Q2 2024 Medifast Inc Earnings Call
Operator: And welcome to the Medifast Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Zecca, Vice President of Investor Relations. Please go ahead.
Speaker Change: And welcome to the Medifast Second Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce your host, Steve Zecca, Vice President of Investor Relations. Please go ahead.
Steve Zecca: Good afternoon, and welcome to Medifast's second quarter 2024 earnings conference call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer, and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the quarter ended June 30, 2024 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 at www.medifastinc.com. This call is being webcast, and a replay will also be available on the company's website.
Steve Zecca: Good afternoon and welcome to Medifast second quarter 2024 earnings conference call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer and Jim Maloney, Chief Financial Officer.
Speaker Change: By now, everyone should have access to the earnings release for the quarter ended June 30, 2024 that went out this afternoon at approximately 4.05 p.m. Eastern Time.
Speaker Change: If you have not received the release, it is available on the investor relations portion of Medifast's website at www.medifastinc.com. This call is being webcast and a replay will also be available on the company's website.
Steve Zecca: 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. However, actual results could differ materially from those projected in any forward-looking statement. All of the forward-looking statements contained herein speak only as of the date of this call.
Speaker Change: Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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.
Steve Zecca: Medifast assumes no obligation to update any forward-looking statements that may be made in today's release or call. And with that, I would like to turn the call over to Medifast Chairman and Chief Executive Officer Dan Chard.
Speaker Change: And with that, I would like to turn the call over to Medifast Chairman and Chief Executive Officer, Dan Chard.
Dan Chard: Thank you, Steve, and thank you all for joining us today. With me today is Jim Maloney, Medifast's CFO. I'm pleased to report on our business transformation progress and share our vision for Medifast in this fast-moving and exciting time for our sector. Medical innovations are enabling more people than ever before to access transformative health solutions. As we have discussed in previous conference calls, the rapid expansion in both the availability and acceptance of GLP-1 medications in the United States and beyond is reshaping the weight loss landscape, which we believe presents both significant challenges and opportunities for our company.
Dan Chard: Thank you, Steve, and thank you all for joining us today. With me today is Jim Maloney, Medifast's CFO . I'm pleased to report on our business transformation progress and share our vision for Medifast in this fast-moving and exciting time for our sector.
Dan Chard: Medical innovations are enabling more people than ever before to access transformative health solutions.
Dan Chard: As we have discussed in previous internings calls, the rapid expansion in both the availability and acceptance of GLP-1 medications in the United States and beyond is reshaping the weight loss landscape.
Dan Chard: which we believe presents both significant challenges and opportunities for our company.
Dan Chard: Our mission, refined over the course of the last 40 years, remains focused on helping individuals achieve healthier lifestyles through integrated holistic solutions. But now, in conjunction with our incredible OptiVEA independent coaches and in collaboration with LifeMD telehealth physicians, we expect to be able to put healthy lifestyle transformation within the reach of more people than ever before. Industry projections indicate that as many as 20 million people or more in the U.S. could be using GLP-1 medications by 2030, whether it be medications we already see in the marketplace today or further innovations that will emerge over the coming years.
Speaker Change: Our mission, refined over the course of the last 40 years, remains focused on helping individuals achieve healthier lifestyles through integrated, holistic solutions. But now we, in conjunction with our incredible Optivea independent coaches,
Speaker Change: and in collaboration with LifeMD telehealth physicians, expect to be able to put healthy lifestyle transformation within the reach of more people than ever before.
Speaker Change: Industry projections indicate that as many as 20 million people or more in the U.S. could be utilizing GLP-1 medications by 2030.
Speaker Change: whether it be medications we already see in the marketplace today or from further innovations that will emerge over the coming years.
Dan Chard: Indeed, research we have commissioned with BCG finds that the support market for this population could reach $50 billion per year or more by the year 2030, vastly exceeding the $8 billion structured weight loss market we previously targeted. Nutrition products make up over half of this GLP-1 support market. It is interesting to note that a recent national survey commissioned by Capital Coefficient showed that approximately 90% of GLP-1 users showed an interest in food specifically created for GLP-1 patients.
Speaker Change: Indeed, research we have commissioned with BCG finds that the support market for this population could reach $50 billion per year or more by the year 2030, vastly exceeding the $8 billion structured weight loss market we previously targeted.
Speaker Change: Nutrition products make up over half of this GLP-1 support market.
Capital Coefficient: And it is interesting to note that a recent national survey commissioned by Capital Coefficient showed that approximately 90% of GLP-1 users showed interest in food specifically created for GLP-1 patients.
Dan Chard: Put simply, as a result of this shift, we are positioning Medifast to address a market that is projected to be more than six times larger than that where we previously operated. This strategic pivot not only broadens our addressable market but also draws upon our expertise in lifestyle modification, which has always been central to our approach. A focus on medically supported weight loss is a natural extension of our core competencies, allowing us to provide what we believe is an even more robust solution and support system for our customers.
Capital Coefficient: Put simply, as a result of this shift, we are positioning Medifast to address a market that is projected to be more than six times larger than that where we previously operated.
Capital Coefficient: This strategic pivot not only broadens our addressable market, but also draws upon our expertise in lifestyle modification, which has always been central to our approach.
Capital Coefficient: A focus on medically supported weight loss is a natural extension of our core competencies, allowing us to provide what we believe is an even more robust solution and support system for our customers.
Dan Chard: We will position ourselves effectively against competitors in this evolving market structure by leveraging our capabilities in science-based product development and clinically proven plans. We are enhancing our product offerings, expanding customer acquisition channels, and elevating the customer experience to drive engagement and retention, all to enable us to take advantage of the potential opportunities that lie ahead. We are focusing on initiating two incremental channels for growth, company-led advertising to drive brand awareness and customer acquisition, and we're also testing a new channel approach through our collaboration with LifeMD to support their patients who are seeking lifestyle support beyond medication.
Capital Coefficient: We will position ourselves effectively against competitors in this evolving market structure by leveraging our capabilities in science-based product development and clinically proven plans.
Capital Coefficient: We are enhancing our product offerings, expanding customer acquisition channels, and elevating the customer experience to drive engagement and retention, all to enable us to take advantage of the potential opportunities that lie ahead.
Capital Coefficient: We are focusing on initiating two incremental channels for growth.
Capital Coefficient: company-led advertising to drive brand awareness and customer acquisition and we're also testing a new channel approach through our collaboration with LifeMD to support their patients who are seeking lifestyle support beyond medication.
Dan Chard: We believe our new comprehensive solution provides us with a differentiated position in the marketplace, providing a more inclusive approach that encompasses nutrition support, dedicated coaching, community engagement, and, through our collaboration with LifeMD, access to medication and clinical support where appropriate. Our mission of helping customers achieve a healthier lifestyle remains unchanged, as we evolve to provide the necessary tools and resources to meet their needs. This approach ensures that our customers receive the best possible care and support, regardless of where they are in their health journey and makes it easier for customers to make lasting lifestyle changes, whether they are using medication, transitioning off medication, or pursuing traditional weight loss methods. Turning to our second quarter results, revenues came in within our guidance range at $169 million.
Capital Coefficient: We believe our new comprehensive solution provides us with a differentiated position in the marketplace.
Capital Coefficient: providing a more inclusive approach that encompasses nutrition support, dedicated coaching, community engagement, and, through our collaboration with LifeMD, access to medications and clinical support where appropriate.
