Q4 2024 Medifast Inc Earnings Call
Greetings and welcome to the Medifast fourth quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad.
A reminder, this conference is being recorded.
Now my pleasure to introduce Steven Zenker, Vice President Investor Relations.
Speaker Change: Please go ahead.
Speaker Change: Good afternoon, and welcome to Medifast fourth quarter and full year 2024 earnings conference call.
Speaker Change: 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 fourth quarter and full year ended December 31st 2024 that went out this afternoon at approximately 405 P M Eastern time.
Speaker Change: If you have not received the release it is available on the Investor Relations portion of Medifast website at.
Speaker Change: W. W. W. Dot Medifast, Inc. Dot com.
Speaker Change: This call is being webcast and a replay will also be available on the company's website.
Speaker Change: Before we begin we would like to remind everyone that todays prepared remarks contain forward looking statements and management may make additional forward looking statements in response to your questions.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Medifast assumes no obligation to update any forward looking statements that may be made in today's release or call.
Speaker Change: Now I would like to turn the call over to Medifast, Chairman and Chief Executive Officer, Dan Chard.
Dan Chard: Thank you Steve and good afternoon, everyone. We appreciate your taking time to join US today to review, our fourth quarter and full year 'twenty 'twenty four results.
Dan Chard: As well as our plans and priorities for 2025.
Dan Chard: This past year was a pivotal year for Medifast as we continued to transform our business to meet the changing nature of our health and wellness market that has been revolutionized by the rising acceptance of G. L. P. One weight loss medications.
Dan Chard: Throughout the year, we worked as a team to adapt to the new realities of the market and ensure that met a fast can flourish as a health and wellness company and a G. L. P. One world.
That means offering solutions to meet the diverse needs of customers whether they are currently on G. L. P. One medications transitioning off of them or pursuing weight loss only through our proven habit based approach.
Dan Chard: Our differentiated solution combined scientifically developed products clinically proven nutrition plans the support of independent after via coaches and where appropriate access to G. L. P. One medications through our collaboration with life M D.
Dan Chard: Together these elements create an integrated offering that reflects the reality of today's marketplace and provides a holistic approach that stays true to our over 40 year heritage.
Dan Chard: We've been encouraged by some of the sequential improvements within certain areas of our coach community.
Dan Chard: Our higher performing coach teams have shown signs of increased productivity with more favorable recent trends.
Dan Chard: Revenue per active earning coach is a metric that we have consistently focused on as an indicator of coach progress in attracting and retaining customers.
Dan Chard: This metric reflects the productivity of our active base of coaches in attracting and supporting customers in a given quarter.
Dan Chard: This metric was the first disrupted by the changes in our business environment in 2022 and has been under significant pressure since then.
Dan Chard: In the fourth quarter of 'twenty 'twenty four we saw a third consecutive quarter of moderating year over year declines in this metric at a negative 5.5% from a negative 22.2% during Q1 of 'twenty 'twenty four which we believe indicates that our active earning coaches are making progress in transitioning.
Dan Chard: To supporting customers that now include current and past G. L. P. One medication users.
Dan Chard: The progress in this area has been demonstrated by retaining and reinforcing the practices being utilized by our higher productivity coaches, who are tailoring their offer to those both on G. L. P. One medications and those who have transitioned off of them.
Dan Chard: The percentage of our customers that have used G. L. P. One medications in the prior 12 months rose to 17% at year end up from just over 3% at the beginning of 'twenty 'twenty four.
Dan Chard: At year end, approximately 44% of coaches, we're supporting at least one customer on a G. L. P. One medication up from 12% at the start of 'twenty, 'twenty, four which really validates our focus on the needs of G. L. P. One customers.
Dan Chard: We certainly expect this number to grow as the G. L. P. One market continues to expand and as our new product line. After V. S N gains traction.
Dan Chard: After via sand is another key highlight of the fourth quarter and the year as a whole.
Dan Chard: It's a product line, which we launched in December is another tool for people using G. L. P. One medications and also supports those looking for help keeping weight off regardless of whether the weight loss was achieved by using G. L. P. One medications or by using the after via program.
Dan Chard: More than just the introduction of the new products after the U S and as a demonstration of our commitment to addressing the full spectrum of consumer needs in today's weight loss market.
Dan Chard: Ascend features high protein fiber rich mini mills and daily nutrient packs that serve as the foundation for two new science backed nutrition plans.
Dan Chard: The first is the G. L. P. One nutrition support plan and it's designed to complement G. L. P. One medications by promoting muscle digestive and bone health during an individual's weight loss journey.
