Q3 2024 Medifast Inc Earnings Call
Speaker Change: Greetings and welcome to the MetaFest Third Quarter 2024 earnings conference call. At this time, all participants are no listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operators since storing 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, Steven Zenker, Vice President of Investor Relations. Thank you, sir. You may begin.
Steven Zenker: Good afternoon and welcome to MetaFast 3rd 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.
Steven Zenker: By now, everyone should have access to the earnings release for the quarter-ended September 30, 2024, that went out this afternoon at approximately 405 PM Eastern Time.
Steven Zenker: If you have not received the release, it is available on the Investor Relations portion of Metifast website at www.metifastink.com. This call is being webcast and a replay will also be available on the company's website.
Steven Zenker: 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 and response to your questions.
The words believe, expect, anticipate, and other similar expressions generally identify forward-looking statements.
These statements do not guarantee future performance and therefore undue reliance should not be placed on them.
Actual results could differ materially from those projected in any forward-looking statements.
Speaker Change: Thanks for watching!
All of the four 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. And with that I would like to turn the call over to Medifast chairman and chief executive officer Dan Chard.
Dan Chard: Thanks, Steve, and thanks to everyone for joining us on the call today. With me is Jim Maloney, Medifast's CFO. We'll give some color on our third quarter results and provide an update on the progress we're making on our business transformation.
The weight loss segment of the health and wellness industry continues to experience profound change. Widespread consumer adoption of GLP-1 medications has fundamentally shifted the way people think about weight management and health.
Steven Zenker: The growth is in many ways staggering, given that it's not quite 12 months since the FDA approved the second generation of GLP-1 medications for use in weight loss regimens.
A recent Kaiser Family Foundation poll showed that 1 in 5 U.S. overweight and obese adults have used one of these medications.
Steven Zenker: Like many of our peer set, we've naturally seen significant impact on our business fundamentals.
Steven Zenker: Adjusting to market realities has not been easy. However, we continue to believe that there is a significant opportunity to return the company to growth.
Steven Zenker: Our goal is to build the health and wellness company of the future, one that is designed to grow in a GLP-1 world.
Steven Zenker: With that in mind, we've been steadily executing on our strategic transformation plan, focusing on our core mission while broadening reach and improving solutions to address the changing nature of the marketplace.
Steven Zenker: We continue to make progress in several key areas and are working with OptiVIA coaches and customers as we shift to reflect this new environment.
Steven Zenker: To establish a thriving health and wellness business that can grow in today's market, we've developed distinct coach-supported program offerings tailored to meet the unique needs of three specific customer segments on their health and wellness journeys.
Steven Zenker: The first offer is targeted at individuals using GLP-1 medications as a core element of their weight loss program.
Steven Zenker: The second offer is for people looking to maintain weight loss and improve health when they come off GLP-1 medications for whatever reason. Those could include costs, side effects, or any other cause.
And the third offer is for people who have never used medications and want to use coach-supported, habit-based programs as the core of their weight loss journey.
Steven Zenker: I want to take a look at each of those target markets separately, starting with those who want to use GLP-1 medications at the core of their weight loss efforts.
Steven Zenker: We've expanded training for our independent optive care coaches to better equip them to help customers develop a healthy lifestyle while using GLP-1 medications.
Steven Zenker: Currently, over 95% of coach leaders have completed this specialized training, and according to our latest survey, approximately 40% of active coaches are now supporting at least one client on a GLP-1 medication.
Steven Zenker: Research commissioned by Metafast suggests the GLP-1 support market could grow to 50 billion dollars or more by 2030, making this audience a core focus for our business.
Steven Zenker: GLP-1 medications have been shown to be highly effective in aiding healthy and lasting weight loss when used in conjunction with healthy habits like diet and exercise.
As such, we believe there is strong compatibility with our experience of helping people through our coach-guided Habits of Health Transformation System.
Steven Zenker: Around 12% of our customers have used GLP-1 medications over the last 12 months, compared with around 4% at the beginning of the year.
We expect this penetration to increase over the coming months as coaches continue to successfully help these individuals with their weight loss goals and in making a healthy lifestyle second nature.
The next target segment reflects growth in the number of people transitioning off medications for any reason.
Steven Zenker: were very encouraged by the potential of Optivea to help people maintain weight loss and improve health when they stop using medications.