Capital Coefficient: Our mission of helping customers achieve a healthier lifestyle remains unchanged as we are evolving to provide the necessary tools and resources to meet their needs.
Capital Coefficient: This approach ensures that our customers receive the best possible care and support, regardless of where they are in their health journey, and makes it easier for customers to make lasting lifestyle changes, whether they are utilizing medication, transitioning off medications, or pursuing traditional weight loss methods.
Speaker Change: Turning to our second quarter results, revenues came in within our guidance range at $169 million.
Dan Chard: We continue to face macroeconomic challenges, including increased competition in the health and wellness space, including the expansion and disruptive effect of GLP-1 regimen adoption, and a broad slowdown in consumer spending. While we do not expect these pressures to ease in the short term, we anticipate that our initiatives will begin to positively impact our top line late this year and as we move into 2025. These initiatives include strategic investments in marketing and product development that are essential to driving long-term growth. Although these investments will negatively impact our EPS in the near term, we believe that they are critical to positioning Medifast for long-term success.
Speaker Change: We continue to face macroeconomic challenges, including increased competition in the health and wellness space, including the expansion and disruptive effect of GLP-1 regimen adoption, and a broad slowdown in consumer spending.
Speaker Change: While we do not expect these pressures to ease in the short term, we anticipate that our initiatives will begin to positively impact our top line late this year and as we move into 2025.
Speaker Change: These initiatives include strategic investments in marketing and product development that are essential to driving long-term growth. Although these investments will negatively impact our EPS in the near term, we believe that they are critical to positioning Medifast for the long-term success.
Dan Chard: These investments are supported by our strong balance sheet, which provides the financial flexibility needed to execute our strategy effectively. We're not only making use of our strong balance sheet but also our strong historical understanding of the market and how to compete effectively in a changing landscape. The new products and plans we are developing are targeted at individuals on GLP-1 medications as well as those who are looking to transition off GLP-1 medications, whether because they have reached their weight loss goal, have plateaued in their weight loss, or no longer have GLP-1 insurance coverage.
Speaker Change: These investments are supported by our strong balance sheet which provides the financial flexibility needed to execute our strategy effectively.
Speaker Change: We're not only making use of our strong balance sheet.
Speaker Change: but also our strong historical understanding of the market and how to compete effectively in a changing landscape.
Speaker Change: The new products and plans we are developing are targeted for individuals on GLP-1 medications as well as those who are looking to transition off GLP-1 medications.
Speaker Change: whether because they have reached their weight loss goal, have plateaued in their weight loss, or no longer have GLP-1 insurance coverage.
Dan Chard: These products and plans are also designed to help customers maintain their weight loss and overall health and wellness as they work with an Optivia coach to learn healthy habits that make a healthy lifestyle second nature. In May, we introduced a new product and service offer, which included a GLP-1 nutrition support kit, a dedicated independent Opti-Via coach, and access to clinician support through Life MD. This package is priced at $282 per month for a six month commitment plus the cost of medication.
Speaker Change: These products and plans are also designed to help customers maintain their weight loss and overall health and wellness as they work with an Optivia coach to learn healthy habits that make a healthy lifestyle second nature.
Speaker Change: In May, we introduced a new product and service offer, which included a GLP-1 nutrition support kit, a dedicated independent optive vehicle coach, and access to clinician support through LifeMD.
Speaker Change: This package is priced at $282 per month for a 6 month commitment plus the cost of medications.
Dan Chard: This represents our first bundled solution for this demographic. We're also developing additional targeted products designed to help minimize the side effects of weight loss medications, provide appropriate nutrition, and aid in lean muscle mass retention. All this targets those groups that are looking to GLP-1 medications as part of their efforts to improve their overall health and wellness. These new products, which we expect to launch by year end, will feature more protein, fiber, and calcium. They will be available in various forms, including bars and shakes, with an enhanced flavor profile to appeal to customers who are using GLP-1 medications.
Speaker Change: This represents our first bundled solution for this demographic.
Speaker Change: We are also developing additional targeted products designed to help minimize the side effects of weight loss medications, provide appropriate nutrition, and aid in lean muscle mass retention.
Speaker Change: All this targets those groups that are looking to GLP-1 medications as part of their efforts to improve their overall health and wellness.
Speaker Change: These new products, which we expect to launch by year-end, will feature more protein, fiber, and calcium.
Speaker Change: They will be available in various forms, including bars and shakes, with an enhanced flavor profile to appeal to customers who are using GLP-1 medications.
Dan Chard: We also anticipate introducing vitamin and mineral supplements around the end of this year. These new offerings will be integrated into comprehensive plans supported by personalized coaching and community engagement. Later in 2025 and into 2026, we anticipate releasing additional products that extend beyond our current offer and tap into additional ways to improve one's health and wellness, including targeting categories in which we do not currently have products. Company-led marketing efforts, which I mentioned earlier, are ramping up in the third quarter with the aim of building brand awareness and highlighting our new GLP-1 support solutions.
Speaker Change: We also anticipate introducing vitamin and mineral supplements around the end of this year. These new offerings will be integrated into the comprehensive plans supported by personalized coaching and community engagement.
Speaker Change: Later in 2025 and into 2026, we anticipate releasing additional products which extend beyond our current offer and tap into additional ways to improve one's health and wellness, including targeting categories in which we do not currently have products.
Speaker Change: The company-led marketing efforts, which I mentioned earlier, are ramping up in the third quarter, with the aim of building brand awareness and highlighting our new GLP-1 support solutions.
Dan Chard: We conducted a series of advertising pilots over the last two quarters to refine our strategies and optimize our future efforts. Our advertising is planned to span various platforms, including social media, internet search, digital display, connected TV, and radio. As the campaign kicks into full gear, we'll launch earned PR and influencer campaigns along with online video to further support awareness and demand generation. We are targeting three key audiences, those curious about GLP-1 medications, current GLP-1 users seeking support as they use or transition away from the medications, and individuals aiming for a healthy lifestyle without using weight loss medications. In total, we spent $4.6 million on these company-led marketing activities in the second quarter. Year to date, that number is $9.7 million.
Speaker Change: We conducted a series of advertising pilots over the last two quarters to refine our strategies and optimize our future efforts. Our advertising is planned to span various platforms including social media, internet search, digital display, connected TV, and radio.
Speaker Change: As the campaign kicks into full gear, we'll launch earned PR and influencer campaigns along with online video to further support awareness and demand generation.
Speaker Change: We are targeting three key audiences, those curious about GLP-1 medications, current GLP-1 users seeking support as they use or transition away from the medications, and individuals aiming for a healthy lifestyle without using weight loss medications.
Speaker Change: In total, we spent $4.6 million on these company-led marketing activities in the second quarter. Year-to-date, that number is $9.7 million.
Dan Chard: We expect that our focus on targeted advertising will drive customer acquisition and engagement. Our goal is to create a seamless experience for our customers from initial interest to long-term relationships. We are committed to building on this progress, delivering a highly personalized solution for customers at various stages in their weight loss journeys. By creating digital ecosystems that utilize dashboards and tracking methods, we enable better monitoring of individual progress. This information will be accessible to customers and coaches, fostering greater engagement and longer customer retention.
