Greetings. And welcome to the Medifast First Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It’s now my pleasure to turn the call over to Steven Zenker, Vice President, Investor Relations. Steven, please go ahead.

Good afternoon. And welcome to Medifast’s first quarter 2025 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 first quarter ended March 31, 2025. It 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 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 statement. 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. Now, I would like to turn the call over to Medifast Chairman and Chief Executive Officer, Dan Chard.

Thank you, Steve. Good afternoon, everyone, and thank you for joining us today. There’s no question that we are operating in a time of tremendous opportunity. The health and wellness space, particularly around weight loss and weight management, is evolving rapidly, and we believe Medifast is well-positioned to take advantage. Scientific research has shown that the use of GLP-1 medications can result in up to 40% of weight loss coming from muscle mass, equivalent to a decade’s worth of muscle loss within just 12 to 18 months. Furthermore, for 88% of patients, GLP-1 medications do not fully support their achieving a healthy weight. We believe these findings reinforce the importance of supporting any health journey with a straightforward health and wellness lifestyle solution to achieve long-term health goals. This is relevant for those using weight loss medications, as well as for those pursuing weight loss and improved health without the use of medications. In either case, Medifast’s OPTAVIA program helps preserve lean muscle and delivers healthier outcomes through healthy habits, nutrition, and coaching for those seeking lasting health outcomes. At the same time, independent research that we have commissioned indicated that 83% of people looking to lose weight lack confidence in transitioning to a long-term healthy lifestyle. This is precisely the strength of our OPTAVIA program, which offers a holistic approach to weight loss and healthier living. Our offering combines science-backed products, personalized nutrition plans, the support of a dedicated OPTAVIA coach, and integration into a like-minded community. Additionally, where appropriate, we provide access to weight loss medications through our collaboration with LifeMD. This integrated solution gives people the tools, accountability, and encouragement they need to learn how to make a healthy lifestyle second nature, lose weight, keep it off, and simplify a complex health journey. Coaches play a vital role in helping people navigate both the active weight loss phase and the weight management phase that follows. These coaches, having faced similar challenges themselves, bring invaluable experience to the process. Studies indicate that most people using GLP-1 medications for weight loss struggle with long-term weight maintenance. An average of two-thirds of weight loss by people using medications is regained within a year of stopping them. And with up to 74% of people discontinuing GLP-1 medications within the first 12 months, it is clear that there is a demonstrated need for guidance in achieving health and wellness. This is exactly why our approach is so relevant. It not only helps people lose weight, but also instructs them in healthy habits that can be utilized to help preserve muscle mass, manage weight loss, and improve health and wellness. With more than 40 years of experience supporting people with their health and wellness goals, including many years when we were selling through multiple channels, we continue to believe that our coaches represent a core competitive advantage. They are our most effective customer acquisition engine and the most efficient way to scale our business. In 2025 we are sharpening our focus on reigniting that engine. We’re taking action to help simplify the coaching experience, increase productivity, and create scalable and successful businesses through stronger new customer acquisition, better retention, and the re-engagement of former customers. There are three key elements to this initiative. First, we are streamlining the coach development path, making it easier for coaches to succeed in a changed competitive environment. We envision that a more clearly defined path will show them how to achieve early wins and develop their business by placing more emphasis on building coach leadership skills. We anticipate that with more intuitive incentives and clearer guidance on how to grow their businesses, coaches will be better empowered to optimize their efforts and achieve financial success. Through leadership education, podcasts, networking events, and shared best practices, we are working to create an environment where coaches can thrive and where their success becomes repeatable and scalable. Second, we are enhancing the tools and insights available to the coaches. Upgrading digital business tools are expected to provide a more seamless way for coaches to track customers’ progress and they can use that data to tailor solutions that best meet individual customer needs. Education resources will focus on how to deliver more personalized customer service, equipping coaches with the skills and strategies to build stronger relationships and more sustainable businesses. This is especially important in their ability and confidence in supporting customers who are currently using or have used a GLP-1 medication. Currently, almost half of OPTAVIA coaches have supported GLP-1 medication patients, the highest level we’ve seen to date, with 25% of coaches having had personal experience using GLP-1 medications themselves as part of their own weight loss and health journey. Third, we are continuing to broaden our product offerings to give coaches more tools to serve their customers. Over the past 18 months, we’ve launched OPTAVIA ACTIVE for those individuals who want to incorporate exercise into their plans, as well as the OPTAVIA ASCEND line, which is designed specifically for those using GLP-1 medications or transitioning into a weight management phase after achieving their healthy weight. With its high protein content, the ASCEND line helps customers preserve lean muscle mass, a core concern for GLP-1 users and all people trying to lose weight and learning how to keep it off. With a more diverse set of offerings, our coaches have the flexibility to create highly tailored plans that meet customers wherever they are in their health and wellness journey. Science remains at the core of our program and products. With recent development breakthroughs, our programs and products should be even more effective in delivering key benefits to support customer health and wellness journey. These development breakthroughs will first impact our OPTAVIA Essential line and will play an important role in the business transformation as we continue to implement changes over the next 12 to 18 months. Additionally, we are currently developing studies that will evaluate the efficacy of the new ASCEND line and the more established Essential line, along with the holistic OPTAVIA model, which pairs customers with a coach and teaches customers how to make a healthy lifestyle second nature, giving coaches even more points to demonstrate why OPTAVIA offers a unique and effective solution. We expect investment in these areas to be mitigated by reductions in company-led marketing costs. While those efforts helped re-engage past customers, they proved less efficient at attracting new ones. This year, we’re putting the emphasis squarely back on our coach community, which remains central to the strength of our brand and the success of our program. The impact of coach support was measured in our clinical research and showed that customers who received coaching support while using the OPTAVIA plan lost 10 times more weight and 17 times more fat over the self-directed group. Turning to our first quarter results, revenues and EPS were in guidance range, with bright spots continuing to appear in parts of the business. For the fourth consecutive quarter, we saw lower year-over-year coach productivity declines, driven in part by the increased productivity of newer coach cohorts. These new cohorts are exhibiting new customer growth ahead of last year and are at levels we experienced back when the business was growing. Q1 marked the first meaningful year-over-year increase in new coaches in the past three years, with a double-digit increase compared to the same period last year. While this hasn’t yet made a meaningful impact on revenue, we believe it sets the stage for future improvement in overall coach productivity and new customer acquisition, and positions us for coach growth in the back half of 2026 if the trend holds. In the meantime, our continued focus on driving cost savings is helping us maintain a strong balance sheet. While a weaker economy could present consumer demand headwinds, we’ve historically seen that economic slowdowns can actually help increase coach recruitment as more people seek additional income-earning opportunities. Also, we presently do not expect tariffs to have any meaningful impact on our business this year. As 2025 progresses, we expect to get a clearer picture of just how resilient these early positive indicators are. The foundation we’re putting in place through our coach-led strategy and evolving product mix supports our focus on delivering more definitive signs of a turnaround by the end of the year. In summary, our focus in 2025 is on empowering our coaches to be more productive, more successful, and better equipped to meet the needs of a growing and diverse customer base. By providing a holistic solution inclusive of clinically proven plans, access to weight loss medications through LifeMD, and the power of customized coaching, we’re delivering a differentiated solution that addresses the full spectrum of weight loss and long-term health. This proven business model has been highly successful in the past and we are optimistic about its potential to drive growth again in the near future.