External research shows that individuals who stop medication usage regain two-thirds of their lost weight and fail to maintain associated health improvements if they do not adopt a modified healthy lifestyle during or after using GLP-1 medications.
Steven Zenker: This is particularly important because of early indications that GLP-1 medications are not being used for the long term.
Steven Zenker: Recent KFF analysis showed that about one-third of users quit taking the medication after six months. And by one year, this number can rise to half or more.
That same poll showed that 1 in 8 U.S. adults have taken GLP-1 medications at some point, with only half saying that they are currently on the medication.
Steven Zenker: By 2030, our internal estimates suggest that as many as 50 million or more people could have started and then stopped GLP-1 usage. A huge potential market.
We are actively exploring this area in more depth and expect to launch a program later this year that meets this group's needs.
Steven Zenker: Lastly, we continue to place focus on finding new customers and reactivating past customers who have no interest in GLP-1s.
Steven Zenker: but who are motivated to lose weight by focusing on wellness, healthy habits, and a healthy lifestyle.
Steven Zenker: Central to our efforts in this area is an initiative to improve overall customer experience, whether new to our program or reactivating after an absence.
Steven Zenker: Improvements include better tracking dashboards and advanced data capabilities, enabling customers and coaches to stay aligned on the progress and on their goals, and allowing greater personalization.
Steven Zenker: Regardless of need state segment, our integrated, coach-supported, lifestyle-based approach accurately reflects the behaviors and priorities of the consumer in a positive way.
Steven Zenker: We differentiate ourselves by offering holistic solutions that include scientifically developed nutrition products and individualized coach and community support, as well as access to weight loss medications through LifeMD where clinically appropriate.
Steven Zenker: With new products in development, as well as enhanced technology to help coaches provide a highly personalized experience to each of their customers, our offer has never been more compelling.
Steven Zenker: Personal coaching, a support community, tailored plans, and personalized solutions have always been at the heart of our offer and they remain just as relevant in a GLP-1 world.
Steven Zenker: We've spent 40 plus years walking alongside people and offering integrated solutions to those learning to live healthy lifestyles.
Steven Zenker: Now, with the evolving dynamic of the weight loss market, we're positioning Medifast to address a broader spectrum of customer needs, working alongside our independent Optivia coaches and in collaboration with LifeMD's physicians.
Steven Zenker: As part of that strategy, we need to ensure that we have the right products, pricing strategies, and positioning in place to drive engagement and retention.
Steven Zenker: We expect to launch a new program at the beginning of 2025 featuring a series of entirely new products under the new Optivia Ascend brand. These products and associated meal plans are specifically designed for those on GLP-1 medications.
Steven Zenker: We also plan to simultaneously launch a supplement pack with vitamins and minerals to help support the program and to provide a complete and balanced diet. This program will be competitively priced to ensure we capture consumers who are already spending money on the medications themselves.
Steven Zenker: Optivia Ascend products are high in protein and fiber to help retain lean muscle mass and promote digestive health and also include calcium to support bone health.
Steven Zenker: These products will be paired with the support of a coach and community, and access to GLP-1 medications through LifeMD.
Steven Zenker: OptiVia Ascend also supports a new program designed to facilitate the key transition and weight maintenance phase of customers' weight loss journey, empowering lifestyle changes and providing essential nutrients.
Steven Zenker: We know that once customers lose the weight, Optivia coaches can teach them how to keep it off.
Steven Zenker: Opti-VSN has a different nutrition profile and the plan was developed in response to coach feedback requesting a simpler, more tailored approach for clients transitioning from active weight loss to weight maintenance.
Steven Zenker: We're also testing starter kits for new customers who want to try Optivia before making a longer term commitment. This program allows us to show customers the effectiveness of our products and familiarize them with our coach community at an attractive initial price point.
Steven Zenker: By offering additional ways to drive affinity with our program, we believe we can bring in more customers which in turn will drive higher numbers of active coaches.
Steven Zenker: Development of these products took about half the time of previous launches, and as we move through 2025 and beyond, we'll continue to consider further product line extensions and modular add-ons that will extend beyond weight loss and support those using medications.