Speaker Change: We expect that our focus on targeted advertising will drive customer acquisition and engagement. Our goal is to create a seamless experience for our customers, from initial interest to long-term relationship.
Speaker Change: We are committed to building on this progress, delivering a highly personalized solution for customers at various stages in their weight loss journeys.
Speaker Change: By creating digital ecosystems that utilize dashboards and tracking methods, we enable better monitoring of individual progress. This information will be accessible to customers and coaches, fostering greater engagement and longer customer retention.
Dan Chard: Enhanced tools for coaches will provide deeper insights into their customer base, allowing them to offer more personalized support. Our efforts to enhance the customer experience are driven by our belief that personalized support is the key to helping customers achieve long-term success. By integrating digital tools and personalized coaching, we can provide our customers with the support they need to achieve their health and wellness goals. We believe that this approach will not only improve customer satisfaction but also drive higher engagement and retention rates, ultimately contributing to our long-term growth. So, to summarize,
Speaker Change: Enhanced tools for coaches will provide deeper insights into their customer base, allowing them to offer more personalized support.
Speaker Change: Our efforts to enhance the customer experience are driven by our belief that personalized support is the key to helping customers achieve long-term success.
Speaker Change: By integrating digital tools and personalized coaching, we can provide our customers with the support they need to achieve their health and wellness goals.
Speaker Change: We believe that this approach will not only improve customer satisfaction, but also will drive higher engagement and retention rates, ultimately contributing to our long-term growth.
Dan Chard: We are making significant strides in our business transformation. Based on a survey we conducted, we estimate that approximately 10,000, or one-third of our active coaches, are now supporting at least one client using GLP-1 medications, reflecting our continued learning in this market. Our product and plan development shows continued progress, with new offerings set to launch around year-end. And we expect to make significant enhancements to the customer experience as we move through the rest of the year, which we believe will make it easier for customers to sign up for our integrated solutions and will result in them staying longer with our program.
Speaker Change: So, to summarize...
Speaker Change: We are making significant strides in our business transformation. Based on a survey we conducted, we estimate that approximately 10,000 or one-third of our active coaches are now supporting at least one client using GLP-1 medications.
Speaker Change: reflecting our continued learning in this market.
Speaker Change: Our product and plan development shows continued progress, with new offerings set to launch around year-end.
Speaker Change: and we expect to make significant enhancements to the customer experience as we move through the rest of the year, which we believe will make it easier for customers to sign up for our integrated solutions and will result in them staying longer with our programs.
Dan Chard: The weight loss market is undergoing a significant transformation, presenting substantial opportunities. There is work to be done, and we must be agile to ensure that we shift and adapt to meet the needs of a market that is rapidly changing. However, Medifast's holistic approach, combining customers, coaches, and clinicians through LifeMD, positions us uniquely to support GLP-1 users in achieving their long-term health goals. With our financial strength, strategic flexibility, and expertise, we believe we are well equipped to capitalize on these opportunities.
Speaker Change: The weight loss market is undergoing significant transformation, presenting substantial opportunities.
Speaker Change: There is work to be done, and we must be agile to ensure that we shift and adapt to meet the needs of a market that is rapidly changing.
Speaker Change: However, Medifast's holistic approach, combining customers, coaches, and clinicians through LifeMD, positions us uniquely to support GLP-1 users in achieving their long-term health goals.
Speaker Change: With our financial strength, strategic flexibility, and expertise, we believe we are well equipped to capitalize on these opportunities.
Dan Chard: I am confident in our team's ability to execute our strategy and drive growth in this rapidly evolving space. Thank you for joining us this afternoon. Now I'll turn it over to Jim to review the quarterly financial details.
Speaker Change: I am confident in our team's ability to execute our strategy and drive growth in this rapidly evolving space. Thank you for joining us this afternoon. Now I'll turn it over to Jim to review the quarterly financial details.
Jim Maloney: Thank you, Dan. Good afternoon, everyone.
Jim Maloney: Thank you, Dan. Good afternoon, everyone. As Dan mentioned, second quarter 2024 revenue was at the upper end of our guidance range as we continue to make progress on our business transformation initiatives.
Jim Maloney: As Dan mentioned, second quarter 2024 revenue was at the upper end of our guidance range as we continue to make progress on our business transformation initiatives. Revenue for the quarter was $168.6 million, a decrease of 43.1% versus the year-earlier period, primarily driven by a decline in the number of active earning Optivea coaches and lower productivity per active earning Optivea coach. Customer acquisition continues to be impacted by competition from GLP-1 medications and consumer spending patterns.
Jim Maloney: Revenue for the quarter was $168.6 million, a decrease of 43.1% versus the year earlier period.
Jim Maloney: primarily driven by a decline in the number of active earning Optivea coaches and lower productivity per active earning Optivea coach. Customer acquisition continues to be impacted by competition from GLP-1 medications and consumer spending patterns.
Jim Maloney: We ended the quarter with approximately 33,900 active earning Optivea coaches, a decrease of 36.2% from the second quarter of 2023. Average revenue per active earning Optivea Coach for the second quarter was $4,972, a year-over-year decline of 10.9%, reflecting the continued headwinds to customer acquisitions. Gross profit decreased 41.4% year-over-year to $123.4 million, driven by lower revenue. Gross profit margin improved 210 basis points to 73.2%, positively impacted by cost savings from our Fuel for the Future initiatives and efficiencies in inventory management.
Jim Maloney: We ended the quarter with approximately 33,900 active-earning OptiVEA coaches, a decrease of 36.2% from the second quarter of 2023.
Jim Maloney: Average revenue per active earning OptiVIA Coach for the second quarter was $4,972, a year-over-year decline of 10.9%, reflecting the continued headwinds to customer acquisition.
Jim Maloney: Gross profit decreased 41.4% year-over-year to $123.4 million, driven by lower revenue.
Jim Maloney: Gross profit margin improved 210 basis points to 73.2%, positively impacted by cost savings from our Fuel for the Future initiatives and efficiencies in inventory management.
Jim Maloney: On a non-GAAP-adjusted basis, which excludes the one-time expenses in connection with a company's restructuring of external manufacturing agreements, gross profit decreased 40.2 percent to $126 million. Non-GAAP-adjusted gross profit margin was 74.8 percent, an increase of 370 basis points from the year-ago period.
Jim Maloney: on a non-GAAP-adjusted basis, which excludes the one-time expenses in connection with the company's restructuring of external manufacturing agreements.
Jim Maloney: Gross profit decreased 40.2% to $126 million. non-GAAP adjusted gross profit margin was 74.8%, an increase of 370 basis points from the year-ago period.
Jim Maloney: SG&A expense was down 23.7% year-over-year to $131.3 million, primarily reflecting lower compensation expense due to lower volumes and fewer active earning coaches. SG&A as a percentage of revenue increased 1980 basis points to 77.9% primarily as a result of the loss of leverage of fixed costs due to lower sales volumes and supply chain optimization costs. We also incurred costs during the quarter to support our business transformation initiatives, which include market research and investment costs related to medically supported weight loss. Cost-to-exit hotel commitments for our annual Opti-Via convention in future years, reflecting a change in strategy and cost for our company-led acquisition initiatives.
Jim Maloney: SG&A expense was down 23.7% year-over-year to $131.3 million, primarily reflecting lower compensation expense due to lower volumes and fewer active earning coaches.
