Greetings, and welcome to the Medifast Fourth Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steven Zenker, Vice President, Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to Medifast's Fourth Quarter 2025 Earnings Conference Call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer; Nick Johnson, President; and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the fourth quarter ended December 31, 2025, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast's website. 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. Now I would like to turn the call over to Medifast's Chairman and Chief Executive Officer, Dan Chard.

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

Thank you, Dan, and good afternoon, everyone. I'm grateful for the opportunity to continue working closely with Dan and the Board throughout this transition. I joined the company in 2018, and I've been deeply involved in the work to reposition the company over the last several years. My focus now is on executing this transition to a metabolic health company, particularly in the field where our strategy becomes real. Our coach-led model remains Medifast's greatest strength, and the data reinforces that belief. By working with a coach, clients can achieve significantly better metabolic health outcomes, losing up to 10 times more weight and 17 times more fat on our flagship 5 & 1 metabolic health plan compared to those attempting to lose weight on their own. That difference underscores why we continue to invest in the coach experience and why we believe our model provides us with a real structural advantage in a crowded market. In a world where many solutions are increasingly virtual or transactional, our model is built on human connection, accountability, and community, and we believe that matters now more than ever. As Dan referenced, we're seeing early signs of improved productivity, and we're pairing that with targeted actions designed to make productivity sustainable. Premier+ and EDGE are both central to our work here. Premier+ has enabled us to simplify our offer, and we expect it to strengthen client acquisition and retention, making it easier for clients to start our program, understand the value, and stay engaged in their metabolic transformation beyond month one. EDGE is a program that incentivizes the duplication of highly productive coaches by rewarding the behaviors that drive client acquisition, coach sponsoring, and leadership development. In the fourth quarter, we achieved a double-digit percentage of active earning coaches reaching the important coach business leadership rank of Executive Director, the highest percentage since mid-2023. And the retention rate of those coaches hitting that rank for the following two months was the highest since 2022. This matters because duplication of this core rank is what ultimately grows their businesses. The more we can find ways to help new coaches reach this important rank, the more we expect we will be able to stabilize then scale the business. In addition, building on that, we're seeing higher engagement and activity levels in the field. As Dan mentioned earlier, coach-led opportunity meetings and training activity have increased significantly across the nation. Our optimal metabolic health story and the science behind it is giving coaches a sharper focus and stronger confidence in delivering meaningful value to their clients. We've invested in equipping them to share our breakthrough metabolic synchronization science responsibly and consistently through efforts like our annual scientific symposium as well as continuing education for our coaches. All of that is translating into more frequent and effective conversations, better follow-through, and a larger investment in in-person events across the country. We're also seeing signals that the word-of-mouth engine is strengthening. We've introduced an expanded referral-oriented activity, and we're seeing indications that a higher share of clients are recommending the program to prospective clients. There are also indicators that sponsoring is improving. And when you combine that with a younger tenured coach mix, it can create a flywheel of momentum. Historically, when productivity improvement was sustained, we have typically seen active earning coach trends improve within the following six to nine months. Delivering on that is what we are focused on for 2026. With that, I'll turn it back to Dan.

Thanks, Nick. Before I hand over to Jim, I want to emphasize two points. First, we are staying consistent. We are not pivoting our strategy. We are executing on what we've been building, moving upstream to address metabolic dysfunction with a clinically proven system built on science and a coach-led model that differentiates us. Second, we are focused on disciplined execution on retaining profitability. We are deepening our leadership in metabolic health through ongoing research and a new product line being developed with our metabolic science at the center. And both Nick and I will share more at the appropriate time as we move through the year. We will continue strengthening and simplifying the coach and client experience, and we will maintain cost discipline and protect our financial flexibility so we can invest in the areas that matter most. Our balance sheet remains strong, and our operating model is tightly aligned to the market realities we're operating in today. We have more work to do, but we're encouraged by the early indicators we're seeing. And as a result, we're confident in the direction we're headed. Now I'll turn it over to Jim to review the financials and our outlook.

