Q4 2021 Medifast Inc Earnings Call
Good day and welcome to the Medifast fiscal fourth quarter and full year 2021 earnings conference call.
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I would now like to turn the conference over to Reid Anderson with ICR. Please go ahead.
Good afternoon, and welcome to Medifast fourth quarter 2021 earnings conference call on.
On the call with me today are Dan Chard, Chairman and Chief Executive Officer, Jim Maloney, Chief Financial Officer.
By now everyone should have access to the earnings release for the period ended December 31, 2021 went out this afternoon at approximately four O five P. M. Eastern time, if you've not received the release it's available on the Investor Relations portion of Medifast website at Www Dot Medifast, Inc. Dot com.
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. The words believe expect anticipate and other similar expressions generally identify forward look.
Statements. These statements do not guarantee future performance and therefore undue reliance should not be placed upon 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 projections that may be made in today's release or call and with that I would like to turn the call over to Medifast, Chairman and Chief Executive Officer, Dan Chard.
Thank you Reed and good afternoon, everyone. Thank you for taking time to be with us on the call with me today is Jim Maloney, our Chief Financial Officer.
I'll start with an overview of the fourth quarter, then Jim will run through our financial results in more detail. Following our prepared remarks, we will open up the call to your questions.
2021 was another record year for Medifast as we continue to demonstrate the power of our coach centric model to positively impact millions of off of their clients' lives and drive strong financial performance.
In the fourth quarter revenue increased 42, 6% over the prior year period to $377 $8 million, reflecting strong execution in all areas of the business.
Earnings per diluted share were $2 91.
A 23, 3% increase over the prior year period.
The number of active earning after via coaches grew 35, 3% to 59800 on a year over year basis and productivity per active earning off the via coach rose six 6% to $6321.
Jim will dive deeper into our performance in just a few minutes, but I wanted to take the opportunity to dig into why the board the leadership team and I are so aligned and our belief that medifast has an unparalleled opportunity ahead of it right now as we move into the next phase of our remarkable growth journey.
Five years ago, there were undoubtedly those who are skeptical about the ability of medifast to deliver on our long term growth goals.
They saw some of that as a manufacturer and omnichannel distributor up diet products and made some assumptions around what we could achieve it.
The reality is the time and time again, we have outperformed expectations.
Our business is now more than doubled twice since we implemented the strategy to put the coach centric vision at the heart of the business.
That coach focused approach is clinically proven to be effective.
Is it being propelled by an innovative approach the fuses the best aspects of direct selling and direct to consumer offerings.
This has enabled us to create a truly differentiated and unique model that puts the after via coach at the center of helping clients on their health and wellness transformation journeys with personalized support.
With this engine powering our momentum we have moved from $275 million in revenue prior to the launch of ought to be up in the new business model to today announcing revenues in excess of $1 $5 billion.
This will seem like extraordinary growth to casual onlookers and certainly it's a testament to our strategy and the team behind it.
Over those of us inside the business. It really is just the tip of the iceberg in terms of what we were capable of achieving.
The success of our transformation to a coach centric model reached an important milestone this past year as we became the market leader by dollar share in the weight management category in the United States. It's a point I think some long standing competitors in this space, who just a few years ago, where more than four times our size in terms of total revenue.
However, we're not content to rest on our laurels. When we began our business transformation five years ago, we set out on a mission to offer the world lifelong transformation, one healthy habit at a time and we defined at that point, our U S. Addressable market is the $7 billion of weight loss through commercial meal plans and replacements having.
Having achieved significant success or.
Our differentiated model gives us a unique permission to play in a much wider space than we do today as such it's a clear it's clear that we can now expand our penetration into the broader $230 billion U S market for health and wellness or more deeply than we do today.
Technology will be at the core of our expanded growth journey, we will leverage technology digital apps and data to improve the efficiency of our coach and client community and will add to our strong platform of clinically proven products and the habits of health system.
We'll make our offer more attractive to increasing numbers of coaches and clients and unlock opportunities for new service and subscription offers this will in turn increase coach efficiency in attracting new clients enhancing the lifetime value of off the via clients and continue to offer improvements.
Led training of new ought to be a coaches.
Enhancing our technological capabilities has been a key area of investment over the past several years and will accelerate as we move forward.
We are seeing solid progress in our proprietary after via apps.
You have cumulatively been downloaded over 300000 times by clients and coaches since launching late last year.