Jim Maloney: SG&A as a percentage of revenue increased 1,980 basis points to 77.9% primarily as a result of the loss of leverage of fixed costs due to lower sales volumes and supply chain optimization costs.
Jim Maloney: We also incurred costs during the quarter to support our business transformation initiatives, which include market research and investment costs related to medically supported weight loss.
Jim Maloney: cost-to-exit hotel commitments for our annual Opti-Via convention in future years reflecting a change in strategy and cost for our company-led
Jim Maloney: On a non-gap adjusted basis, which excludes expenses related to the company's supply chain optimization cost, cost to exit hotel commitments for our annual OptiVIA convention in future years, and cost for the collaboration with LifeMD, SG&A decreased 33.8% to $113.8 million and moved 940 basis points higher as a percent of revenue to 67.5%. Loss from operations was $7.9 million in the second quarter of 2024 versus a gain of $38.7 million in the prior period, driven by lower gross profit partially offset by lower SG&A.
Jim Maloney: Acquisition Initiatives
Jim Maloney: on a non-GAAP-adjusted basis, which excludes expenses related to the company's supply chain optimization cost.
Jim Maloney: cost-to-exit hotel commitments for our annual OptiVIA convention in future years and costs for the collaboration
Speaker Change: With LifeMD, SG&A decreased 33.8% to $113.8 million and moved 940 basis points higher as a percent of revenue to 67.5%.
Speaker Change: Loss from operations was $7.9 million in the second quarter of 2024 versus a gain of $38.7 million in the prior period, driven by lower gross profit partially offset by lower SG&A.
Jim Maloney: As a percentage of revenue, loss from operations was 4.7% in the second quarter, a decrease of 1,780 basis points versus the year earlier period. On a non-GAAP adjusted basis, which excludes the adjustments described previously, income from operations decreased 68.4% to $12.2 million as a percentage of revenue. Non-GAAP adjusted income from operations was 7.3%, a decrease of 580 basis points from the year-ago period. The effective tax rate of 23.4% was higher than the 22.6% recorded in the prior year's second quarter due to the net loss position in 2024 and the corresponding rate impact from research and development tax credits, partially offset by the rate impact from the limitation for executive compensation. On a non-GAAP adjusted basis, the effective tax rate in the first quarter was 26.2%.
Speaker Change: As a percentage of revenue loss from operations was 4.7% in the second quarter, a decrease of 1780 basis points versus the year earlier period.
Speaker Change: on a non-gap.
Speaker Change: adjusted basis, which excludes the adjustments described previously, income from operations decreased 68.4 percent to 12.2 million dollars as a percentage of revenue. non-GAAP adjusted income from operations
Speaker Change: was 7.3%, a decrease of 580 basis points from the year-ago period.
Speaker Change: The effective tax rate of 23.4% was higher than the 22.6% recorded in the prior year's second quarter due to the net loss position in 2024 and the corresponding rate impact from research and development tax credits.
Speaker Change: partially offset by the rate impact from the limitation for executive compensation. On a non-GAAP adjusted basis, the effective tax rate in the first quarter was 26.2 percent.
Jim Maloney: Net loss in the second quarter of 2024 was $8.2 million or $10.75 per diluted share compared to net income of $30.3 million or $2.77 per diluted share in the year earlier period. On a non-gap adjusted basis, net income in the second quarter of 2024 was $10.1 million or $0.92 per diluted share. Turning to our balance sheet, we ended the quarter with $163.5 million in cash, cash equivalents, and investments in no interest-bearing debt.
Speaker Change: Net loss in the second quarter of 2024 was
Speaker Change: $8.2 million dollars or
Speaker Change: $2.75 per diluted share compared to net income of $30.3 million or $2.77 per diluted share in the year-earlier period. On a non-GAAP-adjusted basis, net income in the second quarter of 2024
Speaker Change: was $10.1 million or $0.92 per diluted share.
Speaker Change: Turning to our balance sheet, we ended the quarter with $163.5 million in cash, cash equivalents, and investments in no interest bearing debt. This is up from $150 million as of December 31, 2023.
Jim Maloney: This is up from $150 million as of December 31, 2023. Now, I'll turn to our guidance. We are expecting third-quarter revenue to range from $125 to $145 million, reflecting a continued decrease in the number of active earning Optivea coaches as a result of near-term challenges to customer acquisition due to growing acceptance of GLP-1 medications in the marketplace. We expect our loss per share for the quarter to range from $0.05 to $0.70.
Jim Maloney: The guidance includes expectations of spending $9 million during the quarter on company-led marketing and another $4 million on our coach convention. However, it excludes the cost related to the initiation of our LifeMD collaboration and any gains and losses from changes in the market price of our LifeMD common stock holding, which we are unable to estimate.
Speaker Change: Now I'll turn to our guidance. We are expecting third quarter revenue to range from $125 to $145 million.
Speaker Change: reflecting a continued decrease in the number of active-earning Optivea coaches.
Speaker Change: as a result of near-term challenges to customer acquisition due to growing acceptance of GLP-1 medications in the marketplace.
Speaker Change: We expect our loss per share for the quarter to range from $0.05 to $0.70. The guidance includes expectations of spending $9 million during the quarter on company-led marketing and another $4 million on our coach convention.
Speaker Change: However, it excludes the cost related to the initiation of our LifeMD collaboration and any gains and losses from changes in the market price of our LifeMD common stock holding.
Jim Maloney: I do want to note that while we initially expected to spend around $30 million on marketing this year, we now expect that number to be approximately $25 million. We've made a conscious decision to better align our spending with the availability of the full complement of our new offer, which includes the new products and enhanced customer experience that we expect will be ready for the start of resolution season at the beginning of 2025.
Speaker Change: which we are unable to estimate.
Speaker Change: I do want to note that while we initially expected to spend around $30 million on marketing this year, we now expect that the number to be approximately $25 million.
Speaker Change: We have made a conscious decision to better align our spending with the availability of the full complement of our new offer, which includes the new products and enhanced customer experience that we expect will be ready for the start of resolution season at the beginning of 2025.
Jim Maloney: In summary, we believe that our strong balance sheet will allow us to weather the current market conditions while making the strategic investments necessary to execute our business transformation while maintaining a strong financial position. And that transformation of our business is the most effective way to provide lasting value for the company and stockholders. With that, let me turn the call to the operator for questions.
Speaker Change: In summary, we believe that our strong balance sheet will allow us to weather the current market conditions while making the strategic investments necessary to execute our business transformation while maintaining a strong financial position.
Speaker Change: and that transformation of our business is the most effective way to provide lasting value for the company and stockholders.
Speaker Change: With that, let me turn the call to the operator for questions.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Anyway, press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from Jim Salera with Steven. Please go ahead.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Speaker Change: If you would like to remove your questions from the queue, for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first question comes from Jim Salera with Steven. Please go ahead.
Jim Salera: Hey guys, good afternoon. Thanks for taking our question. Dan, I believe in your prepared remarks you mentioned that about a third of the coaches have someone that they're currently working with.
Jim Salera: Hi, guys. Good afternoon. Thanks for taking our question. Dan, I believe in your prepared remarks you mentioned that about a third of the coaches have someone that they're currently working with that's on GLP-1 drugs.
Speaker Change: Can you give us some insight into how many of those customers?
Speaker Change: started using GLP-1 through the LifeMD partnership or just they did it on their own and they just happened to also have an OptiVit coach.