Thank you, Dan. Good afternoon, everyone. As Dan mentioned, first quarter 2025 results for both revenue and EPS were within our guidance ranges. Revenue for the first quarter was $115.7 million, a decrease of 33.8% versus the year earlier, primarily due to a decrease in the number of active earning OPTAVIA coaches. We ended the quarter with approximately 25,400 active earning OPTAVIA coaches, a decrease of 32.8% from the first quarter of 2024. As Dan mentioned, we continue to see lower year-over-year declines in revenue per active earning coach. Average revenue per active earning OPTAVIA coach for the first quarter was $4,556, a year-over-year decrease of 1.4% compared to a year-over-year decrease of 22.8% during Q1 of 2024. This moderation is being driven in part by the increased productivity of newer coach cohorts, which are exhibiting new customer growth ahead of last year. Gross profit decreased 33.8% year-over-year to $84.2 million, driven by lower sales volumes. Gross profit margin for the current quarter was 72.8%, which was consistent with the year-earlier period. SG&A expense was down 28.4% year-over-year to $85.5 million, primarily due to a $22.4 million decrease in OPTAVIA coach compensation on lower volume, $3 million on market research and investment costs related to medically supported weight loss, which were incurred during the first quarter of 2024 that did not occur in the current quarter, a $2.5 million decrease in employee compensation and a $1.3 million decrease in credit card fees. SG&A, as a percentage of revenue, increased 560 basis points, primarily due to approximately 440 basis points of loss of leverage of fixed costs due to lower sales volumes and 200 basis points of company-led marketing efforts, primarily due to lower sales volumes. These increases were partially offset by 170 basis points of market research and investment costs related to medically supported weight loss which were incurred during the first quarter of 2024 and did not recur in the current quarter. Loss from operations was $1.3 million in first quarter of 2025 down $9.2 million versus the year earlier period. As the decline in gross profit was largely offset by lower SG&A as a percentage of revenue, the loss from operations was 1.1% in the first quarter, 560 basis points below the earlier level. Other income decreased 50.9% year-over-year to $1.8 million due to higher unrealized gains on our investments in LifeMD common stock in the year earlier period. The company's unrealized gain on investments in LifeMD common stock for the first quarter of 2025 was $0.6 million. Income tax expense of $1.3 million for the first quarter of 2025 was lower than the $3.3 million recorded in the prior year’s first quarter. The decrease in income tax expense was primarily driven by a decrease in pre-tax income and a tax shortfall for stock compensation partially offset by a change in unrecognized tax benefits due to the finalization of a state tax examination. Net loss in the first quarter of 2025 was $0.8 million or $0.07 per share, compared to net income of $8.3 million or $0.76 per diluted share in the year earlier period. Turning to our balance sheet, our financial position remains strong with $164.6 million in cash, cash equivalents, and no interest-bearing debt as of March 31, 2025. Now I will turn to guidance. We are expecting second quarter revenue to range from $85 million to $105 million and loss per share for the quarter to range from zero cents to $0.55. Guidance excludes any gains or losses from changes in the market price of our LifeMD common stock holdings which we are unable to estimate. While it continues to prove challenging to forecast our results for the remainder of the year, we continue to see bright spots in certain pockets of the business and believe they set the stage for improvement in coach productivity in the second half of 2025 with coach growth in the second half of 2026.

