Part I [Item 1 – Financial Statements](index=2&type=section&id=Item%201%20%E2%80%93%20Financial%20Statements) Unaudited financial statements show Q2 2025 net income of **$2.5 million** despite revenue decline and near-zero H1 operating cash flow [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 and H1 2025 vs 2024 Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $105,555 | $168,558 | -37.4% | $221,283 | $343,297 | -35.5% | | **Gross Profit** | $76,644 | $123,438 | -37.9% | $160,888 | $250,730 | -35.8% | | **Income (Loss) from Operations** | $(1,066) | $(7,876) | +86.5% | $(2,329) | $64 | -3739.1% | | **Net Income (Loss)** | $2,480 | $(8,154) | +130.4% | $1,708 | $163 | +947.9% | | **Diluted EPS** | $0.22 | $(0.75) | +129.3% | $0.15 | $0.01 | +1400.0% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $101,694 | $90,928 | | **Total Current Assets** | $206,441 | $214,404 | | **Total Assets** | $269,333 | $284,213 | | **Total Current Liabilities** | $46,184 | $64,161 | | **Total Liabilities** | $53,328 | $74,104 | | **Total Stockholders' Equity** | $216,005 | $210,109 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $28 | $20,351 | | **Net cash provided by (used in) investing activities** | $11,303 | $(5,307) | | **Net cash used in financing activities** | $(565) | $(1,511) | - Net cash from operating activities decreased sharply to **$28 thousand** for the first six months of 2025, down from **$20.4 million** in the same period of 2024[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company operates as a single reportable segment named OPTAVIA, which derives revenue from the sale of its products directly to clients[60](index=60&type=chunk)[62](index=62&type=chunk) - During Q2 2025, the company sold all of its holdings in LifeMD common stock, realizing a net gain of **$2.6 million** for the quarter, while the business collaboration with LifeMD continues[56](index=56&type=chunk)[57](index=57&type=chunk) - The company terminated its Amended Credit Agreement with Citibank, N.A. on October 30, 2024, and had no outstanding borrowings at the termination date[59](index=59&type=chunk) Inventories, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Finished goods | $22,199 | $33,702 | | **Total** | **$30,201** | **$42,421** | [Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202%20%E2%80%93%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue decline to fewer coaches and GLP-1 adoption, improving net income via reduced SG&A and business transformation [Overview](index=21&type=section&id=Overview) - The company is undergoing a comprehensive business transformation to address the market shift caused by the rapid acceptance of GLP-1 weight loss medications[70](index=70&type=chunk) - The business model relies on a network of approximately **22,800 active earning OPTAVIA coaches**[70](index=70&type=chunk) - Medifast has developed distinct program offerings for three client categories: those not using medications, those using GLP-1s, and those transitioning off GLP-1s[74](index=74&type=chunk)[76](index=76&type=chunk) - A collaboration with LifeMD provides clients access to clinicians and GLP-1 medications; Medifast sold its equity stake in LifeMD in Q2 2025, but the collaboration continues[78](index=78&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) - Q2 2025 revenue decreased **37.4%** year-over-year to **$105.6 million**, primarily driven by a **32.7%** decrease in the number of active earning OPTAVIA coaches[96](index=96&type=chunk) - SG&A expenses for Q2 2025 decreased by **$53.6 million** (**40.8%**) compared to Q2 2024, mainly due to a **$24.3 million** decrease in coach compensation and the non-recurrence of prior-year costs, including **$12.5 million** for supply chain optimization and **$3.0 million** for convention cancellation[100](index=100&type=chunk) - Other income increased significantly in Q2 2025, primarily due to a **$2.6 million** gain on the investment in LifeMD common stock, compared to a **$4.2 million** loss in the prior-year period[102](index=102&type=chunk) - The company reported net income of **$2.5 million** (**$0.22 per diluted share**) for Q2 2025, a substantial improvement from a net loss of **$8.2 million** (**$0.75 per diluted share**) in Q2 2024[105](index=105&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital increased to **$160.3 million** at June 30, 2025, from **$150.2 million** at December 31, 2024[106](index=106&type=chunk) - Net cash provided by operating activities fell sharply to less than **$0.1 million** for the first six months of 2025, compared to **$20.4 million** for the same period in 2024[107](index=107&type=chunk) - The company terminated its credit agreement in October 2024 and had no outstanding borrowings[113](index=113&type=chunk) [Item 3 – Quantitative and Qualitative Disclosures about Market