The opposite via apps drive deeper and more consistent engagement and are central to our long term strategy of seamlessly connecting ought to be a coaches and clients within the off to be a community.
You ought to be a app, which is designed to support clients on their health transformation journey added over 91000, new users in the fourth quarter.
Each user of the App is now connected in a new way to their coach and provides the capability to communicate even more closely with their coach as well as manage their subscription order for off the via products.
It also gives clients access to over 100, and twenty-five healthy lean and green recipes to support the habit of healthy eating it makes after via more central in front of mind in their pursuit of lifelong transformation.
Our core focus will continue to be on growing the number of clients seeking greater health and wellness targeting those who have failed on diets and want a holistic approach to achieving greater health and wellness in their lives. However, our mission cannot and will not stop there and I'm excited by some of the initiatives that we were considering to help further deepen and widen our engagement with.
Consumers.
Our client community is now comprised of over 1 million individuals annually, who rely on after via coaches throughout their health and wellness journeys.
Most of these clients are here in the United States as.
As we continue to expand into the broader health and wellness segment. This market. We have continued to prioritize a global approach based on the learnings we've had thus far in select international markets.
As we look at consumer trends and evolving behaviors in the health and wellness space. Our surveys revealed several interesting insights to support the effectiveness of our off the vehicle which model.
We know for example that in late 2020 more than half of U S. Adults adopted new positive health route to routines amid the pandemic, 96% of whom planned to continue embracing healthy habits throughout the year six months later, we found that 84% of Americans, we're actively working towards achieving their health goals.
The number one reason U S. Adults wanted to prioritize their health and wellness, what's your feel better both physically and mentally.
Typically people upset resolutions and battle to make changes to their health as they enter a new year. However, our most recent survey suggests the new year resolutions could be a thing of the past.
The number of people setting new year's resolutions.
Cause decreased annually according to our surveys and only 10% of U S adult stuck with the resolutions.
Primary reason respondents filled with lots of motivation followed by not having a plan or the right support.
Less than half of U S. Adults said they were planning upsetting a 2022 new year's resolution with many wanting to take a different approach and incorporate small changes into their daily lives throughout the year.
These findings suggest that consumers are prioritizing health and well being in all areas of their lives and searching for better ways to accomplish their goals year round or.
Our unique off to be a model has proven effective in helping people achieve their individual health and wellness goals with the right support and we believe that it.
It can be the solution to those looking for lasting change.
While parts of our business model may have been initially founded on the direct selling approach we have moved substantially away from the traditional model in recent years to develop a differentiated system. It is more reflective of the way consumer behaviors and demands are shifting.
A comparison of our results in recent years substantially underscores this point.
Over the past three years, our annual sales growth rates were 42% in 2019, 31% in 2020 and 63% in 2021.
On the other hand major public direct sellers had an average annual sales growth rates of negative, 7% positive, 5% and positive 2% in the same periods respectively.
Just annual sales growth rate recorded by any major public direct seller during the same timeframe was less than 14%. Moreover, in 'twenty 'twenty. The first year of the pandemic. Our sales growth was very strong at 31%, but saw some deceleration from prior in the prior year traditional direct sellers on the other hand.
A material acceleration in 2020 as people look not for health transformation, but for alternative income generating options tied to the pandemic uncertainties.
It ought to be a we're building a deeply connected community optimize by a powerful network effect.
Rather than fluctuating direct sales model.
We believe that we have a compelling value proposition and that our platform is highly scalable fortified by our significant investment in technology and infrastructure.
As of the end of 2021 over 90% of our revenue is subscription based and 100% of our orders our direct to consumer which drive strong consistent growth in revenue profit revenue and profit.
Operationally, we're in a strong position, we believe that our accelerated investment in the fourth quarter, including a partnership with a three PL company on a new distribution center in Fort Worth, Texas will help us further increase our supply chain capacity to support over $2 $5 billion in revenue by the end of 2022.
This represents $500 million in manufacturing and fulfillment capacity beyond where we finished in 2020 one.
We continue to build out our technology and innovation lab in Utah and invest in other technology tools, including our proprietary apps to drive coach productivity even higher.
Since we first shifted to the coach centric model in 2016 revenue per active earning coach is up more than 50% and we believe that we're just getting started.
We've talked at length about our commitment to maintain mid teens revenue growth and 15% operating margin annually.
Whether it will be fueled by the large addressable health and wellness market in the United States and our continued expansion into the Asia Pacific markets and other large markets throughout the world while margins will be driven by strong underlying demand from consumers for our unique coach based solution.
