Q3 2020 Medifast Inc Earnings Call
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I'd like to turn the conference over to Scott Van Winkle. Please go ahead.
Good afternoon, and welcome to Medifasts third quarter 2020 earnings Conference call.
The call with me today are Dan Chard, Chief Executive Officer, and Jim Moroney, Chief Financial Officer.
By now everyone should have access to the earnings release for the period ended September 32020.
That went out this afternoon at approximately four or five PM eastern time.
If you've not received it really it is available on the Investor Relations portion.
Medifast website at Www Dot Medifast Inc. dot com.
The call is being webcast and a replay will be available on the company's website.
Before we begin we would like to remind everyone that the prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions.
Words believe expect and.
That's great 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.
Medifast assumes no obligation to update any forward looking projections that may be made in todays release or call.
All the forward looking statements contained herein speak only as of today to this call and with that I'd like to turn the call over to Medifasts, Chief Executive Officer, Dan Chard.
Thank you Scott and good good afternoon to everyone. Joining us. Thank you for taking time to be with US today on the call with me today is Jim Maloney, who is now a little more than three months into his role as our Chief Financial Officer.
That's why I provided some updates on our business performance over the course of the last quarter, Jim will review the Q3 financial results in more detail well then open up the call to take your questions.
I'm pleased to say that despite the wider issues felt by the retail sector. During the global pandemic metastases seems strong acceleration in growth during the third quarter.
Revenue increased 42.8% to 271.5 million and earnings per diluted share increased 120.5% to $2 or 91 cents.
This growth was driven by significant year over year and sequential improvements in the number of active earning coaches, which grew to 42100 independent OPTAVIA coaches in the third quarter, a new record level.
Productivity per active or any coach also increased sequentially to a record level of $6329 driven by an increase in both the number of clients are supported by each coach as well as an increase in average client spend versus Q2.
It's important shifts forward in coach productivity comes as a direct consequence is our continued focus on building tools programs and processes that allow coaches to be as efficient as possible as well as the relevance of our health and wellness offer in an environment, where consumers are looking for lasik solutions to their health and wellness needs.
Well the COVID-19 pandemic continues to cause economic and social answer a need for businesses, we feel confident in our ability to drive long term sustainable growth to deliver on our mission to offer the world lifelong transformation one healthy happens at a time.
That's the end of 2019, we have taken a number of important steps to accelerate the growth of our business.
Well with something quick responses to the pandemic. These initiatives are now delivering meaningful progress which is represented in the numbers, we have announced today import.
Importantly, we still have the adjustment was made to our business over the last two quarters is created and it's an important learnings which are now being used to further optimize our ability to deliver against our long term growth vision.
The company's focus continues to be on supporting our growing community of off the via coaches as they develop and focus on the four competencies that drive our business success, namely attracting new clients.
Supporting clients on the optimal way to five in one plan sponsoring new coaches and developing coach leaders.
The specific adjustments, we made to our business during the second and third quarters consisted of supporting coach led training.
It compelling incentive structure.
And a refined approach to how our coaches are leveraging social media.
With the new programming in place our community of coach leaders drove sustainable gains in both client new clients and new coaches.
A deep dive into this new cohort of clients shows us that we have to tap into a new group of consumers that may not have previously taught tried our products, but whose be saved the whose behavior is entirely consistent with our existing core client base as measured by retention and lifetime value.
We're also very encouraged to see that higher levels of coach conversion from this new client cohort were excited by these trends are looking forward to build on their on their success in the coming months ahead.
The health and focus of our coach and client community remain strong with our coaches highly engaged and enthusiastic about the opportunity that lies ahead for us all.
We just returned from our global alignment summit in Sundance, Utah, where we met with top leaders.
Discuss plans for the upcoming year.
I believe that the company and the feel is more aligned around our missions that at any point in our history and I'm enthusiastic about the prospects of driving operational and transformational success in 2021.