Dan Chard: Yeah, Jim, it's, it's, it's a mix. And there are a number of reasons that we think it's a mix. A part of it has to do with some of them were already consulting with their own physicians, so they stuck with their primary care physician. The other part of it is that we're just starting on integrating the full solution. So, but we see that as an encouraging sign, as you pointed out with one. I mean, that's reflective of our training.
Dan Chard: Yeah, Jim, it's a mix and there are a number of reasons.
Speaker Change: that we think it's a mix. A part of it has to do with some of them were.
Jim: already consulting with their own physicians, so they stuck with the primary care physician. The other part of it is that we're just starting on integrating the full solution.
Speaker Change: But we see that as an encouraging sign, as you pointed out, I mean that's reflective of our training. We have about 90%
Dan Chard: We have about 90% of our coach leaders now who have gone through the training for mentally supported weight loss, so we're starting to see that have an impact on the ability to bring in new clients who are on GLP-1. We also have about 17% of our total active running coaches who have now been trained.
Speaker Change: of our coach leaders now who have gone through the training for Mentally Supported Weight Loss, so we're starting to see that have an impact.
Speaker Change: on the ability to bring in new clients who are on GLP-1. We also have about 17% of our total active running coaches who have now been trained. So we believe that training.
Speaker Change: will have a positive impact on that number. The other big thing that we touched on in the prepared remarks relate to the product focus that we have.
Dan Chard: So we believe that training will have a positive impact on that number. The other big thing that we touched on in the prepared remarks relates to the product focus that we have. I think there was, you know, one of the statistics we shared for the first time was related to a third-party study that continues to, it's an area that continues to come up and reinforce this area of GLP-1 support, which is that 90% of GLP-1 users indicate they're interested in food specifically formulated for people who are on GLP-1 drugs.
Speaker Change: I think there was, you know, one of the statistics we shared for the first time was
Speaker Change: related to a
Speaker Change: a third party study.
Speaker Change: It's an area that continues to come up and reinforce this area of GLP-1 support, which is that 90% of GLP-1 users
Speaker Change: indicate they're interested in food specifically formulated for people who are on.
Dan Chard: And that also kind of reinforces the other part of what we're looking at for the support market, which is that, based on our own research, 80% of those who are open to medically supported weight loss medications are also interested in this combined offer that we are putting forward. So, we think that this launch of, you know, the gap filler in that sense of this nutrition support kit, which sells for about $282 and offers coaching, food, and six months of clinician support, is an important part of our new product offer.
Speaker Change: GLP-1 drugs. And that also kind of reinforces the other part of what we're looking at for the support market, which is that with our own research, 80% of those
Speaker Change: who are open to medically supported weight loss medications are also interested in this combined offer that we are putting forward. So.
Dan Chard: And we're starting to see that become a more significant part of our sales, particularly in the months of May, sequential improvement between May and June. And, you know, we also just held our convention, and we announced and actually sampled a new product line, which is called Ascend, which is a line that was specifically formulated for people on GLP-1 drugs. So, the other current nutrition support product was a bundle of our current products. This new one is completely reformulated.
Speaker Change: We're starting to see that become a more significant part of our sales.
Speaker Change: particularly in the months of May, sequential improvement between May and June . And you know this we also just held our convention and we announced and actually sampled
Speaker Change: a new product line, which has a brand of Ascend, which is a line that was specifically formulated.
Speaker Change: for people on GLP-1 drugs. So the other, the current nutrition support product was a bundle of our current products. This new one is completely reformulated. You know, the last thing, I think, just rounding out this question of why we think...
Dan Chard: You know, the last thing, I think, just rounding out this question of why we think this number of active earning coaches who are supporting GLP-1 clients will continue to increase as we're continuing to improve the integration between our technology and LifeMD's technology, making it easier for our coaches to support their clients with this clinician. Supported model in collaboration with LifeMD, and we also, as pointed out, are activating not only our own company-led acquisition spending but also testing, in collaboration with LifeMD, how we might support their patients with our combined offer.
Speaker Change: This number of of active earning coaches who are supporting
Speaker Change: GLP-1
Speaker Change: Clients will continue to increase his work.
Speaker Change: continuing to approve the...
Speaker Change: The integration between our technology, LifeMD's technology, making it easier.
Speaker Change: for our coaches to support their clients with this clinician.
Speaker Change: supported model in collaboration with LifeMD. And we also, as pointed out, are activating not only our own company-led acquisition,
Speaker Change: spending but also testing in collaboration with LifeMD how we might support their patients.
Dan Chard: So, we feel like we're still very much at the beginning of the transformation, but as we add more components to support our transformation, we're starting to see the impact. It's going to take some time for the impact to translate into a real impact on the top line as we restructure and recreate what we were very successful at doing in the past, for most of the past eight years, which is having that flywheel that brings in new clients, a portion of whom become coaches, and who are able to bring in more new clients.
Speaker Change: with our with our combined offer. So we we feel like we're still very much at the beginning of the transformation, but as we add more components to support our transformation, we're starting to see
Speaker Change: The impact, although it's going to take some time for the impact to translate into a real impact on the top line as we restructure and recreate.
Speaker Change: what we were very successful in doing in the past most of the past eight years which is having that flywheel that brings in new clients who a portion of whom convert to coaches and who are able to bring in more new clients so we're feel good about
Dan Chard: So, we feel good about where we are in the transformation but feel a real, I'll say, urgency to start seeing that new client number improve so that we can see top-line improvement, which we anticipate will be largely part of next year's results.
Speaker Change: where we are in the transformation, but feel a real urgency to start seeing that new client number improve so that we can see top-line improvement, which we anticipate will be largely part of next year's results.
Jim Salera: I appreciate all the detail. Maybe there is one other thing to drill in on. As you start to ramp up the company-supported marketing, you talked about new products, ready-to-drink shakes, or I took it as ready-to-drink shakes, maybe if not, please feel free to correct me, as well as the bars. Is that something that if the customer comes to that driven by the advertisements that are company-led, is there going to be a way for them to order it just directly online without any interaction Or is it still going to require them to have a relationship with a coach in order to get the product?
Speaker Change: I appreciate all the detail.
Speaker Change: Maybe one other thing to drill in on.
Speaker Change: As you start to ramp the company-supported marketing, you talked about, you know, new products, ready-to-drink shakes, or I took it as ready-to-drink shakes, maybe, if not, please feel free to correct me, as well as the bars.
Speaker Change: Is that something that...
Speaker Change: Thank you. It was a pleasure. Thank you.
Speaker Change: The customer comes to that.
Speaker Change: driven by the Advertisements that are company-led is there going to be a way for them to order it just direct online without any Interaction with a coach or is it still gonna require them having a relationship with a coach in order to get the product?
Dan Chard: Yeah, so the shakes are not ready to drink yet. The shakes are in powder form to answer that first question.
Speaker Change: Yeah, so the shakes are not ready to drink. The shakes are in a powder form to answer that first question.
Dan Chard: And yeah, you know, we sell the products, but he's really part of the programs and the programs, and we changed this several years ago because we found that there's far more success for each of these clients or these customers in terms of achieving their ultimate goals if they are tied in with a coach and the community and understand the habits of health. So, yeah, I mean, it's possible for somebody to kind of continue on their own, but they're always assigned a coach so that they can have that support if they need it. But it's a little bit of self-service support, if you will. So, yes, they can get it through the website, but they will be assigned a coach at the same time.