Over the near term, we expect margins to benefit from increasing scale and operational efficiencies as we leverage our recent investments.
There will be short term margin pressure this year from the continued investment in technology and supply chain infrastructure.
Well mid teens revenue growth and 15% operating margins remain the focus of our sustainable long term financial tools. We believe there is significant upside growth potential above and beyond these objectives as we invest in the business leverage our assets and develop new capabilities to drive growth and operational efficiencies.
We have a highly experienced management team a proven strategy and a differentiated market approach.
Continue to pull all the levers available to us to drive consistent growth in our metrics and as we look to the future. We believe that there is significant upside as we focus on delivering our growth ambitions.
As we grow remain we remain committed to building on our corporate values that include giving back to it in our communities.
Over the past two years worth of social and environmental challenges.
Wired companies to re imagine their corporate giving and social responsibility strategies and we think the impact there.
Leave on future generations metaphor.
A matter of fast commitment to lifelong transformation starts with the work that our independent after via coaches do.
And includes actively supporting the communities, where they live and work.
After he has impacted more than 2 million lives, but we believe we have the power to do more.
Our corporate social responsibility initiative healthy habits for all advances our mission by providing underserved communities with education and access to healthy habits.
Through partnership with nonprofits, we can help break intergenerational change or help to give children families and at risk communities the ability to transform their health and wellness destination.
Decision is reflected in the partnership between our corporate team and our coaches and supporting that these urban communities across the globe together, we hit an important milestone this year.
During up to 10 million nutritious meals to kids in need through our partnership with the nonprofit no Kid hungry.
I'll close my remarks, with an update on what's to come for the program in 'twenty 'twenty. Two we will be focused on the education pillar of Orange This initiative.
Our healthy habits for all curriculum go lives and is designed to teach students about healthy habits.
Leave children will be better prepared to make healthy choices of reality.
<unk> and greater access to critical resources, despite socio economic background.
This will be an important and exciting year for Medifast as we look to build on our leadership position in the weight management market and broaden our approach to focus on new segments, and the broader health and wellness market.
We've made meaningful progress in advancing our work and operational infrastructure development and technological advancements over the past year.
We will look to leverage these investments through and during 2022 to drive further growth.
We have a strong and experienced leadership team and a team of employees, who continue to show passion and commitment to our important mission.
Must be optimistic about and I look forward to delivering on our vision in the months ahead.
Now turn the call over to Jim Maloney.
I'll go through the financial results Jim.
Thank you Dan good afternoon, everyone.
Revenue in the fourth quarter of 2021 increased 42, 6% to $377 $8 million from $264 $9 billion in the fourth quarter of 2020.
We ended the quarter with over 59800 active earning ought to be coaches, an increase of 35, 3% from the fourth quarter of 2020.
Average revenue per active earning after via coach from the fourth quarter was $6321.
Six 6% from the prior year period.
We were pleased with <unk> growth and productivity gains on a year over year basis compared to the record highs we achieved in the third quarter.
We believe the sequential declines in the fourth quarter reflects seasonal factors as well as the impact of our supply chain transition.
Earlier in the year and we discussed with you during our Q3 call.
Gross profit for the fourth quarter of 2021 increased 39, 7% to 278 $3 million compared to 199 $2 million in the prior year period.
Reflecting strong revenue growth, partially offset by increased cost of sales.
Gross profit margin was 73, 7% in the fourth quarter of 2021 versus 75, 2% in the comparable prior year period.
158 point decline in gross margin was attributable to higher product and shipping costs.
We instituted a 3.5% pricing increase in December 2021 to offset the recent inflation pressures, we experienced in raw materials and transportation.
We continue to expect pricing strategies productivity programs.
Scale related efficiency in distribution and manufacturing to drive improvement in gross margin over the long term.
SG&A expenses for the fourth quarter of 2021 increased 43, 5% to 231 $4 million compared to $161.3 million for the fourth quarter of 'twenty 'twenty.
SG&A as a percentage of revenue increased 40 basis points year over year to 61, 3% versus 69% in the fourth quarter of 2020.
The increase was primarily due to higher ought to be a coach compensation expense increased salaries and benefits related expenses for employees.
Incremental costs related to continued investment in information technology and distribution.
And increased credit card fees, resulting from higher sales.