Steven Zenker: So, we have a differentiated offer that is designed specifically for the key audience need states, and we have products and programs in place to drive sampling, engagement, and retention as well as to support the transition to long-term weight maintenance.
Steven Zenker: We're about to embark on a clinical study to assess the health outcomes associated with the integration of the Optivia nutrition and lifestyle programs alongside medications.
Steven Zenker: We believe the study will provide valuable insights into the performance of our products and our support for customers on their health journey.
Steven Zenker: The results will add to our existing scientific evidence as we continue to offer differentiated holistic lifestyle programs that serve all clients from weight loss to weight maintenance.
Steven Zenker: Through all of this, we must use marketing and partnerships to maintain competitive white space.
Steven Zenker: drive brand awareness and power client acquisition. Our company-led marketing campaigns reflect an approach that targets key demographics across the three core groups I mentioned earlier.
Steven Zenker: This is a competitive market and it's not easy breaking through the noise in a crowded environment.
Steven Zenker: We've learned some valuable lessons and have been fine-tuning our strategy with a focus on channels that yield the highest return on investment.
Steven Zenker: We are optimizing spending accordingly and have scaled back in less effective areas. We now expect total marketing spend for 2024 to range between $20 million and $25 million.
Steven Zenker: This reflects a disciplined approach that prioritizes efficiency and value.
Steven Zenker: Our collaboration with LifeMD also continues to show promise as we begin piloting joint marketing campaigns highlighting the complementary solutions that both companies offer.
Steven Zenker: These efforts should help us reach new customers and broaden our customer acquisition strategy.
Steven Zenker: The full impact of all these initiatives will take time to materialize, but with resolution season coming up, we see real opportunity.
Steven Zenker: With our newly refreshed website up and running, as well as the availability of our new products and enhanced interface, we are well positioned to begin to see improved performance in 2025 and beyond.
Steven Zenker: As we continue to develop and refine our solutions, we feel cautiously optimistic about our ability to drive further adoption and engagement.
Steven Zenker: Our strong balance sheet gives us the financial flexibility needed to invest in these key growth initiatives for the business.
Steven Zenker: We're managing our capital prudently, focusing on areas that we believe will deliver long-term value for our stakeholders.
Steven Zenker: We have also identified additional cost savings opportunities as part of our ongoing Fuel for the Future initiative.
Steven Zenker: And we believe that these will further strengthen our financial position as we execute our transformation.
Steven Zenker: The weight loss market has been revolutionized and Medifast is committed to moving with it to meet changing needs.
Steven Zenker: Our focus on providing integrated solutions that combine lifestyle modification, clinical guidance, and community support puts us in a strong position, and I'm confident in our team's ability to execute on our strategy to position the company for growth in the quarters and the years ahead.
Steven Zenker: Now, I'll turn it over to Jim to review the quarterly financial details.
Jim Maloney: Thank you, Dan. Good afternoon, everyone. Third quarter 2024 revenue was at the upper end of our guidance range and EPS was above the high end of the range as we move forward with the significant business initiatives Dan just mentioned and strategically timing our company-led customer acquisition spending.
Steven Zenker: Revenue for the quarter was $140.2 million, a decrease of 40.6 percent.
Steven Zenker: versus the year earlier period.
Steven Zenker: primarily driven by a decline in the number of active-earning Optivea coaches and lower productivity per active-earning Optivea coach.
Steven Zenker: Customer acquisition continues to be impacted by competition from GLP-1 medications and consumer spending patterns.
Steven Zenker: Average revenue per active earning Optivea Coach for the second quarter was $4,672, a year-over-year decline of 6.7%, reflecting the continued headwinds to customer acquisition.
Steven Zenker: Gross profit decreased 40.4% year-over-year to $105.7 million. Driven by lower revenue, gross profit margin improved 20 basis points to 75.4%.
Steven Zenker: SG&A expense was down 31.8% year over year to $103.6 million, primarily reflecting lower compensation expenses.
Steven Zenker: Due to lower volumes and fewer active earning coaches as well as reduced cost for coach related events
Steven Zenker: including convention and a decrease in employee compensation partially offset by cost for our company-led customer acquisition initiatives.
Steven Zenker: SG&A, as a percentage of revenue, increased 950 basis points to 73.9%, primarily as a result of the loss of leverage of fixed costs due to lower sales volumes and costs for our company-led acquisition initiatives.
