Greetings. Welcome to the Medifast Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I'll now turn the conference over to your host, Steven Zenker, Vice President of Investor Relations. You may begin.

Good afternoon, and welcome to Medifast's third 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 September 30, 2023, that went out this afternoon at approximately 4:05 PM Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.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 all of you for joining us on the call. With me today is Jim Maloney, Medifast's Chief Financial Officer. I'll take a few minutes to share some insights from Medifast's journey over the last 12 months and then provide you with some context for where we're taking the business. I'll then turn the call to Jim, who will take you through Q3 financials. There are two key takeaways from our latest results. First, our financial position remains very strong and we continue to deliver solid profitability despite continued top-line headwinds. Second, we are making steady progress on several initiatives to expand our offering into the broader health and wellness market and drive sustainable long-term growth. Our recent entry into the sports nutrition market with our new OPTAVIA ACTIVE line is one example. Weight loss medications are another major opportunity for us as the surging awareness and popularity of these products has prompted a huge change in the way consumers think about weight loss and lifestyle modification solutions in general. As a result, earlier this year, we commissioned an extensive independent market research study to understand consumer sentiment towards the medications and our coach-based habit-centered lifestyle program within this evolving business environment. What was immediately clear is that our addressable market is split relatively evenly regarding weight loss medications. Around half of those looking for weight loss solutions are accepting of medication-based therapies, and around half of them reject the idea of using GLP-1 medications like Wegovy to support weight loss. The research clearly demonstrates that most of those who are interested in medical weight loss medications are also looking for support beyond a prescription that includes clarity on how they should incorporate healthy eating and exercise into their lifestyle while using these medical solutions. Additionally, they generally do not see weight loss medications as a lifelong commitment, but rather something that when paired with lifestyle modification can help them make a long-lasting change. So, with this in mind, we're focused on developing an approach that will enable us to make this new business environment our sustainable growth environment. We recently launched the pilot initiative with three different telehealth companies to explore how we might incorporate weight loss medication into our coach-centered business model. These pilots have given us some good insights around positioning and approach. What particularly appears to resonate with customers who are interested in medically supported weight loss is a compelling three-way partnership between customer, clinician, and coach. Importantly, the efficacy claim of GLP-1 medications for weight loss is based specifically on their incorporation with lifestyle changes that include a reduced calorie diet and increased physical activity. As a result, under Medifast's offering, weight loss medications become one important element in an overall tailored lifestyle plan that includes coaching, community support, healthy habit development, and nutritionally balanced meals, along with exercise. This holistic approach we are piloting is collaborative between the customer, coach, and clinician, focusing on helping customers achieve lasting health and wellness as they learn to make a healthy lifestyle second nature. As part of the telehealth pilot program I mentioned, we have been working closely with a set of select coaches to bring them up to speed on the benefits of the OPTAVIA solution for those who are currently using or are considering using GLP-1 or other weight loss medications. Initial feedback suggests that most coaches involved in the pilot are optimistic about having another tool at their disposal for use with customers and that the partnership between clinician and coach is productive for customers who want an approach that fits their own unique needs. This pilot program has provided us with some important data and understanding, and we'll use this information to inform our thinking now that we have shifted into the second phase of our pilot program. During the second phase, we are measuring key metrics associated with OPTAVIA customers who are combining prescribed medical weight loss medicines with our OPTAVIA program. We believe there is significant potential to maintain our market share and growth position by tapping into this important new market, whether through a partnership, acquisition, investment, or an organically developed solution. And we expect to provide more details on our approach in the coming months. Of course, for all those people who are not interested in weight loss medications, OPTAVIA continues to offer a compelling lifestyle modification opportunity. With our clinically proven Coach-led model, that is built on the six macro habits of health, providing the cornerstone of reaching a sustainable, healthy lifestyle. Customers benefit from the support of an OPTAVIA Coach who understands the challenges one faces when looking to improve their overall health and wellness, with most coaches having started as customers themselves. The active role the coach takes, as well as the support of thousands of like-minded individuals in the OPTAVIA community, who are also on their own health and wellness journeys, is what continues to make our solutions so effective. What is clear to the Medifast leadership team is that medical weight loss solutions have to sit within an overall health and wellness ecosystem. Medications alone are not a long-term solution. And only by helping drive holistic lifestyle shifts can we help customers achieve lifelong transformation. Exercise is one important element of that, which is why we're excited by our entrance into the sports nutrition market that took place in mid-September with the launch of our new OPTAVIA ACTIVE product line. The initial products in our new OPTAVIA ACTIVE line consist of essential amino acids, whey protein powders, and a digital exercise program offered through a partnership with Aaptiv. The products are aligned with the habits of healthy motion, one of the six macro habits that underpin our business health model, and can be used by individuals actively looking to move forward along the health spectrum by adding exercise to their health routine, whether as part of a medication-supported or non-medication-supported approach. The products include two flavors of essential amino acids, or EAAs, as well as two flavors of whey protein, and are developed to help support healthy muscle maintenance in conjunction with both exercise and everyday activity. Aging and weight loss are two common causes of reduced muscle mass, which is why it is important to have a diet that is inclusive of EAAs and quality protein and is nutritionally balanced. The objectives of this launch are threefold. First, we believe these products expand our addressable market, allowing our coaches to attract a new demographic to OPTAVIA. Second, they're expected to extend the lifetime value of