With the revised coach initiated training structure robust level of client acquisition strong trends in coach conversion and new insights around how to leverage new incentives and promotional structure. I believe we are well positioned to drive continued growth.
As we look to take advantage of the opportunities to scale over the next few years. It's important that we continue to build our technology, our manufacturing and distribution operational platform in.
In order to give us the infrastructure to power our growth.
With that in mind, we began taking deliberate steps earlier this year to ensure that we have the necessary runway to continue expansion.
Like many similar businesses, we made some proactive moves at the start of the pandemic to ensure that we would be able to handle both changes in demand and changes in working practices.
We prioritize production to our highest volume products limiting our SKU assortment to ensure that we would be able to meet the product demand across the core items and mitigate the risk of disruption to our supply chain.
This approach resulted in an uncharacteristic out of stocks in London or less promiscuous.
While this created some headwinds to our client experience. This move also accelerated some of our long term efforts to consolidate our medifast brand and products to create deeper focus around our OPTAVIA brand.
And currently we have been accelerating our long term supply chain initiatives to ensure that we create the bandwidth to handle our anticipated growth over the next several years.
Specifically, we have bolstered our management capabilities in this space with the addition of Lauren Walker as our new head of sales of global supply chain operations.
Ours is a seasoned supply chain executive.
With critical experience, a drug and driving long term sustainable growth, both direct sales and fast moving consumer goods businesses.
He most recently served as chief supply chain officers at young living essential oils, overseeing the company's integrated supply chain as well as engineering Enterprise project management and new market expansion.
Hi to young living.
He held several roles with Amway Corporation, most recently, serving as vice President manufacturing and technical support organization. She.
She also has held various positions at industry, leading companies, including church, and Dwight Johnson, and Johnson, and Procter and Gamble La.
Aren't as an exciting addition to the team and we're already seeing meaningful benefits from her involvement within the first two months of her tenure.
Next we have made intentional moves to increase our capacity in both powder and bar manufacturing as well as soon as well as distribution.
We have done this through relationships with an expanding network of co manufacturers, whose facilities have been qualified to manufacture our products.
This new manufacturing capability came online in October and will continue to scale as we move into next year ultimately more than doubling our current manufacturing capacity by the end of 2021.
We're also scaling our distribution capability to match our manufacturing capacity.
In addition to our supply chain enhancements, we continue to focus on our technology investment in capability at the beginning of the year, we announced the opening of our New Technology Center in Utah to further enhance our coach and client support capabilities and strengthen our growth platform.
We have now occupy the new space in our building out our capabilities amidst the challenges of the pandemic.
The key initiatives from our technology team have included the Alpha testing of two new apps focused on coaches and clients.
The first after the coach connect is enough does it designed to further increase the productivity of our coaches by giving them access to customize tools to manage their opted the coaching business.
Testing is now complete and we will launch the beta version of the App in the United States in the first quarter of 2021.
The second is the OPTAVIA client up which is focused on creating easy access to mill planning tools to help improve the client experience on the optimal way to five and a one plan alpha.
Alpha tested Alpha testing is also complete and we will launch the beta version of this app in the United States in the first quarter.
During the quarter. We also completed the deployment of a new cloud based telephony system designed to allow us to quickly scale, our call center capability around the world to support our growing community of coaches and clients.
As a reminder, we currently contracts with a partner to provide call center support through the call centers in the United States, the Philippines and Columbia.
Each of these recent technology enhancements follows the successful implementation of our new ERP system during the second quarter of this year.
Whether its supply chain technology programming or people were consistently investing in future growth all while driving strong momentum and margin improvement. Despite the inherent challenges of the COVID-19 pandemic.
Our team, including our loyal independent coaches and clients continue to successfully adapt to the ever changing environment and we're proud to be successfully helping clients achieve lifelong transformation what healthy habit as time during this unique period in society as a whole.
Our focus continues to be on growing the number of individuals who are seeking greater health and wellness and providing a holistic approach to achieving greater health in their daily lives.