Thank you. Our first question is from Jim Salera from Stephens. Your line is now live.

Guys, good afternoon. Thanks for taking our question. I’m going to start off on the second quarter topline guidance. If we look at where the kind of the rate of decline for the topline over the past four quarters, it’s been improving every quarter and that the rate of the year-over-year sales decline has slowed. But then if I just take the midpoint of the guidance, it’s right around 95%, that would actually imply an acceleration in the year-over-year rate of decline. So can you give any color around what’s going on there in the second quarter and why that shouldn’t continue the trend we’ve seen over the prior four quarters?

Thanks, Jim. To address that question right on, when you look at the midpoint of the range and look at what you’re exactly talking about, it could indicate an acceleration. However, you have to take into consideration the timing of promotions that the company has done over Q1 of this year versus Q1 what we’re planning on doing and what we did last year. So in Q1 of this year, we did run a promotion that did quite well. Dan mentioned it in the prepared remarks; it is the first time we saw new coaches actually see a year-over-year improvement, and we haven’t seen that in about three years. And that was due to running a promotion that really incentivized the field to focus on acquiring new customers and also acquiring and sponsoring new coaches. So that worked very well. When you run a promotion like that in a quarter, it does have impacts to the next quarter. Last year, we ran a promotion in Q2, and in this year, in our guidance, we’re not really planning on having a promotion. That’s not to say that we could not change our minds, but what our guidance is showing is that we’re not going to be doing such things in this year. So hopefully, that addresses your question. And I guess the last thing I wanted to say on that is, that doesn’t mean the following quarters would have that same accelerated trend that you’re referring to.

Hey, Jim. Let me just...

Okay.

No. Finish asking your question, then I just have a couple comments.

So essentially, we should see Q2 as the low point in terms of year-over-year rate of decline, like it should be the highest year-over-year rate of decline for the year, if I’m interpreting what you’re saying correctly?

Well, I can’t really go into that since we’re not providing guidance, but that’s the impact, what you’re seeing in Q2. But that, I wouldn’t lead that into, if you’re modeling it, that that trend will continue. That’s really all I can say on that point.

Okay. That’s fair.