Steven Zenker: on a non-GAAP-adjusted basis, which excludes the final $1.7 million of expenses related to the company's overall $10 million collaboration with LifeMD,
Steven Zenker: SG&A decreased 32.9% to $101.9 million and moved 830 basis points higher as a percent of revenue to 72.7%.
Steven Zenker: Income from operations was $2.1 million in the third quarter of 2024 versus $25.5 million in the prior period.
Steven Zenker: driven by lower gross profit, partially offset by lower SG&A.
Steven Zenker: As a percentage of revenue, income from operations was 1.5% in the third quarter, compared to 10.8% in the prior year period.
Steven Zenker: income from operations decreased to 3.8 million dollars as a percentage of revenue non-gap adjusted income from operations was 2.7 percent, a decrease of 810 basis points from the year ago period.
Steven Zenker: The effective tax rate in the quarter of 28.5% was higher than the 12.9% recorded in the prior year's third quarter.
Steven Zenker: Net income in the third quarter of 2024 was $1.1 million, or $0.10 per diluted share, compared to net income of $23.1 million, or $2.12 per diluted share.
Steven Zenker: per diluted share in the year earlier period. On a non-gap adjusted basis, net income in the third quarter of 2024 was $3.9 million or 35 cents per diluted share.
Steven Zenker: Turning to our balance sheet, we ended the quarter with $170 million in cash, cash equivalents, and investments, and no interest bearing debt. This is up from $150 million as of December 31st, 2023.
Steven Zenker: Given our healthy cash position that is projected to be maintained through the expiration of our credit facility and beyond, we have canceled our credit agreement effective October 30th.
Steven Zenker: This action was made as part of our Fuel for the Future initiative as we incurred $50,000 of cash expenses related to the termination
Steven Zenker: and we will achieve annual savings of approximately $500,000 in commitment fees.
Steven Zenker: The credit agreement termination was done in accordance with its terms.
Steven Zenker: As of the date of the termination, the company did not have any borrowings under the credit agreement and the company was in compliance with all covenants. In addition, the company did not incur any premium.
Steven Zenker: or early penalties in connection with the termination.
Steven Zenker: Now I will turn to our guidance.
Steven Zenker: We are expecting fourth quarter revenue to range from $100 million to $120 million.
Steven Zenker: reflecting a continued decrease in the number of active earning Optivea coaches as a result of near-term challenges to customer acquisition due to the growing acceptance of GLP-1 medications in the marketplace.
Steven Zenker: We expect our loss per share for the quarter to range from 10 cents to 65 cents.
Steven Zenker: The guidance includes expectations of spending $7 million during the quarter on company-led marketing. However, it excludes any gains or losses from changes in the market price of our LifeMD common stock holdings.
Steven Zenker: which we are unable to estimate.
Steven Zenker: As we discussed on our last call...
Steven Zenker: 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.
Steven Zenker: that we expect will be ready for the start of resolution season at the beginning of 2025.
Steven Zenker: In summary, we believe that continuing to execute our key business initiatives and supplementing those initiatives with marketing dollars at the right time will allow us to take full advantage of the changes we are making today.
Steven Zenker: With that, let me turn the call back to the operator for questions.
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.
Speaker Change: A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions.
Speaker Change: Our first question comes from Jim Salaria with Steven Zink. Please proceed with your question.
Jim Salaria: Hey guys, good afternoon. Thanks for taking our question.
Jim Salaria: I wanted to start maybe on the marketing spin because if my notes served me correct, I think initially we had talked about like 30 million in company-led marketing for the year. And if I kind of back into where we're at now, Jim, based on what you said before too, that's about half, you know, 7 million in 3Q and 7 million in 4Q.
Jim Salaria: And then in the supplemental, you mentioned scaling back on some less effective areas. So maybe you could just give us some color on.
Jim Salaria: some of the areas that you've scaled back the spend, and for the areas that you still are driving some of the company-led marketing, what the response has been so far, and any learnings that we might be able to take into 2025.
Speaker Change: Thanks for the question, Jim. So, yes, we did spend $7 million this past quarter, and we are intending on spending an additional $7 million.
Speaker Change: in Q4. So year-to-date we are at 17 million dollars through September 30th.