We believe we can effectively and efficiently reach our target audience through our community of OPTAVIA coaches, who are increasingly leveraging social media channels to relate their success with the OPTAVIA habits of health system.
We benefit from increased societal quotes to sidle focus on the importance of health and wellness and a powerful coach powered system that is clinically proven to drive improved results.
Our growth vision is to achieve long term sustainable growth in our revenue in the mid teens by penetrating the large addressable market in the United States and then continuing our expansion in Asia Pacific markets and ultimately developing other large markets throughout the world in the years to come.
Before I turn the call over to Jim Let me know that our commitment to lifelong transformation is not just in our work with coaches and clients.
But also through our active support of the communities in which we live and work.
We recently executed our week of service program supporting living classrooms in.
And their work to help young people achieve their full potential.
Also continue to support no Kid hungry, particularly through an initiative at our recent off the via together live events.
This is a business that is focused on changing the lives of the many not the few and I'm proud of the work that the company our employees and our coach community are doing to create opportunities for people from all walks of life to deliver the best possible version of themselves in whatever way possible.
Let me now turn the call over to Jim Maloney, who will walk you through the financial results Jim.
Thank you Dan.
Good afternoon, everyone.
It's been a pleasure getting to know many of you over the past few months and I look forward to continuing this dialogue.
With that.
Let me walk you through our financial results for the third quarter ended September Thirtyth 2020.
Revenue in the third quarter of 2020 increased 42.8% to $271.5 million from $190.1 million in the third quarter of 2019.
As Dan highlighted.
We hit another record active earning coach.
Coaches ending the quarter with 42100.
This represents 30.7% growth as compared to 32200 coaches in the same period last year and a 15.3% increase from the end of the second quarter of 2020.
Average revenue per active earning coach for the quarter was $6329 compared to $5715 for the third quarter last year and up from five.
$5851 in the second quarter of 2020.
We have now achieved three consecutive quarters of sequential growth.
Also of note OPTAVIA branded products grew to 83% of our total company can CIBIL consumable units sold in the third quarter.
Up from 78% in the prior year period.
Gross profit for the third quarter of 2020 increased 42.7% to $204 million compared to $142.9 million in the prior year period.
Gross profit as a percentage of revenue was 75.2% consistent with the third quarter of 2019.
EPS DNA for the third quarter of 2020 increased $36.8 million to $159.5 million compared to $122.7 million for the third quarter of 2019.
The increase was primarily a result of higher OPTAVIA commissions expense as a result of increased OPTAVIA sales and increased salaries and benefits related expenses.
Partially offset by a decrease in sales and marketing expenses.
Yes, DNA as a percentage of revenue decreased 580 basis points year over year to 58.7% versus 64.5% in the third quarter of 2019.
Income from operations increased $24.3 million to $44.6 million from $20.3 million in the prior year period, primarily as a result of increased gross profit.
Partially offset by increased SGN eight expenses.
Income from operations as a percentage of revenue was 16.4%.
For the quarter, an increase of 570 basis points.
From the year ago period.
Our effective tax rate was 22.8% from the third quarter of 2020 compared to 22.7% in the year ago period.
Net income.
In the third quarter of 2020 was $34.5 million or $2.91 per diluted share based on approximately 11.9 million shares outstanding.
This compares to net income of $15.9 million or $1.32 per diluted share based on approximately 12.1 million shares outstanding in the prior period.
Our balance sheet remains very strong with cash cash equivalents and investments securities of $169.9 million as of September Thirtyth 2020, compared to $92.7 million.
At December 31st 2019.
The company remains free of interest bearing debt and believes is well positioned in this challenging near term macroeconomic environment.
Our board of directors declared a quarterly cash dividend in the third quarter of $13.4 million or $1.13 per share, which is payable on November six.
2020.
This reflected a 50.7% increase in the quarterly dividend over the prior year period and is a direct result of our strong financial position and attractive business model.
There are approximately 2.323 million shares of common stock remaining under our stock repurchase program.