Dan Chard: The second is the optimization plan and is tailored for those who have achieved a healthy weight as well as those who have lost weight. During G. L. P. One medications and who choose to transition off the medications. Both of these groups are seeking to support and manage their weight loss and built habits that support long term health.
Dan Chard: These products meet an important need in a high value and high growth G. L. P. One market science.
Dan Chard: Scientific research published by met a fast recently revealed that G. L. P. One medications can cause muscle loss equivalent to a decade's worth of naturally occurring muscle loss within just 12 to 18 months.
Dan Chard: At the same time, while there can be no doubt that Jill P. One medications are effective for initiating weight loss studies show that up to 74% of patients transition off the medications in the first 12 months of use and studies also show that two thirds of the weight loss on G. L. P. One medications is typically regained within 12.
Dan Chard: Months of stopping treatment with cardio metabolic benefits often reversing.
Dan Chard: This underscores the importance of pairing G. L. P. One medications with lifestyle modifications, including proper nutrition and resistance training.
Dan Chard: Our sand plants address these needs with targeted nutrition solutions that help preserve lean muscle promote metabolic health and support weight management.
Dan Chard: Critically when all of this is paired with the support of a coach support from the after via community and our proprietary habits of health transformation system. We believe the program represents a comprehensive and effective approach to support those on G. L. P. One medications or those managing their weight loss that is not widely available in the marketplace today.
Dan Chard: <unk>.
Dan Chard: The ascend line has been very well received by both customers and coaches census December launch approximately 17% of customer orders placed in January included a sand products, which was in line with our expectations.
Dan Chard: Feedback has been overwhelmingly positive with coach's reporting that the products and new plans make it easier to engage with G. L. P. One medication users and help them integrate healthy habits into their routines.
Dan Chard: Turning to our fourth quarter performance results were largely in line with our expectations, reflecting continued pressure on new customer acquisition, but showing very early signs of stabilization in certain areas.
Dan Chard: Revenue came in at the high end of our expectations and earnings per share came in above our guidance.
Dan Chard: But both were still down from prior year levels.
Dan Chard: Importantly, we continued to benefit from our fuel for the future cost reduction initiatives, which have allowed us to resize, our business, while laying the groundwork for growth in the future.
Dan Chard: To support our coaches as they continue to expand into new customer segments. We continue to expand our education and training support. This includes online training modules quarterly hands on training and our manufacturing and product innovation facilities and on demand podcast that address topics such as new customer acquisition.
Dan Chard: And best practices for supporting new customer types.
Dan Chard: An early episode of the podcast series focused on how to implement successful practices employed by our top performing coach groups and engaging G. L. P. One medication users around our habits of health system.
Dan Chard: We believe that as more coaches adopt these practices and incorporate our programs into their offerings, we will see sustained improvement in certain metrics, including coach productivity in the percentage of active earning coaches acquiring new customers.
Dan Chard: 'twenty 'twenty four also marked the first year of company led marketing initiatives to complement the traditional coach driven model for customer acquisition.
Dan Chard: While initial efforts resulted in a higher than expected customer acquisition cost. We made some changes to our strategy in the fourth quarter to allow us to optimize our messaging media mix and targeting.
Dan Chard: These changes have begun improving our marketing efficiency and effectiveness in certain areas such as E Mail marketing and we anticipate putting further focus on these areas in the future.
Dan Chard: The launch of resolution season in January provided the first opportunity to fully deploy our updated marketing approach, including campaigns that spotlight, our traditional after via and ascend lines.
Dan Chard: To further support new customer acquisition and encourage deeper engagement. We recently introduced a two week starter kit designed to lower barriers to entry for prospective customers.
Dan Chard: From this initiative, we have developed some important insights that we will use as we continue to streamline our offer.
Dan Chard: Our marketing efforts continue to focus on our expanded target that includes three population groups.
Dan Chard: Those who prefer a medication free habit based approach to weight loss.
Dan Chard: Those currently using G. L P. One medications and those transitioning off medications.
Our holistic weight management focus enables us to address the broad spectrum of customer needs across all three groups emphasizing the importance of lifestyle modifications, whether using medications or not.
Dan Chard: A recent survey has validated our approach with results showing that the majority of U S. Adults trying to lose weight agrees that lasting weight loss success depends on changes to diet exercise and overall habits.
Dan Chard: Our financial position remains strong with no debt and a solid cash balance that provides the flexibility needed to invest in key growth initiatives in 'twenty 'twenty four fuel for the future of delivered $21 million in cost savings exceeding our initial targets, we anticipate additional savings of $15 million to $20 million in 12.
Dan Chard: 25, as we continue to optimize our operations.
Dan Chard: Looking ahead, our priorities for 2025 include first accelerating customer acquisition.