Steven Zenker: And, you know, we've made a lot of progress in this area.
Steven Zenker: As we mentioned to investors and in our last several calls,
Steven Zenker: You know, this is a new initiative for the company.
Steven Zenker: and we continue to evaluate this marketing effort. We are making progress in this area and we are continuing to look at what are the best ways to optimize these initiatives.
Steven Zenker: to improve
Steven Zenker: are
Steven Zenker: Customer Acquisition Costs
Steven Zenker: And the timing of that spend, we feel, is better to do it in other times of the year, and that's why
Speaker Change: Some of the pullback happened in Q3. So you're correct in saying that we were going to spend more amounts
Steven Zenker: in 2024, but we believe that it's more appropriate to invest in this
Steven Zenker: in this spend in the coming months and years, or I'm sorry, in the months and quarters. So you'll see us continue to do this type of spend into 2025 through resolution season.
Steven Zenker: So hopefully that answers your question
Speaker Change: Yeah, or there maybe is a follow up. Are there any particular kind of channels or formats on the company-led advertising side that you guys have seen?
Speaker Change: More or less success with, I mean, I know there's kind of different, whether you do it on TV or social media, but have you found more or less engagement through any one of those particular advertising channels?
Dan Chard: Yes, Jim, this is Dan. I think, you know, we've, as Jim said, we've continued to optimize the social media channels have been highly effective.
Dan Chard: Interestingly, some of the ways we've been capturing, just email for those who start to interact with our website have been some of the more effective ways for us to draw in new clients. I'd also add that it's...
Steven Zenker: 90% of our client acquisitions still comes through.
Steven Zenker: our coach channel. So it's important, even though the company-led acquisition is a new part of our client acquisition strategy, it's still a smaller part of the whole. And it's, you know, now it's been a little bit under a year since we started to modify our message and incorporate
Steven Zenker: a GLP-1 medication message that's available to us through LifeMD. And just to kind of highlight some of the things we said in our prepared marks, because I want to make sure those don't get.
Steven Zenker: lost. We now have 95% of our our coach leaders who have been trained to support GLP-1 medications and I think that's
Steven Zenker: You know training is important which then means that they train the rest of our coaches, but
Steven Zenker: I think the the proof of that starting to work is that 40 percent, that was up from 33 percent last quarter, our coaches are now supporting at least one client on a GLP-1 drug and that translates into roughly
Steven Zenker: 12% of our current client base either have been or are currently on GLP-1 medications.
Steven Zenker: and over the last 12 months. And I think one of the things we really feel is important as well is
Steven Zenker: The product development initiatives that have taken place over the last several months that will start to roll out at the beginning of this next year in resolution season. So these are products under the Optivia Ascend brand.
Steven Zenker: that have been specifically formulated to support people on GLP-1 drugs, or, and this second part is important, those who are moving to a maintenance program. And that's true for both.
Steven Zenker: those who are transitioning off GLP-1 drugs as well as off of our traditional
Steven Zenker: program that is coach-led, habits-based.
Steven Zenker: This is an area that our coaches have been talking about for a long time and asking for for a long time and this, along with the clinical research that we anticipate doing to to prove out that our lifestyle program is highly complimentary of
Steven Zenker: people on GLP-1 medications or those who are off and maintaining, I think is an important part for our future. So just wanted to add those comments to your question about where we're seeing the most traction.
Speaker Change: Yeah, that's great. And maybe if I could sneak one more in.
Speaker Change: If my kind of back-of-the-envelope math doesn't fail me...
Speaker Change: The midpoint of your 4Q guidance on the top line implies like a 200, a little bit less than a 200 basis point.
Steven Zenker: Deceleration quarter over quarter.
Speaker Change: Is there a reason that you think that, you know, the rate of decline of the top line would accelerate into 4Q given that we've seen it, you know, get kind of gradually better sequentially over the years that just with less marketing support or, you know, you got this product rollout that doesn't hit until 2025? Just any thoughts on that?
Speaker Change: Yeah, I mean, we we are.
Speaker Change: When you look at our guidance at the midpoint, we are obviously still having continued pressure
Speaker Change: client acquisition, and with that, it's impacting the number of coaches.
Speaker Change: So, when you think about the coming quarter, we are, you know,
Speaker Change: scaling back some of our company-led
Speaker Change: acquisition in advertising.