Income from operations increased 23, 4% or $8 $8 million to $46 $8 million as a result of higher gross profit, partially offset by increased SG&A expenses.
Income from operations.
Percentage of revenue was 12, 4% for the fourth quarter of 2021 compared to 14, 3% in the same period in 2020.
Active tax rate was 27, 2% for the fourth quarter of 2021 compared to 26% in the prior year's fourth quarter. The increase in the effective tax rate was primarily driven by an increase in state income tax rate and the limitations on executive compensation, partially offset.
Set by tax benefit of stock compensation.
Net income in the fourth quarter of 2021 was $34 million or $2 91 per share compared to net income of $28 million or $2.36 per share in the prior year's fourth quarter.
Turning to our balance sheet, we believe our financial position remains strong with no interest bearing debt and approximately $110 million of cash cash equivalents and investment securities at the end of the fourth quarter.
The reduction in cash compared to a year earlier was primarily due to the growth in net inventory to mitigate supply disruption as we had abnormally low levels of inventory at the start of 2021 .
In addition, we had higher capital expenditures this past year to support our long term growth initiatives related to technology and capacity expansion.
Ali we provided a return to shareholders in the form of stock repurchases and dividends. We believe is best in class for such a high growth business.
During the fourth quarter of 2021 the company repurchased another $10 million worth of stock, bringing our total repurchases to $56 million in 2021.
There are approximately $2 1 million shares remaining under the company's stock repurchase program as of December 31, 2021.
Given our expected trajectory for revenue and earnings growth over the next several years.
We continue to believe share repurchase remains a compelling way to enhance stockholder value.
Finally in December 2021 the company's board of directors declared a quarterly cash dividend of $16 $8 million or $1 42 per share.
That was paid on February eight 2022 to stockholders of record as of December 21st 2021 .
Turning to our guidance for the full year 2022 we expect revenue in the range of 1.72 billion to $1 $79 billion in diluted EPS be in the range of $14.50 to $16.
As Dan discussed, we believe we will be able to achieve mid teens revenue growth and be able to achieve 15% operating margin in the long term. We expect in the short term margin pressure. This year from continued investment in technology and supply chain infrastructure our.
Our guidance assumes a 24.252, 25.25% effective tax rate be.
The increase from the prior year's effective tax rate.
It reflects the growth and expansion of our business as well as limitations of certain deductions and.
In closing fourth quarter and full year 2021 results were strong in the face of continued challenges in the external environment and we remain confident in our business model as we head into 2020 two.
We continue to target mid teens top line growth and 15% operating income margin in the long term and we will remain confident in our ability to deliver strong sustainable growth and we believe will enhance value for stockholders.
With that let me turn the call over for questions operator.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
If at any time your question that's been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Yeah.
Our first question will come from Steph Wissink with Jefferies. Please go ahead.
Good afternoon, everyone and thank you for taking our questions. The first one we wanted to explore was just the coach count ending the year and if you can give us any sense of how your coach recruitment cycle.
Year to date, just wanted to get comfortable with that stepped down in coach count.
That you're you're seeing some acceleration in that figure.
10% growth guidance.
Sure. Thanks, that's good to hear from you, yes, we as we talked about are in the a and the last quarter, we'd seen some downward pressure on our client to coach conversion really related to the the earlier transitions we had in the <unk>.
The first half of the year tied to the transformation of our or supply chain or the increase of our capacity and supply chain. So it was expected and and what we've seen coming out of it we ran our central start promotion in the fourth quarter, which resulted in.
And then the expected number of.
New client cohort moving into the new year, So we feel <unk>.
<unk> with where our coach count is going as we move into Q1.
Okay very helpful. And then on a related note the productivity per coach just continues to surprise us to the positive. So I wanted to just give you a little bit more airtime to talk about the initiatives that you think are contributing to that advancement in that figure.
Presenting a larger percentage of the growth overall for the company just want to make sure. We're thinking about 2022 with the balance between coach count growth and productivity embedded in your 15% guidance.
You bet when we when we started out and made put coach at the close of the coach centric model at the forefront of our overall business growth strategy.
At the same time focused on creating ways to make our coaches more efficient.
And there are a lot of ways to do that part of it relates to technology part of it relates to other People's technologies that are helping our coaches be more efficient right now what we're focused on is leveraging our investment in digital apps.
For one thing is to to help our coaches manage more clients. We also over the period. The last couple of years have found ways to.
Move people to them the more let's say the higher value prop.