Dan Chard: Through both company led marketing and enhance coach driven efforts, we aim to attract new customers and reactivate last participant.
Dan Chard: Second priority improving coach productivity.
By scaling best practices from high performing teams and leveraging new coach Education resources, we look to drive sustained improvements in new customer acquisition across the coach community.
Dan Chard: Third priority advancing clinical research.
In 2025, we expect to initiate studies evaluating the outcomes for customers using after via programs alongside G. L. P. One medications as well as those looking for help and long term weight maintenance, while also focusing on areas such as lean muscle mass retention.
Dan Chard: Fourth priority.
Dan Chard: Expanding product offerings.
Dan Chard: Beyond us and we will continue to enhance our introductory product offer based on learnings from our two week intro package.
Dan Chard: As a final priority. We're also evaluating the possibility of entering new categories, including women's health to offer tailored solutions for different need states, thereby broadening our reach and impact.
Dan Chard: In summary, the rise of G. L. P. One medications has reshaped the weight loss market, but it is also underscored the critical need for solutions that address the full picture of health met.
Dan Chard: I met a fastest committed to moving with the market to meet changing needs and to provide providing offerings that help people achieve their health and wellness goals.
Dan Chard: Our focus on providing integrated solutions that combine lifestyle modifications 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 future growth.
Dan Chard: Now I'll turn the call over to Jim to discuss the financials in greater detail.
Jim Maloney: Thank you Dan good afternoon, everyone.
Jim Maloney: Our fourth quarter 'twenty 'twenty four revenue was at the upper end of our guidance range and EPS was above the range revenue.
Jim Maloney: Revenue for the fourth quarter was $119 million, a decrease of 37.7% versus the year earlier period.
Jim Maloney: Primarily driven by a decrease in the number of active earning after via coaches and lower coach productivity.
Jim Maloney: Customer acquisition continues to be impacted by the growing adoption of G. L. P. One medications.
Jim Maloney: We ended the quarter with approximately 27100 active earning after via coaches a decrease of 34.1% from the fourth quarter of 'twenty twenty-three.
Average revenue per active earning after via coach for the fourth quarter was $4391 a year over year decline of 5.5% reflecting.
Jim Maloney: Reflecting the continued headwinds to customer acquisition.
Dan Chard: But an improvement from where the metric was down 22.2% in Q1, 'twenty 'twenty four as Dan mentioned earlier.
Dan Chard: Gross profit decreased 37.6% year over year to $88.2 million driven by lower sales volumes.
Dan Chard: Gross profit margin improved 10 basis points to 74.1%.
SG&A expense was down 34.1%.
Dan Chard: Year over year to $87.5 million, primarily due to a 27.4 million dollar decrease in op to via coach compensation.
Dan Chard: A 7.1 million dollar decrease in employee compensation.
Dan Chard: A 5.8 million dollar decrease two nonrecurring cost incurred in the first quarter of 'twenty twenty-three to establish the company's medically supported weight loss initiative, which includes collaboration costs with life M D and a 3 million dollar decrease in cost for coach related events.
Dan Chard: These decreases were partially offset by the $6.5 million of costs for the company led marketing efforts in the quarter.
Dan Chard: SG&A as a percentage of revenue increased 400 basis points, primarily reflecting 550 basis points of the company led marketing spend and 210 basis points of loss of leverage on fixed cost, partially offset by a 300 basis point decrease.
Dan Chard: Due to nonrecurring cost incurred in the fourth quarter of 'twenty twenty-three two established the company's medically supported weight loss initiative as well as 100 basis points.
Dan Chard: Decrease for coach related events.
Dan Chard: On a non-GAAP.
Dan Chard: Adjusted basis, which excludes non-GAAP adjustments in the prior comparable period for I T and supply chain optimization and the life M. D collaboration cost SG&A decreased 30.1 per cent and moved 800 basis points higher as a percentage of revenue.
Dan Chard: Income from operations was $700000 in the fourth quarter of 'twenty 'twenty four.
Dan Chard: Down 91.8% versus the year earlier period, driven by lower gross profit, partially offset by lower SG&A.
Dan Chard: As a percentage of revenue income from operations was 0.6% in the fourth quarter, a 390 basis point decline versus the year earlier level.
Dan Chard: On a non-GAAP adjusted basis, which excludes one time expenses in the prior year period as described previously income from operations decreased 95.6%.
Dan Chard: And as a percentage of revenue decreased 790 basis points from the year ago period.
Dan Chard: Other income decreased 49.7% year over year to $600000, primarily due to the unrealized losses on our investment in life M D common stock.