Risk](index=30&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Primary market risk from interest rate changes on investments is immaterial, with equity investment risk eliminated after selling LifeMD holdings - The company's main market risk is from interest rate changes impacting its investment portfolio, but it estimates a **10%** adverse change would have an immaterial effect[115](index=115&type=chunk) - Market risk related to price fluctuations in LifeMD common stock was eliminated as the company sold its entire investment during the quarter ended June 30, 2025[116](index=116&type=chunk) [Item 4 – Controls and Procedures](index=30&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures are effective at the reasonable assurance level as of June 30, 2025[117](index=117&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[118](index=118&type=chunk) Part II [Item 1 – Legal Proceedings](index=31&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) The company is subject to routine litigation, which is not expected to materially impact its financial results or position - The company does not believe that litigation and claims arising from the ordinary course of business will have a material adverse effect on its results, financial position, or liquidity[120](index=120&type=chunk) [Item 1A – Risk Factors](index=31&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) No material changes to risk factors previously disclosed in the company's 2024 Form 10-K have been reported - There have been no material changes to the risk factors set forth in the company's 2024 Form 10-K[121](index=121&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 24 shares for employee tax obligations, with **1,323,568 shares** remaining available under its stock repurchase plan - In June 2025, **24 shares** were repurchased at an average price of **$12.66 per share** to cover employee tax withholding obligations[122](index=122&type=chunk) - As of June 30, 2025, **1,323,568 shares** remained eligible for repurchase under the company's stock repurchase plan, which has no expiration date[124](index=124&type=chunk) [Item 5 – Other Information](index=31&type=section&id=Item%205%20%E2%80%93%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025 - During the three months ended June 30, 2025, no director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement[125](index=125&type=chunk) [Item 6 – Exhibits](index=32&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required CEO and CFO certifications - The report includes a list of filed exhibits, such as the CEO and CFO certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act[126](index=126&type=chunk)

Financial Performance - Q2 2025 revenue reached $106 million[11] - The company reported an operating loss of $1.1 million[15] - Earnings per share stood at $0.22[19] - Revenue per active earning coach (AEC) was $4,630[13, 14] - As of June 30, 2025, cash and investments totaled $163 million[6, 21, 22] Coach Network and Productivity - The company has 22,800 active earning coaches[20] - Revenue per active earning coach declined 6.9% year-over-year but increased sequentially for the second consecutive quarter[8] - New coach productivity exceeded the same period last year[8] - 60% of coaches have had at least one client on GLP-1 medications[30, 70] Strategic Initiatives - The company is focusing on science-driven innovation and offer evolution[23, 65] - The Premier+ program streamlines pricing and processes to improve retention and aid recruitment[25, 48, 51] - The OPTAVIA EDGE program is designed to drive coach productivity, client acquisition, and leadership development[52, 71] Market and Health Focus - The company is addressing the rising metabolic health challenge, with 9 out of 10 U S adults being metabolically unhealthy[31, 69] - The OPTAVIA 5&1 Plan has been shown to impact key drivers of metabolic health, retaining 98% of lean mass in a clinical trial[38, 40] Q3 2025 Guidance - The company projects Q3 2025 revenue between $70 million and $90 million[75] - Q3 2025 loss/earnings per share is expected to be between ($0.60) and $0.00[75]