Product line of ought to be and that's been another piece you know going forward, though it has to do with leveraging technology leveraging data and we continue to feel like there's a lot of upside.
Two that our coach productivity number as we make our clients.
More happy or they're too we improve there.
Our experience with coaches and we make coaches more effective by allowing them to manage more clients.
With with few with less time, allowing them to do they perform the more value added.
Activities that we know drive the business growth and drive productivity.
Okay. That's helpful and my last one is on inventory and I know, Jim you talked a little bit about last year's comparable year end inventory was just far too low. So part of this is just the optics.
Of that comparison, but it was up quite a bit year over year help us think through what the portion of that that's inflation related timing related is there anything that would be in transit.
Need to consider in that year end inventory balance and then what do you think about the optimal inventory balance I think gulfport right. What do you want to carry in terms of just in time versus just in case.
Thank you.
Sure so.
As I mentioned.
In the remarks.
So inventory when we came into 2021 at blur.
Exceptionally low has.
You know as a percent of our business.
And if you remember stuff, we were having stock outs at that time.
So we intentionally.
Invested in got levels of inventory to a more proper state.
So the way I see.
<unk> thousand 22.
Uh huh.
Revenue levels will.
Increase with the growth of the business. So you know obviously this past year revenues.
Surpassed and outpaced our revenue growth, but I would expect it will get back to a more normal flow based on the growth of our business.
As we as we came into.
The beginning of this year, we wanted to make sure that we didn't have any disruption and adds a break now we're not seeing any disruption due to inventory and we're not expecting any for the foreseeable future to your question about inflation.
We are we are seeing are in.
Inflation, and I and I mentioned that we.
Took a price increase of three 5%.
That that and we did that in December .
All of last year. So we didn't really see a lift in revenues due to that price increase because it was really the last several weeks of the of the fiscal year.
But our expectations.
For.
For that price increase was to cover our costs.
So the the three 5% increases.
Basically mirroring the increase in our raw ingredients and transportation.
So hopefully that helps.
Very helpful. Thank you I'll pass it along.
Our next question will come from Linda Bolton Weiser with D. A Davidson. Please go ahead.
Yeah.
Yes. Thank you.
So I was just curious if you could give some general directionality on the gross margin and SG&A ratio for the next year.
I mean.
But the price increase kind of kicking in to be a positive factor or do you think you can kind of maintain gross margin roughly going forward, where it is meaning it would be kind of flattish for 2022 or.
Color you could give kind of an on that would be helpful. Thanks.
Yeah, so so as I mentioned.
Linda we're expecting that the price increase.
He is going to offset much of the inflation.
In 2022, so you know the good news about our business as we can basically.
See the inflation costs.
As we lock in a lot of our costs for about a six to seven month period. So we have a good view.
View of how inflation is going to affect 2022 so I would expect.
That gross margins you know on an overall basis.
To you now.
To basically hold like you're suggesting the other comment about investing.
So we're going to we're going to continue to invest.
And that's going to.
Be in technology and supply chain in the coming months and quarters. So you you would expect that the SG&A line item, where most of that investment will be.
It will occur.
It will impact us.
The operating income margin.
By you know 60 to 80 basis points.
Okay.
Thank you that's helpful and.
You know Dan when you talk about kind of the evolution and growth of the company and the fact that you're now thinking you'll be our addressable market as this much bigger number that the overall health and wellness market I kind of wonder how that goes along with them the coaches and how they kind of.
Do you, what they're providing to customers because you've always talked about how they really have a message. They have the habits of health the teachings of Doctor a and this is what they are essentially quote unquote selling is it is a lifestyle more than anything thing. So how do you.
Transition that to them, having a message that somehow addressing a much broader market I mean, if they're going to be selling maybe something that the opex run out.
That gets into something a little bit different. So can you explain your thoughts behind behind that a little bit more.
Sure.
What we have what we've seen in this first part of our transformation as you were saying, which started in 2017 was putting the coaches at the center of everything we do which meant that they receive a greater a greater degree of support from.
From the company and no channel conflict. So that was the first phase the second phase has been about building an operational infrastructure capable of supporting the.
The growth.
And the last phase, which is the question you're asking as we move out of this building out our operations is about creating higher levels of productivity and that productivity.
It did.
I would say includes our new products.
So these are products that are consistent with and part of the habits of health store that they all all of those are already talk about new services. So.