OPTAVIA customers by extending their time with OPTAVIA as they learn to live the habits of healthy motion during and after achieving their healthy weight. And lastly, they extend our offering by adding exercise to the lifestyle program, making it ideal for those who are interested in using lifestyle modifications along with the support of medical weight loss. All the products are designed to be used in conjunction with our existing OPTAVIA plans. The new OPTAVIA ACTIVE product line expands the breadth of our overall addressable market in an important way. The business opportunity within the sports nutrition market is substantial, with a total addressable market that is over three times the size of the structured weight management market in which our products operated exclusively in the past. We expect to add further ACTIVE products to the line next year. The work with weight loss medications and the entry into the sports nutrition market are really just the first steps in Medifast's work to transform into a total lifestyle company, helping our customers make a healthy lifestyle second nature. Regardless of whether a customer wants to explore weight loss, with or without a medical solution, Medifast has a compelling option for them. Long-term success is driven by the adoption of a healthier lifestyle built on nutrition, exercise, and other lifestyle habits. Our scientifically developed products are effective in achieving weight loss when following our clinically proven plans, including the support of our independent coaches. In a clinical study, it was shown that those on the optimal weight five-in-one program who had the support of a coach lost ten times more weight than the self-directed group. Our approach is flexible and inclusive, and we're excited by the opportunities that lie ahead. Turning to the third quarter numbers, our revenues for the quarter were at the high end of our guidance, though down year-over-year by 39.6%, as challenges faced earlier in the year continued as expected. We continue to believe that the efforts we are taking to expand our product offerings, incorporate medical weight loss into our programs, and diversify our customer base will aid in improving these trends. However, we would not expect to see this improvement until 2024. The operating margin for the quarter of 10.8% was ahead of our expectations, as cost reduction actions taken as part of our Fuel for the Future initiative continue to generate savings ahead of schedule. Operating margin is down approximately 150 basis points compared to last year, as investments in customer acquisition and a loss of leverage of fixed costs due to lower revenues year-over-year had a negative impact on the margin. As a reminder, 70% to 75% of our expenses are typically variable in nature, which speaks to the adaptability and resiliency of our business model. As we move into the fourth quarter, we continue to focus on a number of growth initiatives using our strong debt-free balance sheet and our Fuel for the Future expense reduction initiatives to help fund them. As mentioned earlier, in addition to our new OPTAVIA ACTIVE product line and the medically supported weight loss opportunities we are assessing, we are also pursuing the expansion of our customer base by focusing on demographic groups in the U.S. where we are underrepresented. Specifically, we have been taking steps to further penetrate the Hispanic market and we have made great strides in translating our main materials and website into Spanish to better connect with this group. We have now translated more than 70% of our core materials into Spanish and expect to be completed by the end of the year. In October, in conjunction with the National Hispanic Heritage Month, we executed our first-ever OPTAVIA Spanish language social and digital pilot targeting the U.S. Hispanic market. It was intended to begin building the OPTAVIA brand awareness and measure the effectiveness of our efforts to learn how to best market our clinically proven health benefits and scientifically developed products, plans, coaches, and community to this growing demographic. It also enabled us to test and learn how to most effectively match Spanish-speaking coaches with U.S. Hispanic customers. The goal is to leverage the learning from the social and digital pilot as we anticipate launching a larger, more comprehensive media effort to the U.S. Hispanic market in 2024. We believe that advancing our business in the U.S. Hispanic demographic will help us set the stage for future expansion into Latin America. Also, we continue to evaluate the effectiveness of our customer acquisition initiatives, including our recent limited testing of company-led digital marketing, which we conducted over a three-month period to generate prospects. We are conducting attribution, analytics, and path to purchase optimization, which should all result in more efficient advertising spend and scalability. As a company that has a history of marketing directly to consumers, we understand the benefits of corporate advertising to generate prospects for our coaches. It allows our coaches to better optimize their time and focus more on their energy on supporting their customers. We just have to ensure that the return we are getting on these expenditures is commensurate with the costs. We also continue to grow our efforts around our corporate social responsibility initiative, Healthy Habits For All. At our OPTAVIA convention in July, our coach community raised funds for our non-profit partners No Kid Hungry and Living Classroom Foundation. Together with our coaches, we assembled over 6,000 kits for local Metro Atlanta kids. As kids headed back to school, our curriculum reached a new milestone, impacting an estimated 100,000-plus students in thousands of schools across the nation, free of cost since it launched last fall. And in September, we officially opened a new kitchen at the facility of our local partners Living Classroom Foundation. Medifast provided capital funds to renovate the kitchen. Previously, instructors were teaching healthy cooking classes on hot plates. By welcoming kids into the kitchen and inviting them to experiment with healthy ingredients from a young age, we can cultivate a habit in them that can last a lifetime. So, to summarize, backed by a strong balance sheet with no debt, we are building out a new approach that better reflects the new realities of the weight loss and health and wellness marketplace, and which plays to the competitive strengths of our existing offering. We continue to seek to broaden our offerings to integrate medical weight loss, expand our addressable market, and extend our demographic and geographic reach, along with optimizing our coach compensation and increasing corporate advertising to bring in new customers. These efforts are expected to aid in turning around the recent decline in new customers and coaches we have experienced over the past year. We do not expect to start seeing a meaningful impact from these efforts until 2024. And our guidance for our fourth quarter, which Jim will cover in just a minute, reflects the continued short-term challenges we face in customer acquisition in what is seasonally a weaker quarter. However, we do expect our highly variable cost structure and expense reduction efforts under our Fuel for the Future initiative to continue to shore up our profit as we mitigate some of the revenue weaknesses in the quarter. With that, I'll turn it over to Jim to go over the specifics of the quarter.