Dan Chard: On a non-GAAP adjusted basis, which excludes those unrealized losses on the life M D common stock.
Dan Chard: Our income decreased 18.2%, primarily due to the write off of unamortized debt issuance cost.
Dan Chard: The effective tax rate of 37.3% was slightly lower than the 38 point.
Dan Chard: 4% recorded in the prior year's fourth quarter.
Dan Chard: On a non-GAAP adjusted basis, the effective tax rate in the fourth quarter was 34.6% compared to 36.1% in the prior year period.
Dan Chard: Net income in the fourth quarter of 'twenty 'twenty, four was $800000 or seven cents per diluted share compared to $6 million or 55 cents per diluted share in the year earlier period.
Dan Chard: On a non-GAAP adjusted basis net income in the fourth quarter of 'twenty 'twenty, four was $1.1 million or 10 cents per diluted share.
Dan Chard: With respect to our balance sheet, we ended the year with $162.3 million in cash cash equivalents and investment securities and no debt.
Dan Chard: Now I'll turn to guidance, we are expecting our first quarter revenue to range from $100 million to $120 million, reflecting continued customer acquisition challenges that we expect will continue through at least the first half of the year.
Dan Chard: We expect our earnings loss per share.
Dan Chard: For the for the quarter to range from zero cents to a loss of 50 cents per share.
Dan Chard: Our guidance excludes any gains or losses from the changes in the market price of our life M D common stock holdings.
Dan Chard: Which we are unable to estimate.
Dan Chard: Our visibility for the year continues to be limited, but we are hopeful that the initiatives. We have undertaken will allow us to start to see some positive comparisons as we go through the second half of the year.
Dan Chard: We expect coach productivity will be an early indicator of this turn.
Dan Chard: With growth in the number of active earning coaches historically following after a period of time.
Dan Chard: With that let.
Let me turn the call back to the operator for questions.
Thank you well now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Dan Chard: Confirmation tone will indicate your line is in the question queue. You May press star two if you'd 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 Q.
Dan Chard: One moment, please while we poll for questions.
Speaker Change: Thank you. Our first question is from James Valera with Stephens. Please proceed with your question.
James Valera: Hey, guys. Good afternoon, thanks for taking my questions.
I wanted to start off with the one Q guide you know by just kind of take a look at the midpoint. It implies I think down around 37% year over year, which is pretty much in line or kind of sequentially. The same as what you guys did in <unk>, just any thoughts around with.
James Valera: The San launch and some of the companies supported marketing.
Any reason why we might not expect that to improve and just some of the puts and takes around.
James Valera: What you guys have coming on in the beginning of the year that you would expect to drive may be towards the upper end of that revenue range.
Jim Maloney: Yes, so Jim.
As I as I mentioned in.
Jim Maloney: The prepared remarks.
Jim Maloney: We do expect.
Jim Maloney: That coach productivity.
Jim Maloney: Our set of it year over year.
Jim Maloney: To be the to be the early indicator.
Jim Maloney: <unk> returned to growth.
Jim Maloney: And then followed by the.
Jim Maloney: The number of active earning coaches.
Jim Maloney: Growth in that typically historically has taken some time.
Jim Maloney: So.
Jim Maloney: We're going to continue to see pressure on the coach number and that's why you're not seeing that.
Jim Maloney: In the top line revenue number.
Jim Maloney: So you know.
Jim Maloney: Dan and I mentioned in our prepared remarks that.
Jim Maloney: We are starting to see see stability.
As a percent in the productivity numbers so in Q1.
Jim Maloney: 'twenty 'twenty four it was a negative 22% year over year.
Jim Maloney: It's it's gained traction to a negative five 5% in Q4, we're hopeful that we see that number that metric turn to positive in 2025. Once we see that metric turn positive which is the early.
Jim Maloney: <unk>.
Jim Maloney: Then.
Jim Maloney: We would expect that coach growth.
Jim Maloney: Would follow.
Jim Maloney: As it historically has followed after a period of time and then the top line.
Jim Maloney: Shows that growth.
Jim Maloney: Okay.
Jim Maloney: If I think about then maybe using the first half of the year to set up the back half of the year, if I can characterize it that way.
Jim Maloney: Can you just give us some thoughts on the cadence.
Jim Maloney: The company led marketing efforts, because obviously ambitions new product launch I'm sure you wanted to be visible with that and really drive kind of a unique characteristics of the <unk> products.
Jim Maloney: Should we expect more company led marketing kind of front half weighted or just any thoughts on how that should be spaced out across the year.
Jim Maloney: Yeah. So.
Jim Maloney:
What we're what we're currently thinking is.
Jim Maloney: The spend itself.