Speaker Change: And, you know, we sell the products, but these are really part of programs. And the program, and we changed this several years ago, we found that
Speaker Change: There's far more success for each of these clients or these customers in terms of achieving their goals.
Speaker Change: They're.
Speaker Change: ultimate goals if they are tied in with a coach.
Speaker Change: and the community and understand that the habits of health so
Speaker Change: Yeah, I mean it's it's possible for somebody to kind of continue on their own, but they're always assigned a coach so that they can
Speaker Change: have that support if they need it, but that it's a little bit of self-service support if you will. So yes they can get it and through the website and but they will be assigned a coach at the same time.
Operator: Got it. Okay. I appreciate all the detail. I'll hop back in the queue. All right, thanks, Jim. Next question, Linda Bolton-Weiser with DHS.
Speaker Change: Got it. Okay. Appreciate all the detail. I'll hop back in the queue.
Operator: Next question is Linda Bolton-Weiser with DA Davidson. Please go ahead.
Jim: All right, thanks, Jim.
Jim: Next question, Linda Bolton-Weiser with D.A. Davidson. Please go ahead.
Speaker Change: and more. I hope you enjoyed this video. If you did, please give it a thumbs up and subscribe to my channel. I'll see you in the next video.
Speaker Change: Go to www.Flydreamers.com for all of your future video ideas!
Operator: Linda, if you're speaking, we can't hear you.
Speaker Change: Linda, if you're speaking, we can't hear you.
Linda Bolton: Hi, can you hear me now? Yes, we can.
Linda Bolton-Weiser: Hi, can you hear me now?
Operator: Oh, OK. Sorry about that. So if your coaches, if the main problem they're having in acquiring new clients is that the GLP-1 drug is kind of a threat. Why, um... The question went out of my head. Oh, I know what I was going to ask.
Linda Bolton-Weiser: Yes we can. Oh okay, sorry about that. So if your coaches, if the main problem they're having in acquiring new clients is that the GLP-1 drug is kind of a threat
Speaker Change: Why, um...
Speaker Change: The question went out of my head.
Linda Bolton: Can you comment on whether the new client acquisition improved from May to June? Because you started offering the kit in May. So it seems that if the main threat is the GLP-1 drugs, the solution was offered starting in May. So it seems like it would have an immediate effect on improving the number of new clients. So was there a sequential increase in new clients from May to June?
Speaker Change: Oh, I know what I was going to ask. Can you comment on whether the new client acquisition improved from May to June ? Because you started offering the kit in May. So it seems that if the main threat is the GLP-1 drugs, the solution was offered starting in May.
Speaker Change: So, it seems like it would have an immediate effect on improving the number of new clients. So, was there a sequential increase in new clients from May to June ?
Jim Maloney: Yeah, so we, you know, it's, you know, we don't really give details regarding clients in our quarter. But what I can tell you, Linda, is that it is as a percent of our business for new clients and reactivated clients. We did see a significant increase in orders. As a percent of new new clients and reactivated from May to June. So it was a very small percent of the month of May that we were seeing those orders.
Speaker Change: Yeah, so we, you know, it's, you know, we don't really give detail regarding clients inter-quarter, but what I can tell you, Linda, is
Speaker Change: that are, as a percent of our business, for new clients and reactivated clients, we did see a significant increase.
Speaker Change: of orders as a percent of new clients and reactivated from May to June . So it was a very small percent in the month of May that we were seeing those orders.
Jim Maloney: It did increase dramatically in June, but I would still say it's still a small part of our business. We're hopeful that we see that continue into Q3. And then, as Dan mentioned in the prepared remarks, that we're launching new products within that line later this year, so we're hopeful that will keep increasing as a percent of our business and become much more meaningful as we move into 2025.
Speaker Change: It did increase dramatically in
Speaker Change: in June .
Speaker Change: But I would still say it's still a small part of our business. We're hopeful that we see that continue into Q3 and then as Dan mentioned in the prepared remarks.
Dan Chard: that we're launching new products within that line later on this year. So we're hopeful that will keep increasing as a percent of our business and become much more meaningful as we move into 2025.
Linda Bolton: Okay, so I guess I'm confused. Maybe we can talk offline. But so the revenue from new clients increased sequentially from May to June, but the number of new clients did not. I'm not sure how that would happen.
Speaker Change: Okay so I I guess I'm confused maybe we can talk offline but so the the revenue from new clients increased sequentially from May to June but the number of new clients did not? I'm confused how that would happen.
Jim Maloney: No, so, no, no, as a percent of our business, the orders that we were receiving... from customers, that actually increased. Those people were ordering more of the kit that was associated with the GLP-1, versus our old five-in-one program or any other program that we had. So it just means that a portion of our business grew in June versus May. It doesn't mean the entire business grew in June. But we're seeing that movement as we move through this transformation.
Speaker Change: No, so no, no, as a percent of our business, the orders that we were receiving.
Speaker Change: from customers
Speaker Change: That actually increased. Those people were ordering more of the kit that was associated with the GLP-1.
Speaker Change: versus our old five-in-one program or any other program that we had. So it just, that portion of our business grew in June versus May. Doesn't mean the entire business grew in June though.
Speaker Change: But we're seeing that movement as we move through this transformation.
Dan Chard: So a high-level way to look at it, Linda, is that we have a higher number of our coaches who are supporting those on GLP-1 drugs. So that's a third of our coaches, roughly, who are supporting at least one client on GLP-1 drugs.
Speaker Change: So a high-level way to look at it, Linda, is we have
Linda Bolton-Weiser: A higher number of our coaches were supporting those on GLP-1 drugs, so that's a third of our coaches, roughly, who are supporting at least one client on GLP-1 drug.
Dan Chard: And an increasing portion of those clients who are coming in are ordering the GLP-1 Nutrition Support product kit. And we anticipate that, as we continue to train, that proportion of our client base will continue to increase. But there's still a lot of noise out there, so even though we see our coaches and our client community kind of making progress in the sense that we're bringing in a more, I'll say, diverse mix that includes more GLP-1 clients.
Speaker Change: An increasing portion of those clients who are coming in are ordering the GLP-1 Nutrition Support product kit.
Linda Bolton-Weiser: And we anticipate that, you know, as we continue to train, that that proportion of our client base will continue to increase.
Speaker Change: But there's still a lot of noise out there. So even though we see your...
Speaker Change: Our coaches and our client community kind of making progress in the sense that we're bringing in a more, I'll say, diverse mix that includes more GLP-1 clients.
Dan Chard: We are still facing those headwinds that are a result not only of not being able to offer them but also of a very competitive marketplace where a lot of people are offering them. I think another interesting statistic that kind of, well, it's straight up more of a qualitative measure is that we are seeing more of these clients that we're talking about as well, who are transitioning off GLP-1 products and who are interested in using our program for maintenance.
Speaker Change: We are still facing those those headwinds that are a result no longer of not being able to offer, but also of a very competitive marketplace where a lot of people are offering. I think another interesting statistic that kind of, well, it's, it's.
Speaker Change: ...state it morally, a qualitative...
Speaker Change: is that we are seeing more of these clients that we're talking about as well.
Speaker Change: who are transitioning off.