Thank you, Dan. Good afternoon, everyone. Third quarter 2023 results were at or above our guidance. As we continue to execute our cost reduction initiatives with the savings intended to be utilized for key initiatives to stimulate growth. Revenue of $235.9 million was at the upper end of our guidance range of $220 million to $240 million, but decreased 39.6% versus the year-earlier period, primarily driven by a decline in the number of active earning OPTAVIA Coaches and lower productivity per active earning OPTAVIA Coach. Customer acquisition continues to be pressured by the macroeconomic shift impacting inflation and interest rates and the growth in popularity of weight loss medications. We ended the quarter with approximately 47,100 active earning OPTAVIA Coaches, a decrease of 28.9% from the third quarter of 2022. Average revenue per active earning OPTAVIA Coach for the third quarter was $5,008, a year-over-year decline of 15.1%, reflecting the continued headwinds to customer acquisition, partially offset by a price increase we implemented in November of last year. Gross profit decreased 37.3% year-over-year to $177.4 million, driven by lower revenue, while gross profit margin improved 270 basis points to 75.2%, positively impacted by efficiencies in inventory management and lower supply chain costs, including benefits from the optimization of our distribution center footprint. SG&A expense was down 35.3% year-over-year to $151.9 million due to the decreased coach compensation on lower volumes and fewer active earning coaches, as well as progress on several cost reduction and optimization initiatives and the impact of charitable donations in 2022. SG&A as a percentage of revenue increased 430 basis points, primarily reflecting the loss of leverage on fixed costs due to lower sales volumes compared to 2022, as well as market research and investment costs in this year's third quarter related to medically supported weight loss activities. Income from operations was $25.5 million in the third quarter of 2023, down 47% versus the year-earlier period, driven by lower gross profit, partially offset by lower SG&A, and aided by the Fuel for the Future cost reduction efforts. As a percentage of revenue, income from operations was 10.8% in the third quarter, a 150 basis point decline versus the year-earlier level. The effective tax rate of 12.9% was lower than expected and meaningfully lower than the 24.5% recorded in the prior year's third quarter, due to an increase in the tax benefit for charitable donations of inventory, an increase in research and development tax credits, and a decrease in state income taxes. During the quarter ended September 30, 2023, the company completed its 2022 Federal income tax return, which included an update to the estimated tax-basis cost of charitable donations of inventory and the estimated research and development tax credits. Net income in the third quarter of 2023 was $23.1 million, or $2.12 per diluted share, compared to $36.2 million, or $3.27 per diluted share, in the year-earlier period. Turning to our balance sheet and cash flows. Our financial position remains strong with $157.8 million in cash, cash equivalents, and investment securities, and no interest-bearing debt as of September 30, 2023. Cash flow from operations continued to be strong at $137.1 million from the nine months ended September 30, 2023, relatively inline with the year-ago period. Turning to the guidance. While our third quarter results were ahead of our guidance, the operating environment remains challenging, and we continue to expect that future growth initiatives will take time to gain traction and deliver meaningful results. For the full-year 2023, we are estimating revenue in the range of $1.05 billion to $1.07 billion, and diluted EPS to be in the range of $8.65 to $9.55. Our guidance assumes a 20.5% to 21.5% effective tax rate. In summary, we remain confident that our strong financial position, coupled with the progress we are making towards exciting new growth opportunities, discussed by Dan, will enable us to evolve our business like we have successfully done in the past and allow us to continue to generate significant cash flow and strong returns on capital in the years ahead. With that, let me turn the call back to the operator for questions.