Jim Maloney: It doesn't need to have the heavy heavy investment as we did in 2024.
Jim Maloney: To get the same results and that's the reason behind that is in 2024, we had to invest in non working.
Jim Maloney: Marketing.
Jim Maloney: More significantly than we think we do in 2025.
Jim Maloney: We're not going to give a.
Jim Maloney: And amount out, but the way I would think about this is.
Speaker Change: R R.
Speaker Change: More significant spending in marketing is actually in coach compensation, So I wouldn't I wouldn't bring down the number.
Speaker Change: You have in your model, if you're using 22020 fours information because we're going to be investing in growth.
Either in.
Speaker Change:
Speaker Change: Coach commissions or in company led acquisition, we did mention in the prepared remarks that.
Speaker Change: The CAC.
Speaker Change: For advertising.
Speaker Change: Is not where we would like it to be we are seeing.
Speaker Change: Benefits of.
Speaker Change: Reactivation.
Speaker Change: Hum customers, it's much it's a much better CAC. So we plan on continuing to do that investment.
Speaker Change: Okay, just to give you a limit.
Speaker Change: But like I say, just give me just give you a little bit more color.
Jim Maloney: On what Jim was describing as we mentioned earlier.
Jim Maloney: The ratio to look at closely during this period of time as productivity, which is a reflection of how effective our coaches are bringing in new clients. It's also reflective of some of our older tenured coaches.
Jim Maloney: Transitioning out and being replaced by coaches who have experience in.
Jim Maloney: Yeah.
Jim Maloney: Sharing our story that includes.
Jim Maloney: Jill Q1 experience.
Jim Maloney: As we said 44%.
Jim Maloney: Our coaches.
Jim Maloney: Now in our current base have are supporting at least one customer who was using a DLP one drug that number's kind of continues to kind of slowdown with 22% of our offer via coaches having themselves used.
Jim Maloney: A <unk> one drug at some point in their weight loss journey.
Jim Maloney: And our overall base and is reflective of that as well with 17% of our customers now.
Jim Maloney: Having used medication in the last 12 months some of those are still on medication. Although those are the others are not what we see from these new coaches is.
Jim Maloney: Improved productivity, that's driving this number up but.
Jim Maloney: This transition period, which is what Jim is reflecting that's taking place and this is kind of the question Youre getting to how long does that transitions take will go through the first half and even into the second half but as that.
Jim Maloney: That number.
Jim Maloney: Continues to be pressured mainly active earning coach number it's actually changing in terms of its makeup to be reflective of coaches, who are more efficient and more effective at bringing in new clients and new clients are reflective of being able to be supported and those those new.
Jim Maloney: Market segments specifically.
Jim Maloney: Those who are on <unk>, one drugs currently those who have transitioned off and then.
Jim Maloney: We continue to have a majority of our customers who represent about 50% who don't want to use <unk> one drug so we see the mix changing and reflecting more what's happening in the market as well as the capability of our coach community.
Jim Maloney: And improving in terms of their ability to both attract and to support so that's where we feel good about the transition that we're seeing.
Jim Maloney: In terms of the sequential.
Jim Maloney: Let's say moderating negative trend.
Jim Maloney: We anticipate that turning.
Jim Maloney: Just before we.
Jim Maloney: We see a change in the base of active earning coaches.
Speaker Change: Okay I appreciate the detail, maybe if I could sneak in one more kind of higher level question I'm not sure. If you guys have.
Jim Maloney: Data that that you can speak to you on this but for the.
Speaker Change: For the customers that are.
Speaker Change: Off of G. L P. One.
Do you have any sense for what the retention rate is and staying on the program relative to a non medically supported weight loss customer who keeps their target goal and going off the program.
Speaker Change: You see a higher fall off with the people that utilize <unk>, one drugs versus people that do the traditional route.
Speaker Change: It's a little bit mix. So what we see is this.
It ties back to some of those numbers, we shared in the prepared remarks up to 74%.
Speaker Change: <unk> patients quit some time in months between the first year, all the way up until the month 18.
Speaker Change: And we're bringing in a portion of those about.
Speaker Change: I said, 17%.
Speaker Change: In that category.
Interestingly in this kind of ties I think to the question you are asking.
A small portion of those only.
Speaker Change: The number is 12% only 12% of <unk> patients actually achieve their healthy weight before the results plateau.
Speaker Change: Plateau effect that we've talked about in our.
Speaker Change: Supplemental.
Speaker Change: Slides, but that plateau effect essentially means that they have two choices either they stay on the <unk>.
Speaker Change: <unk> medication.
Speaker Change: There are ways to stabilize that still there could be in the overweight or obese category.