And, Jim, I wanted to make you aware, as well as anyone else who’s joining the call for Q&A, that we have joining us today for the Q&A session, Nick Johnson, as well. Some of you have met Nick before, but Nick is our Chief Field Operations Officer and President of OPTAVIA. And Nick is the one who works closely with our now 25,000 coaches across the country. We wanted specifically for him to be here so he could respond to any specific questions you have about progress and programs that we’re making, the progress with the programs we’re making that we’re introducing to our coaches, as well as client acquisition productivity. Jim already touched on one of the important bright spots that are talked about, that we’re seeing in the field, which is year-over-year improvement in new coaches. I think the other thing we’ve talked about over the past several quarters, which continues to be an important trend, is the improvement of productivity, which continues to moderate to this most recent quarter being down 1.4% year-over-year. But that, as we’ve said before, is a reflection of what we believe is a trend in improving ability for our coaches to acquire new clients. And also, a key indicator, which has been in the past, as we’ve analyzed the business for the last 15 years, has been correlated with what typically has been an improvement in year-over-year active earning coach numbers. So, I’ll let you ask any specific questions, but I want to make sure that we’ll give a few minutes or just a brief opportunity for Nick to talk about some of these programs that are helping us see that improvement in year-over-year improvement in coach productivity. So, Nick, just take a minute to reflect on what’s happening in the field.

Yeah. Thanks, Dan, and thanks, Jim. So, if we look at those new cohorts as a bright spot that we’ve been talking about in the prepared remarks, it really comes down to four factors. Number one, coach leaders have evolved their training to the new environment, which is key. Those new coaches that have been brought in in the first quarter really only have experienced the GLP-1 environment. And as Dan said before, they’re experiencing productivity rates that are consistent with even high growth periods in the past. Second point here is the training has included support for those on and off GLP-1s. Half of our coaches, in fact, have supported someone on a GLP-1 already. The third point here is growth in new coaches and growth in that new coach productivity, looking at it year-over-year. A lot of that has to do with some of the programming that we enacted in the first quarter. These are incentives that are designed to both drive client acquisition, which improves productivity and it drives coach sponsoring. So as they’re getting activated in their first few months acquiring new clients, then they’re on to the next step, which is sponsoring coaches and becoming a mentoring coach or a business coach. So those incentives for coach leaders to help their new clients and coaches win in their early months is key to their progress through the compensation plan. As we talked about before, we did continue to pulse the client acquisition side through promotions and we did that through our Spring into Health program, which assisted in driving productivity for new coaches as well, pulling up those averages as we look year-over-year.

I appreciate that. Maybe one question for you and then either Jim or Dan. So do you have a sense of the new coaches, how many of them personally have utilized GLP-1 and is that new cohort one that is kind of over-indexing to the portion of your coaches that utilize GLP-1? And then maybe a tag-on question to that. I think you guys said on the last call in January, the ASCEND product line was just under like 20% of orders. Is there any update on that and how that progressed through the quarter and where we are today?

I can comment on that specific question with respect to how we’re looking at those new coaches coming in. We haven’t necessarily done that segmentation, but that is something that we could likely provide through Jim following the call. And then I’ll let Jim respond to the ASCEND question.

Yes. Regarding the ASCEND question, we previously mentioned that our performance with the ASCEND line has met our expectations, and this trend has continued throughout Q1. By the end of Q1, the ASCEND line accounted for approximately the mid-teens percentage of our total orders, aligning with our expectations.

Okay. And then maybe one last question for me. If I think about the shift in focus on the company-led marketing and kind of pulling back on the company-led marketing and investing back into the coaches, how should we think about that as impacting SG&A? I mean, does that mean that you’re pulling, do you say pulling back like you’re not doing any company-led marketing anymore or it’s just a reduction in the amount of, kind of help us size up what that impact might look like on SG&A as we think about the progression there through the remainder of the year?

Yeah. So, when you’re doing your modeling, Jim, look, we’re doing things with the company-led, as we mentioned in our prepared remarks. But remember that, as a percent of revenue, that was not that large of a percent as compared to the compensation we pay our coaches. We look at those and we look at the driver of which one has the better customer acquisition cost. We looked at that when we first started piloting it through Q1 and what we’ve determined is reactivation works quite well with company-led. So, we will continue to do that. So there will be some pullback, but it’s not going to be that dramatic in your modeling.

Okay. Sounds good. I will pass it on.

Thank you. Next question is coming from Doug Lane from Water Tower Research. Your line is now live.

Thanks. Good afternoon, everybody. Nick, glad you could be on the call. I think what I’d like to get maybe from you, if I could, is some perspective on the impact that GLP-1 has had on your coaching community. I mean, I get all the opportunities that you mentioned with the weight loss and gaining it back after you go off the drug, but it also makes it controversial. So, I wondered if the controversy of adding GLP-1 into the equation has had an impact on your coaching community?