Speaker Change: GLP-1 products and who are interested in
Dan Chard: So you can read about some of that, obviously, in the news, but we're starting to see those clients who feel like they've achieved their weight, but they didn't learn the lifestyle component, who are coming to our coaches to make sure they don't achieve weight gain. So that's, I think, is going to be a meaningful target and segment for the long term.
Speaker Change: using our program for maintenance.
Speaker Change: So you can read about some of that, obviously in the news, but we're starting to see.
Speaker Change: Those clients who feel like they've achieved their weight, but they didn't learn.
Speaker Change: have the lifestyle component who are coming to our coaches to make sure they don't achieve the weight gain. So that's, I think, going to be a meaningful target and segment for the long term.
Linda Bolton: Okay, and then, um... Sorry again, if you said this and I didn't understand, but you said a third of your coaches have at least one patient using a GLP-1 drug. Can you say how many or what percentage of your coaches have had a client get the prescription through life?
Speaker Change: Okay, and then, um...
Speaker Change: Sorry again if you said this and I didn't understand, but you said a third of your coaches have at least one patient using a GLP-1 drug.
Speaker Change: Can you say how many or what percentage of your coaches?
Speaker Change: had a client get the prescription through LifeMD.
Dan Chard: And I mentioned that earlier. So we have We have a mix right now, and what we've seen in these early stages is that quite a few of our customers that are working through coaches are going directly through their primary care physician because that's where they started their conversations. So increasingly, as we kind of integrate the offer more completely, we're seeing more of those go to LifeMD. So we saw improvements in those numbers, but I think we're still at the very early stages of creating the integration and also helping them understand how to use LifeMD if they already have a primary care physician. But we feel like we're making progress there, but right now, it's very much a mix.
Speaker Change: I mentioned that earlier, so we have...
Speaker Change: We have a mix right now, and what we've seen in these early stages is that
Speaker Change: and quite a few of our customers that are working through COACHES.
Speaker Change: are going directly through their primary care physician because that's where they started their conversations. So increasingly, as we kind of integrate the offer more completely, we're seeing more of those go to LifeMD. So we saw.
Speaker Change: improvements in those numbers but I think we're still at the very early stages of creating the integration and also helping them understand how to use Life MD if they already have a primary care physician but we're we feel like we're making progress there but it's right now it's very much a mix.
Linda Bolton: Okay, and then, um... I guess if you talk about, you gave your numbers for advertising spend, and it does point to a smaller amount in the fourth quarter than in the third quarter, I guess that would make sense based on the seasonality of the business. Is that the main reason that there would be a sequential reduction? Because, I mean, you're trying to really make a dent here and get some attention in a very crowded market.
Speaker Change: Okay, and then
Speaker Change: I guess if you talk about, you gave your numbers for advertising spend and it does point to a smaller amount in fourth quarter than in third quarter, I guess that would make sense based on the seasonality of the business. Is that the main reason that there would be a sequential reduction? Because I mean you're trying to
Speaker Change: really make a dent here and get some attention in a very crowded market. So I'm wondering...
Linda Bolton: So I'm wondering, like, are you thinking that during seasonal high points, this 10 million per quarter is what you're going to be spending or, and also related to that, can you comment on Weight Watchers saying the CAC has become just inordinately high, um, given the election and the Olympics and everything going on in the weight loss space? So is your LTV to CAC coming out different than what you thought when you put together the plan for advertising? Has that projection changed at all?
Speaker Change: Like, are you thinking that, you know...
Speaker Change: During seasonal high points, this $10 million per quarter is what you're going to be spending, or...
Speaker Change: And also related to that, can you comment on, Weight Watchers said the CAC has become just inordinately high, given the election and the Olympics and everything going on in the weight loss space.
Speaker Change: So is your LTV to CAC coming out different than what you thought when you put together the plan for advertising? Has that projection changed at all?
Jim Maloney: Yeah, let me see if I can address those questions. So, you know, in the prepared remarks, we mentioned that we're going to reduce our marketing spend from 30 million to 25. That does have some to do with the seasonality. We do want to continue to invest in this year at a higher degree than we did in Q1 and in Q2 because we want to make sure that we're spending enough to get additional brand awareness as we move into. Um, 2025. Because, as you know, Linda, that, you know, the brand itself, the awareness, has been done through coaches and not through advertising in the past.
Speaker Change: Yeah, let me see if I can address those questions. So, you know, in the prepared remarks we mentioned that we're going to reduce our marketing spend from 30 million to 25.
Speaker Change: That does have some to do with the seasonality. We do want to continue to invest.
Speaker Change: in this year at a higher degree than we did in Q1 and in Q2 because we want to make sure that we're spending enough
Speaker Change: to get additional brand awareness as we move into...
Speaker Change: 2025, because as you know, Linda, that, you know, the brand itself, the awareness...
Speaker Change: has been done through coaches and not through advertising in the past so we believe we need to continue to invest
Jim Maloney: So we believe we need to continue to invest at a good rate. But that's why we're considering the second half of 2024 to be an investment period of time. So as we go into 2025, we're hopeful that that investment will pay off in those periods, plus pulling back a little bit on the spend. And we would spend that money in 2025 in better periods. Like you just said, things like the Olympics and the election do make it more difficult to spend dollars when there's a lot of noise out there on social media and other means.
Linda Bolton-Weiser: at a good rate.
Linda Bolton-Weiser: But that was, you know, that's why we're considering the second half of 2024.
Linda Bolton-Weiser: to be a an investment period of time so
Linda Bolton-Weiser: As we go into 2025, we're hopeful that that investment will pay off in those periods, plus pulling back a little bit on the spend.
Linda Bolton-Weiser: And we would spend that money in 2025 in better periods, like you just said, the, the, you know, things like the Olympics and the election, you know,
Linda Bolton-Weiser: Those do make it more difficult to spend the dollars when there's a lot of noise.
Linda Bolton-Weiser: out there in social media and up in other means. So, you know, we were relatively, we're obviously much newer at
Jim Maloney: Um, so, you know, we were relatively, we're, we're obviously much newer to advertising. I would say that on the CAC question, we're seeing that the CAC is relatively what we expected, but we need to hit a target that is lower, and we're looking to do that as we move through 2024. So we realize that this is gonna take us some time, and that's why we're willing to invest in and learn about what the right message is to get to the amount of customers or potential customers that lower that CAC.
Linda Bolton-Weiser: advertising. I would say that on the CAC question, you know, we're seeing that the CAC
Linda Bolton-Weiser: is relatively what we expected, but we need to hit a target that is lower, and we're looking to do that as we move through 2024.
Linda Bolton-Weiser: So we realize that this is going to take us some time.
Linda Bolton-Weiser: And that's why we're willing to invest and learn in what that right message is to get to the amount of customers or potential customers that lower that CAC.
Linda Bolton: Okay, um... Can I also ask, according to my model, and this is not your guidance, of course, but I've got like $25 million of free cash flow for the year, significantly down. Are you pretty committed to maintaining that? You've got, um, cash on your balance sheet, so you've got an ability to invest in the business, meaning negative free cash flow. Are you pretty committed to keeping free cash flow positive? Or do you think that you could just take some time here and invest heavily in the next year or two?
Linda Bolton-Weiser: Okay.
