of the year. We expect our earnings loss per share for the quarter to range from $0.00 to a loss of $0.50 per share. The guidance excludes any gains or losses from the changes in the market price of our LifeMD common stock holdings, which we are unable to estimate. Our visibility for the year continues to be limited, but we are hopeful that the initiatives we have undertaken will allow us to start to see some positive comparisons as we go through the second half of the year. We expect coach productivity will be an early indicator of this turn, with growth in the number of active earning coaches historically following after a period of time. With that, let me turn the call back to the operator for questions.

Operator: Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Jim Salera with Stephens. Please proceed with your question.

James Salera: Hey, guys. Good afternoon. Thanks for taking my questions. I wanted to start off with the 1Q guide. If I just kind of take a look at the midpoint, it implies, I think down around 37% year-over-year, which is pretty much in line or kind of sequentially the same as what you guys did in 4Q. Just any thoughts around with the ASCEND launch and some of the company supported marketing, any reason why we might not expect that to improve? And just some of the puts and takes around what you guys have coming on in the beginning of the year that you would expect to drive maybe towards the upper end of that revenue range?

Jim Maloney: Yes. So Jim, as I mentioned in the prepared remarks, we do expect that coach productivity, the percent of it year-over-year to be the early indicator of return to growth and then followed by the number of active earning coaches growth. And that typically historically has taken some time. So we're going to continue to see pressure on the coach number and that's why you're not seeing that in the top line revenue number. So Dan and I mentioned in our prepared remarks that we are starting to see stability as a percent in the productivity numbers. So in Q1 of 2024, it was a negative 22% year-over-year. It's gained traction to a negative 5.5% in Q4. We're hopeful that we see that number that metric turn to positive in 2025. Once we see that metric turn positive, which is the early indicator, then we would expect that coach growth would follow, because it historically has followed after a period of time and then the top line shows that growth.

James Salera: Okay. If I think about then maybe using the first half of the year to set up the back half of the year, if I can characterize it that way, can you just give us some thoughts on the cadence of the company-led marketing efforts, because obviously you have this new product launch. I'm sure you want to be visible with that and really drive home kind of the unique characteristics of the ASCEND products. Should we expect more company-led marketing kind of front half weighted or just any thoughts on how that should be spaced out across the year?

Jim Maloney: Yes. So what we're currently thinking is the spend itself doesn't need to have the heavy as heavy investment as we did in 2024 to get the same results. And that's the reason behind that is in 2024 we had to invest in non-working marketing more significantly than we think we do in 2025. We're not going to give an amount out, but the way I would think about this is, our more significant spending in marketing is actually in coach compensation. So I wouldn't bring down the number that you have in your model if you're using 2024's information because we're going to be investing in growth either in coach commissions or in company-led acquisition. We did mention in the prepared remarks that the CAC for advertising is not where we would like it to be. We are seeing benefits of reactivation of customers, it's a much better CAC. So we plan on continuing to do that investment.

James Salera: Okay.

Dan Chard: Jim, just to give you a little bit.

James Salera: Go ahead.

Dan Chard: I was going to say, just give you a little bit more color on what Jim is describing. As we mentioned earlier, the ratio to look at closely during this period of time is productivity, which is a reflection of how effective our coaches are at bringing in new clients. It's also reflective of, some of our older tenured coaches, transitioning out and being replaced by coaches who have experience in sharing a story that includes GLP-1 experience. As we said, 44% of our coaches now in our current base have are supporting at least one customer who is using a GLP-1 drug. That number is kind of continues to kind of flow down with 22% percent of our OPTAVIA coaches having themselves used a GLP-1 drug at some point in their weight loss journey. And our overall base is reflective of that as well. I mean with 17% of our customers now, having used medication in the last 12 months, some of those are still on medication, although others are not. What we see from these new coaches is that improved productivity that's driving this number up. But there's this transition period, which is what Jim is reflecting that's taking place. And this is kind of the question you're getting to, how long does that transition take? And we'll go through the first half and even into the second half. But as that number continues to be pressured, meaning the active earning coach number, it's actually changing in terms of its makeup to be reflective of coaches who are more efficient and more effective at bringing in new clients. And those new clients are reflective of being able to be supported in those new market segments, specifically those who are on GLP-1 drugs currently, those who have transitioned off and then we continue to have a majority of our customers who represent that 50% who don't want to use GLP-1 drugs. So we see the mix changing and reflecting more what's happening in the market as well as the capability of our coach community in improving in terms of their ability to both attract and to support. So that's where we feel good about the transition that we're seeing, in terms of the sequential, say, moderating negative trend, but that we anticipate that turning just before we see a change in the base of active earning coaches.