Consistent with last quarter and due to the ongoing uncertainties related to COVID-19 pandemic.
We're not providing guidance at this time.
We would however, like to provide you with some insight into the first month of the fourth quarter in that Octobers topline year over year growth trends are performing consistent with.
The year over year trends, we experienced in the third quarter.
As Dan mentioned earlier in Q4, 2020, we intend to further invest in our supply chain second.
Technology and coach incentive programming.
Which will affect our operating margins in Q4, but.
But we will enable our long term growth and operating income objectives.
To close we are proud to report another strong quarter, especially in such a time of uncertainty and challenges.
We believe the company is well positioned in a significant position of financial strength.
And we are excited about the opportunities ahead.
With that let me turn the call over for questions operator.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Kara Anderson from B. Riley FBR. Please go ahead.
Hi, good afternoon.
Hi, Kara.
So I just wanted to start by talking about <unk>.
Out of stocks and you mentioned a little bit of a headwind to the client experience. Just wondering if you can talk about how that compares to maybe some of the disruption you saw.
Sure in the supply chain.
And then whether or not we saw any impact from that disruption to the client experience.
The quarter was not something we would expect to impact future.
Future quarters.
Sure Yeah, very different versus what happened last year last year was a an operational disruption, meaning that we were switching out the structure of our PICC lines. This year.
We are as we entered into the.
Second and third quarter and recognize the growth was good. It was was happening more quickly we are growing at an accelerated rate.
We deliberately to ensure that we could effectively supply with our top fuse.
Polled.
About.
36 is the count right now of our skews and held on them being produced to allow us to be more efficient at producing the are our top selling skus. So I can say that none of our top selling skews ever went out of stock and no one was without fuelings during the quarter.
Now.
We started in the second quarter and came online in October with several new co manufacturer relationships that effectively takes our manufacturing capacity up.
And by the end of 2000.
At the end of the next fiscal year 2021, our capacity will be roughly double so accelerating.
As we move through the year. So we don't anticipate to having manufacturing be a headwind as we move forward.
Okay, Great and then.
Well clearly that promotion you ran then ran in April may and then the subsequent.
Quint maybe sentence.
He works in your favor just wondering if you can discuss any plans for running some promotions in the future.
Yes, we feel like we learned a lot through these promotions. They were obviously a reaction to the pandemic environment, but as it turns out we were able to.
Attract a new group of clients, we probably wouldn't have probably.
Probably wouldn't have tried OPTAVIA previously so it has to do with.
Both trainee program that was in place in the field.
Specific offer that was both for coda coach incentives as well as a.
Client promotion and then a very specific social media strategy. So we.
We brought in a large cohorts of clients that came in the second quarter. Our big question. As you remember last quarter was would they act like a traditional clients. Both in terms of their retention lifetime value and then their coach conversion. So we are pleased now that we have.
Almost six months behind us for that first cohort to see that they are acting I'm almost identically in some cases, even a little bit better than those that came in from a through traditional mi and so to answer. Your second question, Yes, we do anticipate using the similar type of promotion as we head into the next year, we think our.
Our coaches are.
It helps them perform a different level driving up our productivity per active earning coach to a new historical high and as well as being highly efficient from a cost standpoint.
During the month that it takes place it's a it has a little bit pressure on gross margin, but subsequent months comes back as reflected by our.
Significant increase in our in our operating margin this quarter.
Got it and then on.
I guess as we approach the holidays and were seeing rising covert cases like how should we think about coach growth over the next quarter or two is there any seasonality or otherwise disruption we should consider when we think about that they're not our model.
Yeah, we don't.
No. It's just it's hard for us to project, what the the impact of wave two or wave three is going to be so that's the reason we're not price.
Providing guidance, we believe we are well positioned.
To to work through the the fourth quarter.
You know in the past, we've been able to lap.
Or available to add sequential improvement from quarter to quarter, we're not sure if that will be the case. This this time around because of the changes and promotions that we feel highly confident as Jim stated. The we saw what we saw in October was very encouraging in terms of what we expect to see.