Thank you, Dan. Good afternoon, everyone. Fourth quarter 2025 revenue was within our guidance range with revenue per active earning coach showing year-over-year growth for the first time since Q2 of 2022 and reaching its highest level since Q3 of 2024. Our fourth quarter loss per share was $1.65. The loss per share is impacted by a $12.1 million noncash valuation allowance we recorded against our deferred tax assets in the current quarter, which on a per share basis represented $1.10 of the $1.65 loss. The loss per share before the noncash deferred tax valuation allowance was $0.55, which was better than the guidance range we provided. Revenue for the fourth quarter was $75.1 million, a decrease of 36.9% versus the year earlier period, primarily driven by a decrease in the number of active earning coaches. We ended the quarter with approximately 16,100 active earning coaches, a decrease of 40.6% from the fourth quarter of 2024. This decline was driven in part by the rapid adoption of GLP-1 medications, which continues to impact the traditional weight loss category. It's also reflective of the work we have been doing to build a new coach leadership structure comprised of the most productive executive director organizations described by Nick. Accelerating the exit of less productive and less profitable coaches contributed to average revenue per active earning coach for the fourth quarter reaching $4,664, a year-over-year increase of 6.2%. This represents a much-anticipated green shoot during the current quarter with coach productivity turning positive both year-over-year and sequentially. As we have discussed previously, we view increases in revenue per active earning coach as an early indicator for future coach growth, which we believe will in turn lead to revenue growth. As a reminder, revenue growth is expected to take several quarters to materialize, and productivity per coach needs to sustain in order for revenue growth to occur. Gross profit for Q4 2025 decreased 40.9% year-over-year to $52.1 million, driven by lower sales volumes. Gross profit margin decreased 470 basis points to 69.4%, primarily driven by the loss of leverage on fixed costs of 420 basis points and a one-time restructuring charge of 40 basis points. SG&A expense for Q4 2025 was down 31.5% year-over-year to $59.9 million, primarily due to an $18.6 million decrease in coach compensation, a $5.8 million decrease in company-led marketing-related expenses, and a $4.2 million decrease resulting from the realignment of the employee base to lower revenue levels, partially offset by a $1.9 million increase due to a one-time restructuring charge and a $1.6 million increase in coach event costs. Q4 2025 SG&A as a percentage of revenue increased 630 basis points from last year, primarily reflecting 370 basis points of loss of leverage on fixed costs, a 300 basis point increase for higher coach event costs, and a 250 basis point increase due to a one-time restructuring charge, partially offset by 440 basis points of reduced company-led marketing-related expenses. During Q4 2025, we executed a restructuring across all of our business functions and further scaled back our marketing spend with targeted future savings of over $30 million. These restructured costs, along with other initiatives, are incorporated in our 2026 guidance. Loss from operations was $7.8 million in the fourth quarter of 2025 compared to income from operations of $0.7 million for the year earlier period, driven by lower gross profit, partially offset by lower SG&A. As a percentage of revenue, loss from operations was 10.4% in the fourth quarter compared to income from operations of 0.6% for the year earlier period. Other income increased 151.1% year-over-year to $1.4 million, primarily due to unrealized losses on our investment in LifeMD common stock in Q4 2024 that did not recur in the fourth quarter of 2025. Income tax expense was $11.7 million for the fourth quarter, an effective tax rate of negative 183.9% as compared to $0.5 million, an effective tax rate of 37.3% recorded in the prior year's fourth quarter. As I alluded to earlier, we recorded a $12.1 million noncash valuation allowance against our deferred assets in the current quarter, which was equal to our ending deferred tax asset balance. We assess deferred tax assets for realizability on a quarterly basis, and the current quarter's analysis warranted the establishment of the valuation allowance. Net loss in the fourth quarter of 2025 was $18.1 million or $1.65 per diluted share compared to net income of $0.8 million or $0.07 per diluted share in the year earlier period. The $12.1 million valuation allowance represents $1.10 of the loss on a per share basis. The loss per share before the noncash deferred tax valuation allowance was $0.55. With respect to our balance sheet, we ended the year with $167.3 million in cash, cash equivalents, and investment securities and no debt. Additionally, our working capital, defined as current assets less current liabilities, was $158.7 million as of December 31, 2025. Now I'll turn to guidance. We are expecting our first quarter revenue to range from $65 million to $80 million and our loss per share for the quarter to range from $0.15 to $0.70 per share. We expect to see continued coach productivity growth during the quarter, up both year-over-year and sequentially. With our confidence level up regarding visibility for the entire upcoming year as we focus on metabolic health, we are reinstituting annual guidance. For the full year 2026, we expect to make significant headway on our efforts to get back to profitability with revenue of $270 million to $300 million and loss per share between $1.55 and $2.75. Also included in our guidance is that we believe improvements to get back to profitability will start in Q4 2026, following the launch of our new product line, and we will be targeting improvements in earnings to continue into 2027 and beyond. Finally, we believe our working capital will be more than $140 million at December 31, 2026.