Well, thanks, Doug, for the question. Certainly, the impact of the GLP-1 environment has been reflected in what we’ve been seeing throughout the last couple of years. It really, for us, is a training opportunity. It’s not necessarily a controversial topic in and of itself. It’s simply a disruption that causes us to have to retrain around the new environment specifically. As you know, it takes time for a training around a new way of looking at the market and looking at your offering, as it takes time to take hold and start to duplicate its scale inside of the network. So, the disruption really has an effect on the training approach and adjusting our sales to what the environment is giving us. But also, we continue to see bright spots, as we said in the prepared remarks, as Dan said in the prepared remarks, around what our new coaches are experiencing today. They only know the GLP-1 environment. They only know that the GLP-1s do exist. So, it’s not controversial for them. They’re still offering what we’ve historically offered in our core and then delivering beyond that from a lifestyle transformation perspective. So, that’s how I would respond to that question, Doug. Dan, anything from your side?

I think it's important to note that it's been over two years since GLP-1 drugs started to significantly affect our client base, particularly those who had previously been consistently using OPTAVIA. Initially, these drugs were seen as a way to address issues related to overweightness and obesity. However, it's become increasingly clear that while they can be a helpful tool, they are not a complete solution. Physicians have commonly prescribed these drugs in conjunction with lifestyle changes, but many patients either lack understanding of how to live a healthy lifestyle or opt for the easier path of using the drugs solely as appetite suppressants. As a result, we've noticed that the problems associated with GLP-1 drugs are now more visible than they were two years ago. Specifically, using a GLP-1 drug without altering one's lifestyle can lead to a significant loss of lean muscle mass, sometimes up to 40%. Moreover, many patients are not interested in relying on medication for life, which explains why 74% stop taking the drug after a year. Those who discontinue its use without engaging in lifestyle changes tend to regain the lost weight within that same timeframe. Our coaches have recognized this and are now able to assist clients considering alternatives to GLP-1 drugs, which has influenced recent statistics. Approximately 50% of our coaches have experience with clients using GLP-1 drugs, and about 25% have either tried or are currently using these medications themselves. We view this as an evolving landscape that presents greater opportunities for our coaches to help three specific groups: those who prefer not to incorporate GLP-1 drugs into their health journey, those transitioning off, and those who want support while using these drugs. We now have more clarity and fewer uncertainties than before, and our coaching team is adapting accordingly.

It’s very helpful. That’s good color. I mean, I get it. The landscape shifted dramatically with the introduction of GLP-1s, and so you’ve adopted, and so now you’re coaching. Your coaches are shifting as well in their ability to sell to all three of those clientele. But this is a lot of products now. Just out of curiosity, how much is a monthly cost of being fully on the GLP-1 and the supporting nutritional programs?

Well, actually, the majority of the clients who are on a GLP-1 drug or have transitioned off and want to continue their weight loss, the majority are using our 5-in-1 programs or Classic programs. Some of them also add the ACTIVE line, which is not a significant cost, but think about the monthly cost of being on the 5-in-1 program is roughly $400. If you break that down into how much it is per meal, it’s actually quite reasonable, because that’s feeding them 80% of their food in a given day. So five out of their six meals is enough to be a program. So the change has not been dramatic, and the impact and the benefits of adding either the ACTIVE product or transitioning to the ASCEND line is actually very much in line with what they have paid in the past.

Okay. Have you talked about what LifeMD charges for the GLP-1 monthly?

LifeMD is going, there’s a subscription cost to use their telehealth service, which is less than $20, I think.

Yes. A month, yeah.

And then they have a variety of price plans for their products, but the majority of people now, and I think this is true of our coaches who use them as well, are covered through their insurance. And most of our coaches or the clients of our coaches who are using a GLP-1 drug are using their primary care physician and their own insurance. So we have about, we’ll just say a majority who are using their own physician services. But we have a complete offer that allows us to use LifeMD where necessary.

Okay. That’s helpful. Well, it’s good to hear about the new coach cohorts and hopefully that bodes well for 2026 and beyond. Thank you.

Thank you. I want to express our appreciation for your questions and the chance to discuss the progress in our business transformation. As we refine our model, train our coaches, and enhance our offerings, we are dedicated to better meeting customer needs in this evolving environment. We now have a much deeper understanding of how our lifestyle program connects with those transitioning off GLP-1 drugs or opting not to use them. We are excited to continue improving our productivity as we move forward, and we will share more details about our progress in our next call or at upcoming investor conferences. Thank you all, and have a great day.

Thank you. That does conclude today’s teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.