Through the last quarter of the year.
Okay.
Housekeeping question from me.
The commission rate in the quarter.
Oh, yes, yes. This is Jim it was up it was approximately 42%.
Which is pretty consistent with last year.
Yeah.
I see that and then what with DNA and stock based compensation.
So that the depreciation no amortization yep yep, so that the.
Hold on for one second so the.
For the.
For the quarter it was a.
Well on second.
Usually in the first three quarters to dig into it.
Yes over the first the first three quarters it was.
Up $5.3 million in the in the share based compensation for the first three quarters.
<unk> was 4.2 million.
Thank you so much that's all for me.
Thanks Sarah.
The next question comes from Sebastian Barbero from Jefferies. Please go ahead.
Hi, Tim Congrats and good quarter.
I have two questions number one I was wondering if you could talk to the growth cadence.
In Q3.
Distribution strength.
Time, Warner or do you see a big boost comes out of it.
In the quarter.
Yes, you are little bit distorted, but it is but I think you asked Sebastian what are what the growth what we saw in Q2 Q3 from a growth since it didnt standpoint.
Q3, specifically did you see.
Yes.
Yes always what we saw in Q3 was a retention rate consistent what with what we would see historically, so think about that large cohort of new clients that came in in the second quarter.
Went on to repeat the way our typical cohort of clients would.
We also saw a slight improvement on coach conversion. So as you know we ran what we described as a business builder promotion.
In August that ran all the way through October and so we saw not only that this new cohort repeated the same rate, but did they actually converted to coaches at a slightly higher rate, which is why you saw a larger than what would be typical.
Acceleration in our active or any coaches in the quarter.
Got it and you mentioned.
Hey, Hi, Ben and Cline.
[music].
Can you give us more details from that end.
Yeah. So so the promotion that we ran in the second quarter was.
The offer so there's training and offer and then a social media strategy. The offer was for any new client, who was or any client who hadn't purchased in the last 12 months.
Could come in and and purchase the essential start kit, which is basically one month's worth of food at a discounted rate. So in the in the second quarter, which where we had.
A an active running.
Productivity per active earning coach of roughly $5800 that number reflected a price discount and so as those same clients repeated in the third quarter. There were repeating at full price at a full price so that was the.
The up side benefit each of those clients with spending more.
On a non promoted basis than they didn't want to do in the prices promoted so they went on to repeat and and have the you don't have.
The same kind of death of refi that we typically would see.
Additionally.
Because of the promotion and some of the other things that Weve been there were applied to help coaches to be more productive each client or each coach was also able to support a higher client count.
Got it okay.
And then talking.
What about the east.
The stock outs.
And is there any you missed the remaining 80% or so product.
I would focus on.
Any of them going out of stock.
No as I said are as I said earlier the.
We manage.
The out of stock rich risk by pull holding production on our slowest moving skews and so none of our high moving skews ever went out of stocks nor do we believe that there is a risk of them going out of stocks. That's how we that's how we manage.
The the operational risks during the pandemic and a time of accelerated growth. So in October we began to to add back manufacturing capacity tied.
Tied to new relationships with co manufacturers and so yes, beginning last month.
We should we should start to see those slower suing slower turning skus go back into.
A stock in basis.
And as we move into next year, we have.
More than adequate manufacturing capacity to supply the.
The growth we anticipate next year.
So does his keys that in common stock until 2021 should we expect going through back January sales.
Later in the month.
Some some of them will never come back to have been part of our strategy is to consolidate our brands to just the OPTAVIA and so at the slowest turning skus.
We'll we'll likely will likely not return on effort roughly think of that as 17 skews.
That wont wont return, but we don't believe that the.
That will have any type of.
Volume impact because essentially we have for the most part.
Applicant skews and the OPTAVIA line. So we've been running since we transitioned and introduce the OPTAVIA line.