James Salera: Okay. I appreciate the detail. Maybe if I could sneak in one more kind of higher level question. I'm not sure if you guys have data that you can speak to on this. But for the customers that have come off of GLP-1, do you have any sense for what the retention rate is in staying on the program relative to a non-medically supported weight loss customer who hits their target goal and going off the program like do you see a higher falloff with the people that utilize GLP-1 drugs versus people that go the traditional route?

Dan Chard: It's a little bit mixed. What we see is, and this kind of ties back to some of that those numbers we shared in the prepared remarks up to 74% of GLP-1 patients quit sometime in month between in the first year, all the way up till the month 18. And we're bringing in a portion of those about, like I said, 17% are in that category. Interestingly, and this kind of ties, I think, to the question you're asking, a small portion of those, only the number is 12%, only 12% of GLP-1 patients actually achieved their healthy weight before their results plateau. And that's kind of that plateau effect that we talk about in our supplemental slides. But that plateau effect essentially means that they have two choices, either they stay on the GLP-1 medication and have their weight stabilized, but still they could be in the overweight or obese category or they leverage our program. So we're seeing a portion of those patients come and use coaching to complete that process, which means depending on how long they have to stay here, they can be on our products lose 10, 20, 30 pounds. We also, just as a reminder, that the ASCEND product that we just launched is meant to address this issue of how do they optimize or manage to stay at that healthy weight they achieved. And so that, we believe, will add an additional value to the lifetime of each of these customers who's coming in. So we're still we still feel like we're in early days in seeing the dynamics of this new customer base, but we're we feel good that we're now seeing a reflection inside our customer base that shows what's happening in the broader category and our coaches are doing a good job of supporting that new client base and then bringing in more like that.

James Salera: Great. I appreciate all the color guys. I'll pass along.

Operator: Thank you. Our next question is from Linda Bolton-Weiser with D.A. Davidson. Please proceed with your question.

Linda Bolton-Weiser: Yes. Hello. I was wondering first if you could just give me the operating cash flow and capital spending for 2024?

Jim Maloney: Yes. The operating for 2024, hold on for one second, it will take me a second to get to. Yes. So the operating cash flow for the full year is [24,476,000] (ph). And the CapEx that's investing activities is [7,454,000] (ph).

Linda Bolton-Weiser: Okay. Thanks. And then so in terms of the marketing spend you're talking about the advertising spend, I guess, marketing and advertising, you had talked about I think something like $24 million to $25 million in 2024. Is that the way it came out for the year? Is that the number for the full year?

Jim Maloney: Yes. We hit approximately $24 million, correct.

Linda Bolton-Weiser: Okay. And then I think somebody already asked it, but I mean for 2025, you're saying that dollar spend will be about the same or will it be lower or do you have a projection?

Jim Maloney: Yes. So we're not providing a projection because we're still working through that. But the way I would look at that is we're not going to need as much spend in marketing in 2025 as we did in 2024 because there was quite a bit of non-working marketing that we had to invest in, in 2024. However, we're going to do the right things to invest, which is, which may be adjusting the way we provide coach compensation because as you know, Linda, coaches actually do more marketing than the company. So last year we spent a significant amount in coach compensation well in excess of what we spend in company-led acquisition of customers. So that's why I was trying to say that we haven't made a final decision and that's why we're not providing a number. But I wouldn't think of you sort of have to look at the total bucket as you're modeling and we're going to invest in growth and that's really the message.