Thank you. At this time, we will be conducting a question-and-answer session. Our first question comes from the line of Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.

Yes, hello. So, your gross margin was very impressive in the quarter, the 75% number. It sounds like those are kind of permanent-type improvements you've made along the lines of the supply chain. Is that 75% gross margin level, is that something that's roughly sustainable going forward, or how should we think about that level?

Yes, Linda, this is Jim. We saw an improvement in our gross margin during Q3, reaching 75%, thanks to our Fuel for the Future initiatives. We're beginning to experience the benefits of optimizing our distribution centers, which has improved our inventory controls and reduced obsolescence compared to the previous year. Additionally, our enhanced procurement practices have helped lower costs. However, I want to note that we won't discuss gross margin specifics since we haven't provided future guidance. What I can mention is that there are fixed costs included in our cost of sales, and with the anticipated decrease in revenues, we may lose some leverage on our profit and loss statement related to gross margin. This is likely to impact Q4. Currently, we're estimating a revenue range for Q4 between $170 million and $190 million, and we expect that loss of leverage to affect gross margin.

Right, okay. And then, I'm curious about, Dan, you're talking about the testing or trying out some digital marketing methods. And that's a little unusual being that you pay a lot of commissions to your coaches to kind of drive demand. Do you think down the road, like if you were to adopt some kind of permanent method of digital marketing, is there any way to quantify what percentage of revenue you might spend on that? Are we talking it's just a few percentage points of revenue, or could it be higher than that? Thanks.

We're in the early stages of testing these approaches. This isn't new for us; we previously had a direct marketing strategy aimed at end users. As you've mentioned, we shifted away from that, allowing our coaches to leverage word-of-mouth through social media instead of spending our budget on it. The landscape has evolved, and given changes in social media algorithms and the increasingly competitive messaging environment, we believe now is a good time to apply past insights, particularly regarding medical weight loss, and introduce a fresh message through our advertising efforts. We have conducted small tests and are pleased with the results so far. Any actions we take will depend on understanding the financial benefits. It's important to note that we're currently testing in both the Hispanic market and more broadly to improve client acquisition costs while promoting new messages that align with our overall offerings, which include insights on medically-supported weight loss and a more comprehensive program. We believe that all of this will enhance our coaches' productivity, helping us return to previous performance levels.