Speaker Change: Or they leverage our program so we're seeing.
Speaker Change: A portion of those.
Speaker Change: Patients come and use coaching to us to complete that process, which means.
Depending on how long they have to say, yes, they can be on our <unk>.
Speaker Change: Our products.
Lewis: Lewis 10 2030 pounds.
Lewis: We also just as a reminder, that the set of product that we just launched is is meant to address this issue of how do they optimize or manage to two.
Lewis: To stay at that healthy weight, they achieved and so that we believe will add an additional.
Lewis: Value to lifetime of each of these customers is coming in so we're still we still feel like we're in early days in seeing the dynamics of this new customer base, but we're we feel good that we're now seeing.
Lewis: Reflection inside our customer base that shows what's happening in the broader category and our coaches are doing a good job of supporting that and their client base and bringing in more like that.
Speaker Change: Okay I appreciate all the color guys I'll pass along.
Speaker Change: Thank you. Our next question is from Linda Bolton Weiser with D. A Davidson. Please proceed with your question.
Speaker Change: Yes, Hello, I was wondering first if you could just.
Speaker Change: Give me the operating cash flow and capital spending for 2024.
Speaker Change: Okay.
Speaker Change: The operating.
Speaker Change: For 2024.
Speaker Change: One second I'll take me a second to get to.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes, so the.
Speaker Change: Operating cash flow for the full year is 20 $24 million 476.
Speaker Change: And the.
Speaker Change: Capex.
Speaker Change: Investing activities is.
Speaker Change: $7 million and 454.
Speaker Change: Okay. Thanks, and then.
Speaker Change: So in terms of the the marketing spend you're talking about.
Speaker Change: The advertising spend I guess marketing and advertising you had talked about.
Speaker Change: I think something like $24 million to $25 million in 'twenty 'twenty. Four is the is that the way. It came out for the year is is that the number for the full year.
Speaker Change: Yes, we hit approximately $24 million correct, Okay and then.
Speaker Change: I think somebody already asked it but I mean for 2025, Youre, saying that dollar spend will be about the same or will it be lower or.
Speaker Change: Do you have a pretty good so.
Speaker Change: Yeah. So.
Speaker Change: We're not providing a projection because we're still working through that.
Speaker Change: But the way I would.
Speaker Change: Look at that as well.
Speaker Change: We're not going to need as much spend.
Speaker Change: In marketing.
Speaker Change: In 2025, as we did in 2024, because there was quite a bit of non working.
Speaker Change: Marketing that we had to invest in in 2024. However.
Speaker Change: We're going to do the right things to invest which is which.
Speaker Change: Maybe.
Speaker Change: Uh huh.
Speaker Change: Adjusting the way, we we provide coach compensation because as you know Linda coach coach is actually do more marketing than the company. So last year, we spent a significant amount in coach compensation well in excess.
Speaker Change: What we spend in.
Speaker Change: Company led acquisition of customers.
Speaker Change: So that's why I was trying to say that we haven't made a final decision.
Speaker Change: And that's why we're not providing a number.
Speaker Change: But I wouldn't.
Speaker Change: Think of you sort of have to look at the total bucket.
And as you're modeling and we're going to we're going to invest in growth and that's really the message.
Speaker Change: So I'm not sure I understand are you are you, meaning that you spent some kind of additional spending on top of coach coach commissions in 2024 or are you just referring to the big bucket. That's the commission payments to the coaches.
Speaker Change: No I'm, referring to what you're yeah, no I'm only talking about coach compensation.
Speaker Change: But as.
Speaker Change: When we talk to investors, we talk to them regarding.
Speaker Change: The different levels of what the coaches do.
Speaker Change: Two to earn that compensation.
Speaker Change: Compensation, what we asked them to do is one of the big things. We asked them to do is to do a word of mouth Cam.
Speaker Change: Campaign in attracting new customers that is one of the items that were asking which is.
Speaker Change: That.
Speaker Change: Ask is actually more.
Speaker Change: And the ask of what we do for company Lat.
Speaker Change: We always.
Speaker Change: Historically have really never spent more.
Speaker Change: Much on a marketing activity the company.
Speaker Change: We have that in the dollars of coach compensation.
Speaker Change: So in addition of a different way to look at Atlanta is word.
Really looking at how efficient our expense spending is both in form of company led acquisition.
Speaker Change: Which is kind of the traditional advertising the other big bucket has been our own milk campaigns, which are known to attract or re attract lapsed users and then the third big buckets, which represents the majority is.
Speaker Change: That portion of it the commissions that go against coaches.
Speaker Change: We're attracting new clients in.
Speaker Change: As we're evaluating the relative efficiency of each of those buckets, what we're finding.