Basically to kind of twin twin lines of products. So this is a reflection of us moving away from the OPTAVIA product or Smith excuse me from the Medifast branded products and consolidating down to one line that we're able to do that now because as of last quarter.
We have we discontinued our franchise structure. So we no longer had a legal obligation to supply those medifast skews. So while we do still sell medifast skews through.
Our OPTAVIA coaches that number and that proportion has been declining significantly and ultimately as we said will also transition.
The direct marketing portion of our business to be.
Client acquisition.
Digital client acquisition engine for our coaches so at that point, we won't have any need for the Medifast Brad.
The next question comes from Linda Bolton Weiser from D.A. Davidson. Please go ahead.
Hi could you give us an update on your international business and I guess, it's been more than a year now since you've launched at what is the year over year growth rate of international is it very high growth or is it just modest or can you give us a little bit of color on that.
Yes.
How you doing Linda as we said before we we don't.
Plan to report specifically on international I will give you a couple of highlights.
So we said once it achieves a meaningful part of our business.
So Asia Pacific continues to grow.
Grow at Us.
A consistent rate it has been impacted we think by both the pandemic, but probably even more so in Hong Kong the political unrest.
But we continue to add additional support for the business, including Nate.
Native language support in the form of the Philippines call Center and.
Additional.
This other support in terms of translated materials, So where we are confident that this is going to be a meaningful part of our business.
Long term and but at this point is not above the 10% level.
Thanks, and I seem to recall that there were.
Pretty big trip expenses related to your incentive trip in the second half of last year, if I'm remembering correctly and that Youve benefited from not having those in the second half of this year how much of a benefit was that in the third quarter and then what would be the number that would be in the prior year period for the fourth quarter.
<unk>.
Yes so.
As as I mentioned.
Our sales and marketing expenses were.
Were lower this year versus last year in Q3.
You know overall for the full sales.
Six month period, if you look at the second half of the year.
We're talking about $5.6 million I would say.
Most of it was accrued.
In Q3, and that's why you're seeing some of the benefit in Q3.
Okay.
And.
Can you just you know one of the questions that we frequently get from investors is trying to gauge the ultimate potential of the number of coaches in the U.S.
Would you suggest we look at other direct sellers, even if they sell other products like in Avon or a tupperware nu skin and kind of gauge your potential in the U.S. for the number of coaches you know as being comparable to those companies or why or why or why would why would that be or not.
That would be a good idea to do that sort of thing.
Yes, I think there's some some pretty significant differences between between a coach and a distributor.
So I think it's it would be difficult to compare.
We did do both.
Work on the addressable market for the business as well as.
The interest in coaches I mean, if people who were interested in being coaches for the concept as we describe it so we did that.
Last quarter and what we found was.
At.
At our.
Within our growth vision, which was stated as 15% growth rate that we had no. This is all done pre covered but we don't think this is necessarily change that we had.
What we believe is.
10 years worth of growth. If we just did exactly what we are doing today, our intention is to make coaching more and more attractive and you heard that a little bit.
Tied to what kinds of tools, we offer in the form of moral and mobile apps and other.
Tools to make coach in more attractive so I think.
When you add that together, we believe we have a.
Roughly a decade worth of growth with what we have been doing and ability to expand beyond that as we as we continue to modify.
Our offer to coach as it makes it ocean business more attractive.
Great. Thanks, and then finally can you just talk about Oh, if you think you're getting benefits from the pandemic in terms of.
People wanting the ease of having the delivery of the food products and also just weight gain during the pandemic do you think you're benefiting from that.
Yes, we did some modeling we actually hired a an outside firm to kind of help us understand that is included both quantitative analysis and also a qualitative survey.
What we believe is a very small benefit.
Tied to the pandemic that has to do with what you stated earlier, maybe some weight gain and also.
A higher level of.
Awareness.
And concern about health, we did another survey this adjusted that well over 80% of Americans are concerned about their.
Their health during the pandemic. So that's so those are some of the the quantifiable pieces. The the part that's been helpful for our coaches.