Okay. And then, I was just wondering about if you could give any color on what you saw in October, with the return to people paying educational loan payments. Like, are you seeing kind of worsening trends or kind of the same? What are you seeing kind of so far in the most recent couple of weeks?

When we examine our metrics, particularly customer retention and average revenue per order, we see that these figures have remained stable throughout October. However, customer acquisition is the one metric that is currently below our historical averages, which is reflected in the guidance we provided.

Okay. And then, I guess I can do the math, but Jim, what are you guiding for tax rate for the fourth quarter?

For the fourth quarter, I want to clarify the tax rates. As we mentioned in the earnings release, we completed our 2022 tax return in the third quarter, and as part of our usual process, we make adjustments to prior estimates based on the actual amounts from the tax return during this period. Typically, these adjustments are not this significant, and we did not expect it to be this large, but it is essentially a one-time adjustment. We anticipate that our tax rate for the full year will be between 20.5% and 21.5%. Therefore, for the quarter, I don't expect to see a rate of 12.9% again; it will be much closer to the 20% level.

Okay. And is that one-time tax benefit? Is that cash or non-cash?

That was a cash benefit that we got in 2023.

So, it's essentially reflected in your year-to-date cash flows?

Correct, yes.

Hi, guys. Thanks for taking our question. I wanted to ask a little bit around the consumer that seems to not want to engage with the medically-supported weight loss. To be honest, a 50-50 split is frankly better than we would have anticipated, just given all kind of the headline news about the GLP-1 drugs. Can you maybe offer some color around what their hesitation is to use kind of the pharmaceutical option on that? And is that something that maybe over time their opinion could change?

Sure. This is Dan. We've found this aspect quite interesting as well. We had expected a different response. It seems that the group of consumers we're discussing tends to be more assured in their ability to manage weight loss independently and do not feel prepared for medical interventions. What we’ve discovered is that as a person's target weight loss increases, their interest in medically-supported weight loss also rises. Additionally, those expressing interest in medically-supported weight loss are often the same individuals who show enthusiasm for the OPTAVIA program. We conducted a trial of a variation of our program aimed specifically at individuals considering or currently using medically-supported weight loss. This group showed about four times the interest in our program compared to those not interested in medical options. Ultimately, it comes down to their self-confidence in managing weight loss independently and their overall weight loss goals.

That's helpful. I think in your prepared remarks, you mentioned that you were working with a select group of coaches to help kind of train them on the cross-sell with the GLP-1 drugs. Could you just give us an idea for, was it just kind of a random selection of coaches and you just wanted to have a smaller pilot program, or were they selected based on maybe their existing customer base that might be more susceptible or more likely to pair the GLP-1 drugs with your program?

We typically collaborate with our coaching leadership to identify various elements to test, and this selection varies based on our objectives. The coaches chosen for this initiative were selected for their adaptability and past performance in engaging their client base. Rather than pre-screening them for openness to the idea, we took a small subset of our over 40,000 coaches, focusing specifically on how clients they attracted would react and how the coaches themselves would engage with this new partnership model among clinicians, coaches, and clients. The feedback has been very encouraging. Initially, there were many questions from our coaches about the implementation. However, as the pilot progressed, we observed an increasing number of clients who are being coached and are currently participating in medical weight loss programs. The ability to offer a prescription for medically-supported weight loss alongside support from an OPTAVIA Coach has proven to be highly appealing. As a result, we have advanced from the first phase of the pilot to the second phase, concentrating on understanding what a medically-supported weight loss client looks like throughout their health transformation journey with their coach. The initial results were positive enough for us to proceed, and we strongly believe that the OPTAVIA lifestyle program, which now includes the ACTIVE line, has become more relevant than ever, particularly for the 50% of clients seeking medically-supported weight loss to complete their journey.

Thanks, that's helpful information. Since you mentioned the ACTIVE line, could I ask a question or two about it? It seems to be designed to complement someone who is already involved in the broader program. Do you think there's a possibility to introduce ACTIVE to a customer who is already at their target weight but wants to maintain it and prefers a collaborative environment with a coach? Or is it mainly intended for clients who have already signed up for the broader program and use it as they approach their weight loss goals?