Linda Bolton-Weiser: So I'm not sure I understand. Are you meaning that you spent some kind of additional spending on top of coach commissions in 2024 or are you just referring to the big bucket that's the commission payments to the coaches?

Jim Maloney: No, I'm referring to what you're, yes. No, I'm only talking about coach compensation, but as when we talk to investors, we talk to them regarding the different levels of what the coaches do to earn that compensation, what we ask them to do is one of the big things we ask them to do is to do a word-of-mouth campaign in attracting new customers. That is one of the items that we're asking, which is that ask is actually more than the ask of what we do for company-led. So we always historically have really never spent much on a marketing activity of the company. We have that in the dollars of coach compensation.

Dan Chard: So in addition, a different way to look at it, Linda, is we're continuously looking at how efficient our spending is both in the form of company-led acquisition, which is kind of the traditional advertising. The other big bucket has been our own mail campaigns, which are to attract or reattract lapsed users. And then the third big bucket, which represents the majority is that portion of the commissions that go against coaches who are attracting new clients. And as we're evaluating the relative efficiency of each of those buckets, what we're finding or continue to find is that as our coaches are becoming better at attracting new customers. And so I'm referencing those newer coaches who understand how to attract clients in this new environment that the spend efficiency with that money spent with coaches doing the attraction is the most efficient use of our cash. So it's kind of taking an additional increment to continue to use our own company-led advertising dollars in the most efficient way and that second most efficient way is to reattract lapsed users, which really comes out more to be reflected in a lifetime value component. But those two things are what's driving or what is driving that productivity number up. Coach is becoming better at doing it and -- our optimizing the customer attraction, the lapsed customer attraction.

Linda Bolton-Weiser: Okay. So of the 17% of your, I think, it's customers, you said at year-end that are on the GLP-1 drugs. What percentage of the 17% got the drug by -- through LifeMD?

Dan Chard: Actually, it's a -- the majority are getting it through their own providers. So I don't have a percentage to share with you, but the majority are coming through their own providers and a portion of those are -- so if you say that 17% think of those as two different groups, those who are on GLP-1 drugs and those who have transitioned off and it's about half and half. So roughly 8% who are still on the drug and they're majority coming through their own provider and then another half who have transitioned off and we're using just the OPTAVIA program.

Linda Bolton-Weiser: Do you find that your coaches are actually advertising the fact that they have the connection with LifeMD or not really?

Dan Chard: Yes, they are. So if we think about the LifeMD offers access to the drugs, when coaches have a customer who doesn't have a primary care physician, they're actively using LifeMD to help that customer gain access. But the majority of the customers that are using have a primary care physician and they're able to access the drug through them. What they can't access through the physician services are the lifestyle component. So they use our coaches for that.

Linda Bolton-Weiser: So some of the other direct selling companies especially the ones that are selling like nutritional supplement types of things, they're reassessing their MLM models, their actual structure of their models because they feel that they are outdated in the sense that they over reward the people at the top of the structure and are not paying enough to the people at the bottom who are really working hard to kind of ramp up and gather customers et cetera. And these other companies are actually talking about changing their compensation structures. Do you feel the need to do that or have you done any of that or kind of what are your thoughts on that issue?

Dan Chard: I mean we've made some small adjustments over the years that are reflective of making sure that we're rewarding the type of work that you're talking about. We're starting in a very different place from probably most of the direct sellers that you're talking about. We actually have, I'll say, much more of a front-end oriented compensation plan. So we compensate coaches who are doing nothing, but coaching close to 30% in commissions. And so that's higher than what most are able to pay out. And then we also have, I'll say, a generous compensation structure for those who are also leading. But it's -- we haven't had that. I know what you're referring to and I know some of the companies that you're referring to that are doing that, but we're not contemplating anything like what you're describing.