[Executive Summary & Business Update](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Update) Medifast reported significant Q2 2025 revenue decline, achieving net income and maintaining a strong balance sheet, focusing on business transformation - CEO Dan Chard stated the company is focused on **transforming the business** by reigniting coach growth and productivity through targeted initiatives to enhance offerings and expand client solutions[2](index=2&type=chunk) - The company highlights a scientific finding that its OPTAVIA 5 & 1 Plan helps preserve **98% of lean mass**, positioning it as a key benefit for metabolic health beyond simple weight loss[2](index=2&type=chunk) Q2 2025 Key Metrics Overview | Metric | Value | Source | | :--- | :--- | :--- | | **Revenue** | $105.6 M | Q2 2025 | | **Active Coaches** | 22,800 | Q2 2025 | | **Net Income** | $2.5 M | Q2 2025 | | **Diluted EPS** | $0.22 | Q2 2025 | | **Cash & Investments** | $162.7 M | As of June 30, 2025 | | **Debt** | None | As of June 30, 2025 | [Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Medifast's Q2 2025 financial performance saw a **37.4% revenue decrease**, but improved operating loss and **$2.5 million net income**, driven by expense control and an investment gain [Revenue and Coach Metrics](index=1&type=section&id=Revenue%20and%20Coach%20Metrics) Q2 2025 revenue fell **37.4% to $105.6 million** due to a **32.7% decline in active coaches** and client acquisition challenges, exacerbated by GLP-1 medications Revenue and Coach Metrics Comparison (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Revenue** | $105.6 M | $168.6 M | -37.4% | | **Active Earning Coaches** | 22,800 | 33,900 | -32.7% | | **Avg. Revenue per Coach** | $4,630 | $4,972 | -6.9% | - The primary drivers for the decline were continued challenges with client acquisition and broader operating environment pressures, including the rapid adoption of GLP-1 medications for weight loss[3](index=3&type=chunk) [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Gross profit decreased **37.9% to $76.6 million** due to lower revenue, but **SG&A expenses significantly reduced by 40.8%**, leading to an improved operating loss of **$1.1 million** Profitability Metrics (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Gross Profit** | $76.6 M | $123.4 M | -37.9% | | **Gross Margin** | 72.6% | 73.2% | -60 bps | | **SG&A Expenses** | $77.7 M | $131.3 M | -40.8% | | **Loss from Operations** | ($1.1 M) | ($7.9 M) | +86.5% (Improvement) | - The decrease in SG&A was primarily due to a **$24.3 million** reduction in coach compensation and the non-recurrence of prior-year costs, including **$12.5 million** for supply chain optimization and **$3.0 million** for convention cancellation[7](index=7&type=chunk) [Other Income, Taxes, and Net Income](index=2&type=section&id=Other%20Income%2C%20Taxes%2C%20and%20Net%20Income) Medifast reported **$3.9 million in other income**, primarily from a **$2.6 million gain on LifeMD investment**, resulting in a **net income of $2.5 million** ($0.22 diluted EPS) for Q2 2025 - The company recorded a **$2.6 million gain** on its investment in LifeMD common stock in Q2 2025, compared to a **$4.2 million loss** in Q2 2024[9](index=9&type=chunk) Net Income and EPS (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net Income (Loss)** | $2.5 M | ($8.2 M) | | **Diluted EPS** | $0.22 | ($0.75) | [Capital Allocation and Balance Sheet](index=2&type=section&id=Capital%20Allocation%20and%20Balance%20Sheet) Medifast maintains a strong, liquid, and debt-free balance sheet, holding **$162.7 million in cash, cash equivalents, and investment securities** as of June 30, 2025 - The company's balance sheet remains strong with **$162.7 million** in cash, cash equivalents and investment securities and **no debt** as of June 30, 2025[12](index=12&type=chunk) [Business Outlook](index=2&type=section&id=Business%20Outlook) Medifast provided a cautious Q3 2025 outlook, projecting revenue between **$70 million and $90 million** and diluted EPS ranging from a **loss of $0.60 to breakeven** Q3 2025 Outlook | Metric | Guidance Range | | :--- | :--- | | **Revenue** | $70 M - $90 M | | **Diluted EPS** | ($0.60) - $0.00 | [Financial Statements](index=5&type=section&id=Financial%20Statements) The unaudited financial statements detail a year-over-year decline in revenue and gross profit, a shift to net income for the quarter, and a stable balance sheet with reduced liabilities [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, Medifast reported **$105.6 million in revenue** and **$2.5 million net income**, a significant improvement from the prior year's **$8.2 million net loss** Statement of Operations Summary (Three Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | **Revenue** | $105,555 | $168,558 | | **Gross Profit** | $76,644 | $123,438 | | **Income (loss) from operations** | $(1,066) | $(7,876) | | **Net income (loss)** | $2,480 | $(8,154) | | **Earnings (loss) per share - diluted** | $0.22 | $(0.75) | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$269.3 million**, total liabilities decreased to **$53.3 million**, and stockholders' equity increased to **$216.0 million** Balance Sheet Summary (As of June 30, 2025 vs Dec 31, 2024) | (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $101,694 | $90,928 | | **Total Current Assets** | $206,441 | $214,404 | | **TOTAL ASSETS** | $269,333 | $284,213 | | **Total Current Liabilities** | $46,184 | $64,161 | | **TOTAL LIABILITIES** | $53,328 | $74,104 | | **Total stockholders' equity** | $216,005 | $210,109 |