Actually, it's a combination of both. This expansion significantly broadens our addressable market. For individuals focused on weight loss, our coaches can incorporate healthy habits like exercise into their programs. This approach increases the lifetime value by boosting spending while they're enrolled, as well as extending it after they complete the program. Additionally, it enables us to target individuals closer to their healthy weight who are seeking to achieve optimal health in their journey. In this way, we can enhance the health of those already at a healthy weight by integrating exercise. Furthermore, introducing the ACTIVE line and program completes our overall lifestyle management solution. It's important to note that research from medical weight loss pharmaceutical companies ties their claims to healthy diets or reduced calorie intake alongside increased physical activity and the use of GLP-1 drugs. Therefore, adding the ACTIVE line and coaches focused on promoting physical activity enhances our offerings and positions us as a key player in the long-term solutions for users of GLP-1 drugs.

That's very helpful. Maybe one more question on the ACTIVE line. I know we're still early days. Is there kind of a line of sight to expand the product offering there beyond just kind of your core protein and amino acid blend? Are there other products we could think about, whether it's like either supplements or like a pre-workout that would be complementary, or is that too much kind of outside the core of what you're trying to do?

Yes, the plan is to extend the line with products being launched next year. Again, reflective of what we learn about this initial launch. But we're already receiving feedback from and had already identified some close-in opportunities to make the line more competitive and more complete. So, the intention is to introduce additional products next year.

Okay. Great. I'll hop back in the queue. Thanks, guys.

Thank you.

Thanks.

Our next question comes from the line of Doug Lane with Water Tower Research. Please proceed with your question.

Yes, hi. Good evening, everybody. And the case for the GLP-1 is pretty compelling, Dan, that you make here. And I understand wanting to add it to your product offerings. I guess I look at your balance sheet, I would just assume that outright acquisition makes a lot of sense. That's what WeightWatchers did. But you mentioned a number of other possible arrangements, partnerships, investments, et cetera. Maybe help us understand why something other than an outright acquisition could make sense here?

Sure, Doug. It's good to hear from you. We have been taking a very thoughtful approach to this. Initially, we were evaluating what role GLP-1 drugs might play in a coach-centered habit-based model. We moved from analyzing to exploring by partnering with three different telehealth companies. And that's allowed us to get a feel for what we have that's complementary, what they have that gives us the ability to make this offer compelling for our customers and our coaches. What we found is there's some things that we do very well that telehealth companies don't, and there's some things that they do very well or they have a capability of doing that we don't have the capability of doing. But there's a lot outside of that crossover. So, as we're moving into this next phase, we're trying to ensure that we do what is right for the business and, by that, I mean both coaches, clients, but also our financials. There are different levels of success and profitability inside telehealth companies, and as you know, we have one of our success marks in the past has been high cash generation and improved margins. So, we're thoughtful about how we maintain that, but also have the potential of leveraging some of these outside capabilities. So, it's an evaluation, and that evaluation is being made on an even deeper level now that we're moving into phase two of these pilots.

That makes a lot of sense. That's insightful. Can we envision a scenario where a partnership leads to an investment, which then progresses to an acquisition? This could be a multi-stage process, right?

Absolutely. We are very aware that while GLP-1 drugs from both the first and second generation have been available for some time, significant changes are occurring, including shifts in insurance coverage and the introduction of new products currently being tested. We are closely monitoring these developments to ensure we remain agile and make the best decisions for our investors and capital strategy. As you correctly noted, Doug, we have considerable flexibility due to having no debt, a strong cash position, and the capacity to make prudent long-term decisions as we continue to understand the market dynamics and how they fit into our model.

Hey, it looks like we have reached the end of the question-and-answer session. I'll now turn the call back over to Dan Chard for closing remarks.

Thank you, and thanks for your continued interest in Medifast. As a team, we're excited by the opportunity that lies ahead, and we look forward to sharing more on our progress in the coming weeks and months. We hope to see many of you at the upcoming investor conference, including the Stephens Annual Conference on November 14th and the ICR Annual Conference in early January. Again, thank you for your time today.

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