Is that people are far more available I think people are less busy because they're working from home not traveling as much not going out as much and so they have more time to be coached and to focus on their health. So I think it's.
Ins and some I'd say, we were growing in a very healthy way prior to the pandemic, we've been able to figure out some ways to operate very effectively and.
And ways will help us not only during the pandemic, but after the pandemic.
And that's a health in general.
As of higher concern with Americans and really with people all around the world. So we think that Theres, a long term benefit that will help us as well.
Thanks, and then finally can.
Can I just ask you about your thoughts on use of cash flow either to raise our dividend usually in December you announce your dividend increase it was very large 50% or so last time around are you still leaning heavily toward high dividend or would you.
Think about switching a little bit more towards share repurchase. Thanks.
Yes, so all those discussions are being had at the board level.
So you know as we as we get.
You know.
More job board input over the next.
Quarter so.
Those you'll you'll see that.
Oh those decisions being made we really don't go into.
Much detail on.
On the.
Capital allocation until we actually make a decision.
Okay. Thank you very much thanks.
Thanks Linda.
The next question comes from Doug Lane from Lane Research. Please go ahead.
Yes, hi, good afternoon everybody.
Hey, Dan the.
The coach numbers, you mentioned was pretty impressive.
Certainly I had what we were looking for so to your point that's good evidence that whenever you're putting in place is is.
He has been working in developing your new cohort down the line, if you will into coaching and hopefully into leadership positions.
So youre thinking out hopefully in 2021, but whenever we get to back to a more normal consumer mobility environment. What learnings have you gathered this year that changes how you go to market once we return to some sort of normalcy.
Yes, we have I think our primary learning was.
That there is a group of potential clients.
Who with the write off.
Offer and the right message on social media.
Are attracted to our OPTAVIA program.
And those.
Those that the training the offer and the social media program allowed us to attract them in a way that we haven't been able to before so we anticipate anticipate repeating.
Refined version hits that ties back to to our our learnings from this year.
And our coaches as well as coach leaders are very.
And then another they understand how to optimize the promotion we anticipate that this will be an important part of our our business rhythm as we go forward. So.
I think we're very.
Optimistic about what we've learned and us and its ability to.
Really kind of add to the the way we partner with our coaches to to penetrate into accelerate our AR.
Our our growth vision moving forward.
Well no that makes sense, but there's no plan to abandon the in person to advance the global conventions. The leadership trips what have you there so.
Going from top line to margins, the 16% kind of operating margins that Weve already mentioned that it's probably not going to be down in the fourth quarter, but we should even probably extrapolate that out into 2021 and beyond where margins will come back to you know maybe not where they were before but certainly not stay at the 16% levels as you begin to reinvest in these.
Person events.
Yeah, what we've what we've said and I think.
What we've said in the past is that we believe our business will support.
A 15%.
Operating margin as we move forward and that we plan to achieve that.
Around the same time, we achieve a $1 billion in revenue so we think that.
That stays that will allow us to invest and invest back in the business for the programs that you're describing.
And at the same time support a.
The dividend that we pay and the operations of the business and allow us to invest in and can it continue to support a growing infrastructure to support the business.
Right I remember those goals I think that also included 50000 active coaches have you updated the timetable for that.
No. We we decided a lot at the end of last year that.
There were focused really on the long term sustainable growth rate of in the mid teens that we've described and that.
We are kind of confident enough in the cadence of the business. So that we can project that out.
Without trying to tie it to make those specific goals time bound.
Okay. Thanks, Dan.
Thank you Doug.
There are no more questions in the queue.
This concludes our question and answer session I would like to turn the conference back over to Dan Chard for any closing remarks.
Yes, just like to say thank you for all of your.
Participation in this conference call and.
We appreciate your interest in Medifast and also appreciate.
Joining us this evening.
And look.
Well look forward to providing you an update on our upcoming quarter.
And as I said appreciate all of our of your interests and big Shout out to all of our coaches across the world at this stage. Thank you again bye bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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