Speaker Change: Can I also ask, I mean, according to my model, and this is not your guidance, of course, but I've got like 25 million of free cash flow for the year, you know, significantly down. Are you pretty committed to maintaining, you've got
Speaker Change: cash on your balance sheet so you've got an ability to
Speaker Change: Invest in the business, meaning negative free cash flow. Are you pretty committed to keeping free cash flow positive or do you think that you could just take some time here and invest, you know, heavily in the next year or two?
Jim Maloney: So we don't, we, you know. As you articulated, we do have a strong balance sheet. We do want to continue having that strong balance sheet. Once we have more learnings on our advertising spend, we are expecting to accelerate that, but we won't do that unless the investment is right for the shareholder. So, you know, we're looking at the CAC also, and we're looking at LTV, and we're making those calls based on the return on investment.
Speaker Change: Yeah, so we don't, we, you know, you know, we're, we're, as you articulated, we do have a strong balance sheet. We do want to continue having that strong balance sheet. Once we, once we,
Speaker Change: have more learnings on our advertising spend, we are expecting to accelerate that, but we won't do that unless the investment is right for the shareholders.
Speaker Change: So, you know, we're looking at the CAC also, and we're looking at LTV, and we're making those calls based on the return on investment.
Jim Maloney: So I know that's a, I'm not really directly answering your question, but we do, again, want to keep a strong balance sheet. We will increase the amount of spending once we know there is a good return for shareholders.
Speaker Change: So, I know that's a, I'm not really directly answering your question, but we do, again, we want to keep a strong balance sheet.
Speaker Change: We will increase the amount of spending once we know there is a good return to shareholders.
Linda Bolton: Okay, yeah, that's helpful. Let's see, what else was I going to ask? I guess that's all I have for now. I will take the rest offline. Thank you.
Speaker Change: Okay, yeah, that's helpful.
Speaker Change: Let's see, what else was I going to ask?
Speaker Change: I guess that's all I had for now. I will take the rest offline. Thank you.
Operator: Thanks for that. Thanks. Once again, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Thanks a lot. Thanks.
Speaker Change: Once again, if you would like to ask a question, please press star 1 on your telephone keypad.
Operator: The next question comes from David Larson with BTIG. Please go ahead.
Speaker Change: Next question comes from David Larson with BPIG. Please go ahead.
David Larson: Hi, can you talk about your relationship with LifeMD and the go-forward model? Like, how much will you be charging for a bundled solution? What does that bundled solution look like?
David Larson: Hi, can you talk about your relationship with LifeMD and the go-forward model, like how much will you be charging for a bundled solution? What does that bundled solution look like?
Jim Maloney: And how much of the money goes to you? How much goes to LifeMD? And what sort of uptake do you expect in terms of members going to your platform and LifeMD's platform at a steady stage? Any more color there would be very helpful. Thank you.
David Larson: and how much of the money goes to you, how much goes to LifeMD and what sort of uptake do you expect in terms of members going to your platform and LifeMD's platform at a steady stage? Any more color there would be very helpful. Thank you.
Jim Maloney: I mean, currently, the way we're working together, and we're obviously just at the start of this. If you look at the combined offer, we're charging $282. $65 is for the six-month commitment that LifeMD's subscription, and our GLP-1 kit is $217. So that's how you get to $282. That does not include the medication. But, you know, we're going to work through this. We don't really have anything more to communicate on pricing.
Speaker Change: I mean currently the way we're working together and we're obviously just at the start of this
Speaker Change: If you look at the combined offer, we're charging together $282.
Speaker Change: $65 is for the six-month commitment that LifeMD's subscription.
Speaker Change: We're going to work through this. We don't really have any more to communicate on pricing, but we're going to work through this over the coming months and coming quarters.
Jim Maloney: But we're going to work through this over the coming months and coming quarters to make sure that we highlight the value that we bring as an offer. When you think about it, we have a lot of elements that consumers are looking for when you consider someone that's going on medication to become more healthy. So we have pretty much all the elements that you would want as a patient or a customer.
Speaker Change: to make sure that we're
Speaker Change: Oh
Speaker Change: highlighting the value that we bring.
Speaker Change: As an offer, when you think about it, we have a lot of elements that consumers are looking for when you consider someone that's going on medication to become more healthy.
Speaker Change: So we have we have pretty much all the elements that you would want as a patient or a customer.
Jim Maloney: It certainly makes a lot of sense to me, you have the GLP-1, and you have the diet coaching piece as well. How are your top performing coaches responding to the relationship with LifeMD? You know, like, I guess, if you take these GLP-1s, maybe you're not as hungry, so you order less food. How convinced are they that they'll make more money with LifeMD? Thanks.
Speaker Change: It certainly makes a lot of sense to me, you have the GLP-1, you have the diet coaching piece as well.
Speaker Change: How are your top performing coaches responding to the relationship with LifeMD? I guess if you take these GLP-1s, maybe you're not as hungry, so you order less food. How convinced are they that they'll make more money with LifeMD? Thanks.
Dan Chard: Yeah, I'd say there's a growing confidence in LifeMD. LifeMD has, over the years, built a great service with their primary care physicians. We actually now, for the second year in a row, had a LifeMD physician come and present and run a panel for our coaches, most recently two weeks ago at our Optivia convention.
Speaker Change: Yeah, I'd say there's a growing confidence in LifeMD. LifeMD has, over the years, built a great service with their primary care physicians.
Speaker Change: We actually now, for the second year in a row, have had a live MD.
Speaker Change: physician come and present and run a panel for our coaches most recently two weeks ago at our Optivia convention.
Dan Chard: So confidence is growing, and part of the growth in that confidence comes from their physicians being trained specifically on what the Optivia program is. Part of the confidence comes from the improvement in technology integration, which means that our customers and our coaches' customers have a much better experience. So, for example, the ability to check eligibility, schedule time with a clinician, and order products is all now integrated into the Optivia app.
Speaker Change: So the confidence is growing.
Speaker Change: And part of the growth and that confidence comes from their physicians being trained specifically on what the Optivia program is.
Speaker Change: Part of the confidence comes from the the improvement in the technology integration, which means that they're
Speaker Change: our customers and their coaches' customers.
Speaker Change: have a much better experience.
Speaker Change: So, for example, it's the ability to check eligibility.
Speaker Change: To schedule time with a clinician and to order products is all now integrated into the Optivia app. And so the more integrated into the overall solution it is, the greater.
Dan Chard: And so the more integrated into the overall solution it is, the greater the confidence becomes. So I think we're where we believe we would be at this stage, but we also expect to see improvements in that as we continue to integrate the service between the two companies.
Speaker Change: The confidence becomes, I think,
Speaker Change: So I think we're where we believe we would be at this stage, but we also expect to see improvements in that as we continue to integrate the service between the two companies.
David Larson: Okay, great. Thanks very much. I appreciate it.
Dan Chard: Thank you. I would like to turn the floor over to Dan for his closing remarks.
Speaker Change: Thanks very much, appreciate it.
Speaker Change: Thank you. I would like to turn the floor over to Dan for closing remarks.
Dan Chard: I'd like to thank everybody for joining us today, and we look forward to seeing many of you at the County Corps Genuity Growth Conference next week and then at the Wells Fargo Consumer Conference in September. Thank you.
Dan Chard: I'd like to thank everybody for joining us today, and we look forward to seeing many of you at the CounterCore Genuity Growth Conference next week, and then at the Wells Fargo Conference in September . Thank you for joining.
Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.