Speaker Change: We'll continue to find is that.
Speaker Change: Our coaches are becoming better at attracting new customers and so im referencing those those newer coaches who understand how to attract clients in this new environment.
Speaker Change: The spend efficiency.
Speaker Change: With that money is spent with coaches during the attraction is the most efficient use of our cash so it's it's kind of child.
Speaker Change: Taking on additional increments to.
Speaker Change: We continue to use.
Speaker Change: Our company.
Speaker Change: Company led.
Speaker Change: Advertising dollars in the most efficient way that second loss sufficient way is to re attract lapsed users, which really comes out more too.
Speaker Change: <unk> be reflected in a life.
Speaker Change: The lifetime value, but those two those two things are what's driving it.
Speaker Change: Or what is driving that productivity number up coaches, becoming better at doing it.
Speaker Change: Yeah.
Speaker Change: Our optimizing.
Speaker Change: The customer attraction the lapsed customer attraction.
Speaker Change: Okay.
Speaker Change:
Speaker Change: So of the 17% of your.
Speaker Change: I think its customers. He said at year end that are on the G. L. P. One drugs.
Speaker Change: What percentage of the 17% and got the drug by.
Speaker Change: Through life M D.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Actually it's a the majority are getting it through their own providers.
Speaker Change: So I don't have a percentage to share with you but.
Speaker Change: But the majority.
Speaker Change: Pretty are coming through their own providers and.
Speaker Change: A portion of those are are so if you say that 17% think of those as two different groups those who are on drugs and those who have transitioned off and its about half and half so roughly 8% who are still on the drug and there is there.
Speaker Change: Majority coming through their own provider and then another half who have transitioned off and we're using just the opposite via program.
Speaker Change: Do you find that your coaches are actually advertising. The fact that they have the connection with life M D or not really.
Speaker Change: Yeah. They are they are what they are there. So if we think about the.
Speaker Change: Life MD offers access to the drugs.
Speaker Change: What are.
Speaker Change: Coaches have a customer.
Speaker Change: Who doesn't have a primary care physician.
Speaker Change: They're.
Speaker Change: Actively using life MD to to help that.
Speaker Change: Customer.
Speaker Change: Gain access, but the majority of the customers are using have a primary care physician and they're able to access the drug through them what they can't access through the physician services are the lifestyle component. So they use our coaches for that.
Speaker Change: Mhm.
Speaker Change:
Speaker Change: So some of the other direct selling companies.
Speaker Change: Especially the ones that are selling like nutritional supplement types of things.
Speaker Change: They're reassessing their MLM models their actual structure of their models because they feel that they are outdated in the sense that they over reward the people at the top of the structure and are not paying enough to the people at the bottom who are really working hard to kind of.
Speaker Change: Ramp up and gather customers et cetera, and these other companies are actually talking about changing their compensation structures.
Speaker Change: Or do you feel the need to do that or have you done any of that or I mean, what are your thoughts on that.
Speaker Change: Issue.
Speaker Change: We've made some small adjustments over the years, but our.
Speaker Change: That are reflective of making sure that we're rewarding the type of work that you were talking about we're starting in a very different place from probably most of the direct sellers that you're talking about.
Speaker Change: We have well save much more of a front end.
Speaker Change: Oriented.
Speaker Change: Compensation plan. So we compensate coaches who are doing nothing but coaching.
Speaker Change: We're close to 30%.
Speaker Change: And commissions.
Speaker Change: And so that's that's higher than what most are able to pay out and then we also have.
Speaker Change: I'll say, a generous compensation structure for those who are also leading but we haven't had that I know what you are referring to and I know some of the companies that you're referring to that are doing that.
Speaker Change: Not contemplating anything like what Youre describing.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: Yeah.
Let's see I guess.
Speaker Change: You know I guess, the operating cash flow for the year I guess, it sort of came out a little bit lower.
Speaker Change: Then I would've thought so therefore your free cash flow is a little bit you know dwindle down.
Speaker Change: Very small here.
Speaker Change: I mean do you envision that the free cash flow.
Speaker Change: You're not giving guidance, but I would expect it could still stay positive in 'twenty to 'twenty five is.
Speaker Change: Is there any color you can give on that.
Speaker Change: Yes, I mean the <unk>.
Speaker Change: I'll I'll give on that is.
Speaker Change:
Speaker Change: We decided in at.
Speaker Change: In October.
Speaker Change: To cancel our credit facility.
Speaker Change: Cause.
Speaker Change: You know we're looking out.
Speaker Change: Using our long range planning.
Speaker Change: But we were not going to need to borrow any.
Speaker Change: Funds and with through their credit facility.