I want to start off by asking about the coach productivity and how we should think about the sequencing of that into 2026. Particularly, can you give us any detail around the guests or the consumers that are matched up with these coaches? You mentioned you noticed a younger composition of coach, but does that also apply to the consumers that are tethered to the coach? Can you offer any insight on how we see that progressing through '26?

Sure, Jim. Thanks for the question. This is Dan. Yes, you're focused on the right area. This is one of the significant changes we've experienced in recent years. As we mentioned earlier, this is the first instance since mid-2022 where we've observed a year-over-year improvement in productivity, and it surpasses the levels we've seen over the last several quarters. This reflects two main things happening with our coaches. They are sharing a new narrative centered on metabolic health, which resonates in an environment that has shifted the focus of weight loss largely to GLP-1 solutions. We've emphasized that metabolic health encompasses more than just weight loss. Consequently, we are attracting a new type of customer seeking different health benefits, linked to this fresh narrative. Our coaches have undergone retraining to effectively communicate this metabolic health message, which we are seeing lead to anticipated improvements. We expect that as we continue to refine our storytelling and roll out new products in the latter half of this year, the level of productivity will be maintained and even enhanced. Additionally, a key aspect of this quarter's report is the notable improvements in our cost structure. As Jim indicated, we successfully restructured the business to better reflect our current position, resulting in approximately $30 million in savings, which we expect to see slightly in the fourth quarter of last year and continuing into this year.

If I think about the sequencing of the top line, particularly against the backdrop of the $270 million to $300 million that you gave for the full year. If my math is correct, at the midpoint, 1Q is down like 37%, but the midpoint for the full year is only down around 27%. So that would imply improving generally throughout the year. Is it possible that we can get to a point where revenues are flat or maybe even modestly positive by 4Q? Or is it more of kind of a gradual improvement, but we should still exit the year with productivity positive, but absolute top line year-over-year still negative?

Yes, we are not providing quarterly guidance. Reflecting on 2022, we removed full year guidance due to the disruption caused by the introduction of GLP-1 medications, which required us to remain flexible in our investments to ensure we stayed on the right path. Now that we have focused on metabolic health and moved past the transformation phase into execution, we can offer longer-term guidance. We are pleased to share our annual guidance today, which indicates our increased confidence in the transition to metabolic health. Based on the information we've provided to investors, it is reasonable to expect stabilization in our top line, aligning with this expectation.

Yes, I'll start by addressing the first part of the question, and then Nick Johnson will share his insights on field observations. Currently, we are witnessing a significant increase in people discontinuing GLP-1 drugs. A recent study revealed that after two years, approximately two-thirds of GLP-1 patients stop using the medication for various reasons. This study also indicates that many of these individuals regain the weight they lost, and some even gain more than their original weight after ceasing GLP-1 usage. Consequently, we are seeing a substantial influx of clients that our coaches can engage. About a quarter of our patients are either currently using or have used GLP-1 drugs. Now, I'll let Nick discuss our coaches' success in attracting both new clients and those who have previously used, or are currently using, GLP-1 medications.

Thanks, Dan. Jim, as Dan was mentioning, the story in the field around metabolic health and specifically about what's to come. I think it's important for us to talk about some of those foundational pillars of our proprietary science metabolic synchronization, which focuses on a 14% reduction in visceral fat and 98% preservation of lean mass and then protecting healthy muscle. And when you think about that off-ramp group, and you think about the body composition, specifically around the type of weight that's being lost and you think about a healthy portion of that weight loss coming from lean mass, lean muscle, it's on consumers' minds. So when you think about what's coming with new plan, new program and system in the back half of the year, you can be thinking about solving for some of those outages, which are on people's minds today. And just to further articulate the point, our field is very excited about what's to come because they understand it's the quality of the weight that's coming off, where it's coming off, the type of dangerous visceral fat that's coming off as opposed to the type of weight that you want to maintain, specifically lean mass.

There are no further questions at this time. I would like to turn the floor back over to Dan Chard for closing comments.

I'd like to thank you all for joining the call today. We appreciate your continued interest in Medifast and the thoughtful dialogue that we've had this afternoon. We remain focused, as Jim said, on executing the transition to a more differentiated metabolic health company. We feel like we're well on our way to doing that and to strengthening our coach community and positioning the business for sustainable long-term performance. We look forward to updating you on our progress in the quarters ahead, and we thank you again for being with us today.

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