Speaker Change: You know, this that part of the year, Jim, is due to seasonality, we feel is
Speaker Change: You know, we wanted to make sure that we gave
Speaker Change: guidance that we were certain that we can do our best in achieving. So
Speaker Change: If you look back at the last several years, Q4 has been more difficult than other quarters.
Speaker Change: as people aren't thinking about their health and wellness at that point and better in January and beyond.
Speaker Change: Great. I appreciate all the thoughts, guys. I'll hop back in the queue.
Speaker Change: Our next question comes from Linda Bolton-Weiser with DA Davidson. Please proceed with your question.
Linda Bolton-Weiser: Yes, hello. So I was wondering, of the 12% of your clients,
Linda Bolton-Weiser: who were on or currently are on a GLP-1 drug. Can you give us some ideas to what portion got their script from Life MD?
Speaker Change: Um, yeah, we're not we're not putting that number out there publicly. I mean, it's it's I'll say it's it's I mean, obviously, it's a mix between the two. And I think.
Speaker Change: what we're seeing.
Speaker Change: is that a portion of those people who are coming in, that portion of that 12%,
Speaker Change: are some who have been transitioning off. So they're finding us in different ways. So some of those individuals have got their script.
Speaker Change: through their own physician and transitioned off and are looking for a way to help them maintain their weight loss and others have come through Life MD. What I will say is we have
Speaker Change: some very successful coach groups who are
Speaker Change: working very closely with LIFE MD physicians who are really specialized in this area and as we've
Speaker Change: continue to improve the integration of our technologies together. That experience is becoming...
Speaker Change: Very attractive to the way our coaches do business. So we anticipate that number will will continue to improve and become a more Kind of central part of how our coaches support those those those groups who are looking for medical supportive weight loss
Speaker Change: So I've actually signed up in the last couple months with LifeMD to get a compounded somaglutide and you know I asked my clinician when I was meeting with her online about well I asked
Speaker Change: specifically about Optivea. She did not offer the information and then when I asked about Optivea she had never heard of it or she vaguely had heard of it but she didn't know much about it and she said she didn't know much about it.
Speaker Change: So, I guess I'm just wondering like what's the value of the partnership with LifeMD if their clinicians are not
Speaker Change: oriented toward
Speaker Change: you know, helping people that might want the services of Optivea. Like, why didn't the clinician know about Optivea?
Speaker Change: Yeah, I think your experience is probably different than most. The Life MD
Speaker Change: has a group of trained physicians who have been trained on the Optivia program.
Speaker Change: and specifically our technology kind of routes.
Speaker Change: those customers who come through our website or through a coach to that group of physicians.
Speaker Change: you may not have.
Speaker Change: gone through that process, but I don't, I mean, I think we could kind of look at the process you use, but if you, if you went to LifeMD
Speaker Change: on your own rather than through your coach or.
Speaker Change: through our website, you may have gotten a physician who is supporting the LifeMD program in general rather than those physicians who have been specifically trained to support OptaVIA customers. I think that's probably what happened, but I'd have to give more details.
Speaker Change: So the whole partnership is not designed for you to take advantage of their customer base. It's more for your customer base to have access to LifeMD.
Speaker Change: medically supported weight loss through LIFE-MD. The second the second phase which we're starting to integrate now and I mentioned in the prepared remarks
Speaker Change: has to do with with co-marketing and
Speaker Change: leveraging the program, the lifestyle program, to support their patients who are either looking for a lifestyle program or
Speaker Change: those who are potentially transitioning off. So we're at the very beginnings of that part of it, but you're correct that the initial phase has been largely for our customer base, but the second phase is to access their customer base as well, to leverage that in some different ways.
Speaker Change: Okay, so switching a little bit to the cost side. I was a little surprised to see the magnitude of the...
Speaker Change: of the loss expected in fourth quarter, I guess it's de-leverage more than anything, but the clinical trials that you talked about or the clinical studies, is there a cost associated with that? And does that spending start in the fourth quarter or does it start in 2025?
Speaker Change: Linda, the majority of the cost of the studies will occur in 2025 and beyond, so very little will be spent in Q4.
Speaker Change: So, you're correct in saying that the, you know, the leverage on the fixed cost due to volume pressures is impacting us in Q4.