Linda Bolton-Weiser: Okay. And then let's see. I guess the operating cash flow for the year, I guess, it sort of came out a little bit lower than I would have thought. So therefore your free cash flow is a little bit dwindled down very small here. I mean do you envision that the free cash flow. Well, I know you're not giving guidance, but I would expect it could still stay positive in 2025? Is there any color you can give on that?

Jim Maloney: Yes. I mean the color I'll give on that is we decided in October to cancel our credit facility because we're looking out using our long-range planning that we were not going to need to borrow any funds through the credit facility. So we made a conscious decision to cancel that credit facility and because we were obviously spending having fees on that credit facility and we just didn't think the need for it was there. So that should give the investor confidence that we believe that our cash position, cash and investments for the foreseeable future should be at a very strong point.

Linda Bolton-Weiser: Okay. And then my last question is, I mean, you are giving guidance for the first quarter. Usually, in a normal time in your historical kind of performance, you would see a seasonal uptick sequentially in coaches in the first quarter because of the weight loss season. Do you expect a sequential uptick in the number of coaches in the first quarter of 2025?

Jim Maloney: Yes. So what we're expecting is that coaches -- the number of coaches will continue to be pressured until we get our coach productivity metric in a positive nature year-over-year. So historically when we look back at when we grew back in 2016, 2017 time frame once we started that growth path, what we saw at that point in time is the revenue per active earning coach turned positive and then we saw coach growth. So it's going to continue to be pressured until we get the growth of the metric regarding coach productivity in a better spot, which we do believe that's going to happen sometime in 2025.

Linda Bolton-Weiser: So when you say pressure, do you mean a consistent sequential decline in coaches every single quarter? That's kind of what you're talking about?

Jim Maloney: For Q1, we do expect there to be pressure on that number. So, yes, we do expect that to have a decline in coaches.

Linda Bolton-Weiser: And then just one more question. When you look at that year-over-year decline in coach productivity, I guess it was 5.5% in the quarter, in the fourth quarter. If you had to break it down between like I don't know how you would do it like unit sales versus mix because you're offering under the GLP-1 offerings are, I think, lower kind of price per unit. The customer is spending less money on your product. So is there any way to think of the down 5.5% in terms of like volume versus mix or something? Yes.

Jim Maloney: Yes, yes. So overall, I would say, our average order hasn't changed dramatically. So the dollars haven't changed that dramatically. So that's really still what's happening is the new customers and being able to attract lapsed customers is actually moderating that number more than a dollar change in the quarter.

Linda Bolton-Weiser: So it's more that the coaches are sort of like coaching fewer people or something rather than each person buying less or something. Is that kind of it?

Jim Maloney: Yes, but it's actually -- it's getting -- it's stabilizing because we're starting to see certain coach groups having very good productivity. So there are certain coaches that are doing very well and that's helping that number do better. So when we mention it going from a negative 22% year-over-year to a negative 5.5% year-over-year from Q1 of 2024 to Q4 of 2024. That moderation is because certain coach lines are doing better and we're seeing that. We're seeing that certain coach lines are actually attracting new customers in all three segments, customers that are using medication, customers that are not using medications and customers that are coming off the medications. So we're seeing that happen in real time.

Linda Bolton-Weiser: Okay. That's all for me. Thank you.

Dan Chard: Thanks, Linda.

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

Dan Chard: I'd like to thank you for those questions and for the opportunity to further discuss our progress in our business transformation. As we adjust our model, train our coaches and introduce new products, we aim to better meet the needs of our customers in this changing environment. We look forward to continuing our efforts to improve coach productivity as we move forward and we'll provide you with additional details regarding our progress on the next call. Thank you, everyone. Have a great day.

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