Think of it services anything we do they make our coaches more productive. Good example, there is a we fairly recently did a test to understand how we can make our coaches more.
Effective and efficient and attracting new clients and.
And what we've found is that there is a significant opportunity we believe as it played out in <unk>.
Bringing lapsed clients back to connect with our coaches. So these are clients, who previously had a positive experience.
On using our R. R structured plan to get healthy and who May have lost the connection with our coach so by using technology and data and our mobile apps, we create the ability to bring them back in so in other words, increasing the lifetime value.
Of clients and then the other side of this is just tied to making again on the on the service side are our coaches more capable of supporting a more clients. So theres a product component.
There is a component to help.
Bring higher lifetime value by bringing former clients back in and Theres a component around helping our coaches be more efficient in supporting clients by giving them a meaning clients are more opportunities to yep.
Use technology to to go through our our health transformation plan.
Yeah.
Okay and then.
Just you know Dan just a question about kind of the seasonality of the coach decline here a little bit in the fourth quarter.
No.
You'll have these promotions in September and I kind of thought that would be like a special plus.
You know that that actually maybe you could have coach growth in the fourth quarter sequentially.
Most of them work as expected or were they a little less effective than what you had planned.
No the objective and the outcome, we're looking for from the promotions.
What was to bring in a new cohort of clients in the fourth quarter. When we had some specific objectives around you know how many clients would be brought in that outcome was achieved in the way we.
The way we expected.
As you know from the past that our the way our cycles began his new clients come in.
They go on plan.
A portion of those clients become coaches.
And and then they go on and get more new clients and achieving the right.
The ratio of of tenure and client and coach mix is a it was what drives our continued growth so what.
What you saw in the fourth quarter so.
Uh huh.
The sequential decline not significant but a relevant AR was.
Section of.
Again, the transition that we made earlier in the year two out of $1 billion of capacity so during that transition.
When our.
Q1, and Q2 in particular, when our our car to curb of orders were significantly higher than normal had that that weighed on client experience created downward pressure and that has a delayed impact in Q4. So what we saw in the fourth quarter was.
A new client cohort coming in.
And all of our.
Yeah.
Client.
Experience metrics returning to normal as we headed out as we finished the year and started the new year. So we're confident in where we were at the end of the year with new clients coming in and confident with where we are now with client experience being where it is and being the beginning of the <unk>.
The point of our seasonality, which is kind of January February March.
Okay.
And then just finally I didn't go back and watch what do you happen to recall.
You guided to in terms of revenue growth in 2020 one at the beginning of the year, because it's certainly probably didn't guide to a 60% revenue growth. So I'm just curious if.
Yes, that's the guidance that you're giving which is totally in line with your long term growth objective is it somehow reference.
It's like significant slowing I mean, if you go from 60% to 15% growth.
In 2022 that that is a pretty significant slowing.
Maybe your thoughts on that.
Yeah, So I E.
Linda.
In Q1, if you remember we did not provide guidance we didn't start providing guidance since we entered the pandemic I think we started providing guidance.
In the July timeframe of last year.
So we didn't we don't have that reference going back to the beginning of 2021.
Okay, alright, thanks, a lot.
Yep. Thank you.
Again, if you have a question. Please press Star then one our next question will come from Doug Lane with Lane Research. Please go ahead.
Yes, hi, good evening, everybody Denby, a stat that you quoted on the success of Medifast in the weight loss market here in the U S is pretty impressive I'd like to just probe that a little bit more how condos.
That is up to be a go to market different than some of your other competitors and again without naming names, but maybe just from a style or type what is it about ought to be at that differentiates. Yeah. Maybe you can even start with why theres no real apparent seasonality in this business or at least there hasnt been since you rebrand adopt.
Four or five years ago.
Sure. Thanks, Doug Yeah. That's a great question, we have consistently as.
As we moved our to our to our new model, we moved away from anything that it it wasn't our past it looked like a marketing a diet. So.
What that really means is that when a client becomes part of the offer via plan Theyre getting a number of services that are unique to that plan. So it starts with coaching.
And as you know and ought to be a coach.
The majority of them have been clients previously so that they have a shared experience and we know that makes a big difference. It also Ah is a plan that coach has executed that's very personalized to the individual.
So it's the coaching plan is next thing is is that it.
It helps them learn a set of healthy habits.
The first habit is healthy eating which is eating six small meals a day. So it's you know even though their objective in the outcome of that healthy eating plan is weight loss. The objective is to establish a healthy habit that will last a lifetime.