Speaker Change: Also, you know, we're investing, we're continuing to invest in marketing and we're looking at the best ways to go about doing that.
Speaker Change: There also is some timing differences so we did do better
Speaker Change: versus our guidance on the bottom line in Q3 that shifted into Q4, some of that was
Speaker Change: you know, work that we're doing.
Speaker Change: with the
Speaker Change: the plan that Dan mentioned regarding OptiVIA's SEND.
Speaker Change: Okay, but in terms of the clinical studies, I mean I'm not a drug person so I mean I don't know what to imagine for the cost of such a thing. Is it is it like 10 million dollars or 15 million dollars or 15 million dollars? Like what what types of costs are we talking about for these studies that you're planning?
Speaker Change: Subs by www.zeoranger.co.uk
Speaker Change: Yeah, so right now the initial estimates
Speaker Change: Most of it will occur in 2025 and beyond, would be less than $2 million.
Speaker Change: Okay.
Speaker Change: And then, um...
Speaker Change: In terms of the vitamins and supplements that you talked about offering in 2025,
Speaker Change: Are these...
Speaker Change: as well as the new programs gonna be ready, like.
Speaker Change: right at January 1st when people are doing their resolution or a little before January 1st, like when are we actually gonna see them kind of launch?
Speaker Change: We'll be introducing those two coaches in the latter part of this year, so basically next month, and then they will be introduced for use with new clients in our current client base.
Speaker Change: during resolution season. I think, you know, just to give you a little bit of insight in terms of why we've done that, as you know, our traditional approach with our products has been to include the vitamin supplements inside of the product. And because
Speaker Change: So this new product set was tested with people on GLP-1 drugs as well as those who are transitioning and going into weight maintenance.
Speaker Change: And so we pulled the vitamins out of...
Speaker Change: are fuelings, or what we're referring to in this line as mini-mills.
Speaker Change: and to improve the taste profile. And we were successful in doing that. And then we're providing them a supplement so they can be taken separately. So we think it provides a better product experience for this new segment of consumers. And yes, it will be ready for resolution season.
Speaker Change: http://www.kenhub.com
Speaker Change: And so can you give us some rough ideas for the price point? Is it like a vitamin pack or something? Is it a monthly cost of like $30, $40? Like can you give us some idea?
Speaker Change: Those are all being discussed internally. We're going to be announcing that shortly.
Speaker Change: So, you know, there's more to come on that as we launch that product in the coming weeks.
Speaker Change: Okay, and then my last question was just on what you said about cash flow.
Speaker Change: um
Speaker Change: You said your cash balance that it is now, you expect to continue as the cash balance for how long? I didn't quite understand what your comment was there.
Speaker Change: Yeah, I mean we basically
Speaker Change: are looking at our forecasts.
Speaker Change: And what we were attempting on saying was that, you know, we believe that the credit facility will not, would not be used, so we decided to cancel it.
Speaker Change: The expiration of that credit facility was in 2026, and we had really no intention on using it unless we
Speaker Change: did something inorganically and then we would need a different type of facility and it wouldn't be a revolver so we made the conscious decision to cancel it and save
Speaker Change: The fees that we're paying on that credit facility because at least at this point in time We're not there was no need for it
Speaker Change: Obviously, if things change, we would be working with our banking partners to re-establish
Speaker Change: a facility when needed.
Speaker Change: Okay, so what you're just basically saying is...
Speaker Change: you don't expect to need financing to fund your operations or something in 2025. That's basically what you're saying, right? That is correct. That's exactly right.
Speaker Change: Yeah, okay. And then do you have the operating cash flow number either in the quarter or the nine months year-to-date?
Speaker Change: Go to Beadaholique.com for all of your beading supply needs!
Speaker Change: The operating, well, I can, I can.
Speaker Change: out.
Speaker Change: provide that to you offline Linda
Speaker Change: Okay. All right. Those were all my questions. Thank you very much.
Speaker Change: Thanks.
Speaker Change: There are no further questions at this time. I would now like to turn the floor back over to Dan Chard for closing comments.
Dan Chard: I want to thank you all for joining us today, and we look forward to seeing many of you at the upcoming Stevens Annual Conference that will take place in several weeks. Have a good evening.
Dan Chard: [music]
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