Speaker Change: So we made a conscious decision to cancel like credit facility.
Speaker Change: And because we were we were obviously spending.
Speaker Change: Uh huh.
Speaker Change: Having fees on that credit facility and we just didn't think.
Speaker Change: The need for it was there so.
Speaker Change:
Speaker Change: You know.
Speaker Change: That should give the.
Speaker Change: Investor confidence.
Speaker Change: That we believe that our cash.
Speaker Change: Our cash position.
Speaker Change: Cash and investments.
Speaker Change: For the foreseeable future.
Speaker Change: Should be at a very strong point.
Speaker Change: Okay.
Speaker Change: Then my last question is I mean, you are giving guidance for the first quarter.
Speaker Change: Usually in a in a normal.
Speaker Change: Time, Yeah, and your historical kind of performance you would see a seasonal uptick sequentially and coaches in the first quarter because of the weight loss season do you expect a sequential uptick in the number of coaches in the first quarter of 2025.
Speaker Change: And so what we're what we're expecting is.
Speaker Change: That.
Coach is the number of coaches, we will continue to be pressured.
Speaker Change: Until we get.
Speaker Change: Our coach productivity.
Metric.
Speaker Change: In a positive nature year over year, so historically.
When we look back at when we grew back in 2000.
Speaker Change: 17, 16, 17 timeframe once we started that growth path.
Speaker Change: We won't.
Speaker Change: We saw at that point in time is the <unk>.
Speaker Change: Revenue per active earning coach.
Speaker Change: <unk>.
Speaker Change: Turned positive.
Speaker Change: And then we saw coach growth.
Speaker Change: It's going to continue to be pressured until we get.
Speaker Change: The growth of the metric regarding coach productivity.
Speaker Change: And a better and a better spot, which we do believe that's going to happen sometime in 2025.
Speaker Change: So when you say pressure do you mean, our consistent sequential decline in coaches every single corner, that's kind of what you're talking about.
Speaker Change: For for Q1, we do expect there to be pressure on that number. So yes, we do expect that to have a decline in our coaches.
Speaker Change: And then just one more question when you look at that year over year decline in coach productivity I guess, it was five 5% in the quarter and the fourth quarter.
Speaker Change: You had to break it down between like.
Speaker Change: Oh I don't know how you would do at like unit sales versus mix, because you're offering under the.
Speaker Change: The G. L. P. One offerings are I think lower kind of price per unit that the customer is spending less money on your product. So is there weren't any way to think of the down five 5% in terms of like volume versus mix or something yeah. Yeah.
Speaker Change: Yeah, Yeah, yeah. So.
Speaker Change: Overall, I would say our average order.
Speaker Change: Changed dramatically.
Speaker Change: So the dollars haven't changed that dramatically so that's really still.
Speaker Change: What's happening is the.
Speaker Change: The.
Speaker Change: New customers and being able to attract lapsed customers is actually moderating that number.
Speaker Change: More than more than a.
Speaker Change: Uh huh.
Speaker Change: Our change in in the quarter.
Speaker Change: So it's more that the coaches are sort of like coaching fewer people or something rather than each person buying less or something is that kind of it.
Speaker Change: Yes, but it's actually.
Speaker Change: It's getting it's stabilizing because we're starting to see.
Speaker Change: Certain.
Coach groups.
Speaker Change: Very good productivity.
Speaker Change: So there are certain coaches that are doing very well.
Speaker Change: And that's.
Speaker Change: That's helping.
Speaker Change: That number.
Speaker Change: Do better so when we when we mention it.
Speaker Change: It's going from a negative 22% year over year to a negative five 5% year over year from Q1 of 2020 forward it to you.
Speaker Change: Q4 of 2024 that moderation is because certain coach lines are doing better and we're seeing that we're seeing that.
Certain coach lines are actually.
Speaker Change:
Speaker Change: Attracting new customers in all three segments customers better.
Using medication customers that are not using medications and customers that are.
Speaker Change: Coming off the medications, so we're seeing that happen in real time.
Speaker Change: Okay. That's all for me thank you.
Linda Coach: Thanks Linda.
Speaker Change: Thank you there are no further questions at this time I'd like to hand, the floor back over to Dan Chard for any closing comments.
Dan Chard: I'd like to thank you for those questions and for the opportunity to further discuss our progress on our business transformation as we adjust our model train our coaches and introduce new products.
Dan Chard: We aim to better meet the needs of our customers in this changing environment, we look forward to continuing our efforts to improve coach productivity as we move forward.
Dan Chard: Glad you with additional details regarding our progress on the next call. Thank you everyone have a great day.
Dan Chard: Okay.
Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.