And so that's another difference so the products are really in the service of our Lord knows those healthy habits.
The.
Next area of difference is are the habits of health system.
So that's a proven system that teaches people the whys behind what they are doing so again still focuses on instilling the series of micro habits.
That that then.
You know extend well beyond the time that they are using our after via <unk> fuel links to help them learn the habits and goes beyond just the habit of healthy eating to include has a habit of healthy hydration healthy exercise healthy sleep. So again, not a not just a caloric restriction.
Education program and the last one is the community.
People, we know from our research lack the ability often to do something that can be difficult, which is change your way of thinking and changing the way you're of acne and some things that you've learned for in some cases your whole life to a new way of thinking a new way of acting.
So it's a that ties back to the after the community we have ways to connect the ought to be a community together so they help each other out.
Ask your questions and support each other and so the tie into the off the community goes even beyond just the the coaching relationship to support it. So we specifically target people, who have failed on diets and who are ready to try a new approach all tied to.
To habits, using coaches community habits of health and our products that help them establish those those habits.
That's interesting do you have any data on what percentage of your clients have actually been on other weight loss programs before they came to ought to be.
Since since the majority of Americans have at some point Ben on some kind of diet, so as and when I say that the majority I would say you know you know.
80% to 90% of Americans have at some point tried to lose weight. We we assume then we have some support for this that the majority so lets say, 80% to 90% have tried some other means of doing it before.
And we did you know clinical research a couple of years ago.
So kind of bear out the importance of having the coach and I'm learning healthy habits and that clinical research supports.
Our our claims of our approach being more effective.
Then just as your desk diet so yeah.
Yeah go ahead.
Oh, Okay, I didn't mean to interrupt sorry I.
I was just going to move on to see what kind of what is the typical up to be a demographic visa b the broader weight loss market demographic.
Yeah, we are.
Our demographic is typically I mean, our target is really women.
You know middle aged women around 40.
And and the demographic of weight management I don't I don't have those numbers, what I can say about our demographic is that it.
<unk> continues to expand on both ends we're getting younger people who are focused on getting healthy.
And we're getting all the older people, who are focused on getting healthy all of them looking for a holistic approach to their their health and wellbeing.
The other side of this that's a part of the health habits of health system. As you know it goes even into how you start to think about health in a more productive.
Productive way. So you know we focus on are not only healthy body, but also healthy healthy mind unhealthy mindset. So yeah. The debit the demographic is expanding on both sides I think particularly though its interesting to see.
The the demographic go into the the younger group, who are anxious to learn how to break what they were break the habits that they were you know grew up with learn more about healthy nutrition healthy exercise healthy hydration healthy sleep and apply it into their lives.
Hum.
Thank you that's helpful and just one last thing with your expanded target market should we look for an entry into the <unk>.
Something beyond meal replacement is in more traditional nutritional supplements.
Yeah, I mean, as I said before when we look at I mean, if you look at that broader health and wellness market a portion of it is product based.
So food supplements those kinds of things and we think we can continue to offer more to our our clients in that area.
But there are large areas of service focus as well and large areas of technology supports as well. So we think we can also play in those other areas. So think of it as our expanding into additional service offered offerings all using.
Our coaches are.
Leveraging technology as you heard from our script, we've launched it you know the two apps that we've launched we have had over 300000 downloads.
With 90000 of those in the fourth quarter for our clients. We also have accelerated the development of those apps. We are we've had.
Year to date of our six releases of each of those apps both the the coach App and the client up which means roughly we have a religion.
Our release per week.
Each and so you can see us.
Moving more quickly and more aggressively as well as thoughtfully into leveraging.
These these apps to support our coaching structure and we think that's a that's gonna be a meaningful change there for us and part of what helps us expand further into our health and wellness market.
Okay. That's helpful. Thanks, Dan.
This concludes our question and answer session I would like to turn the conference back over to Dan Chard, Medifast, Chairman and CEO for any closing remarks.
We want to thank everybody, who has been able to join the manifest call today and we particularly appreciate are the work of our coaches and their effort to transform the lives of now last year.
Over a million people, who participated in the off to be a plan where our confidence.
And are looking forward to the upcoming year with we feel like we've shown our ability to work through environmental knock macro challenges as well as continue to add innovation and new ways of thinking about.
Our business and the broader market and look forward to speaking with our investors again as well as our analysts in the ER to report our next quarterly results. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.