Core Viewpoint - Medifast, Inc. (NYSE: MED) is initiated with a Strong Buy rating and a price target of $56, focusing on its weight management and nutritional products under the OPTAVIA brand [1] Company Overview - Medifast, Inc. manufactures and distributes weight management products and nutritional products, primarily under the OPTAVIA brand [1] Research Methodology - Moretus Research employs a structured, repeatable framework to identify companies with durable business models, mispriced cash flow potential, and intelligent capital allocation [1] - The research combines rigorous fundamental analysis with a high-signal, judgment-driven process, avoiding noise and overly complex forecasting [1] - Valuation is based on sector-relevant multiples tailored to each company's business model and capital structure, emphasizing comparability, simplicity, and relevance [1] Investment Focus - Research coverage favors underappreciated companies undergoing structural change or temporary dislocation, where dispassionate analysis can lead to asymmetric returns [1] - Moretus Research aims to provide professional-grade insights, actionable valuation, and a strong filter for what truly matters in modern equity analysis [1]

Core Viewpoint - Medifast's shares have increased by approximately 10.9% since the last earnings report, outperforming the S&P 500, but there are concerns about whether this positive trend will continue leading up to the next earnings release [1] Group 1: Earnings Report and Market Reaction - The consensus estimate for Medifast has shifted downward by 100% over the past month, indicating a negative trend in earnings expectations [2] - The stock has received a subpar Growth Score of D and a similar score for momentum, while it holds a C grade for value, placing it in the middle 20% for that investment strategy [3] Group 2: Outlook and Future Expectations - The overall VGM Score for Medifast is D, suggesting a lack of strong performance across various investment strategies [3] - Estimates for the stock have been broadly trending downward, and the magnitude of these revisions indicates a negative outlook, with a Zacks Rank of 3 (Hold), suggesting an expectation of in-line returns in the coming months [4]

Medifast® Q1 2025 Earnings Supplement © 2025 Medifast, Inc. All Rights Reserved. This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally can be identified by use of phrases or terminology such as "intend," "anticipate," "expect" or other similar words or the negative of ...

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $115.7 million, a decrease of 33.8% year over year, primarily due to a decrease in the number of active earning OPTAVIA Coaches [19] - Net loss for Q1 2025 was $800,000 or $0.07 per share, compared to net income of $8.3 million or $0.76 per diluted share in the prior year [22] - Gross profit decreased 33.8% year over year to $84.2 million, with a gross profit margin of 72.8%, consistent with the previous year [20] Business Line Data and Key Metrics Changes - The number of active earning OPTAVIA Coaches decreased by 32.8% year over year to approximately 25,400 [19] - Average revenue per active earning OPTAVIA Coach for Q1 was $4,556, a year-over-year decrease of 1.4%, showing a moderation compared to a 22% decrease in Q1 2024 [20] Market Data and Key Metrics Changes - The company noted that a weaker economy could present consumer demand headwinds, but historically, economic slowdowns have increased coach recruitment as more individuals seek additional income opportunities [16] Company Strategy and Development Direction - The company is focusing on empowering coaches to be more productive and successful, with a strategy that includes streamlining coach development, enhancing tools and insights for coaches, and broadening product offerings [10][12][13] - The introduction of the OPTAVIA Ascend line aims to support individuals using GLP-1 medications, helping preserve lean muscle mass [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth, citing early positive indicators and a focus on coach-led strategies [17] - The company expects to see clearer signs of a turnaround by the end of 2025, with a focus on improving coach productivity and customer acquisition [17] Other Important Information - The company is currently developing studies to evaluate the efficacy of the new Ascend line and the established Essential line, which will support the business transformation over the next 12 to 18 months [14] - The financial position remains strong with $164.6 million in cash and no interest-bearing debt as of March 31, 2025 [22] Q&A Session Summary Question: Clarification on second quarter top line guidance - Management explained that the guidance reflects the timing of promotions and that the absence of a planned promotion in Q2 could lead to an acceleration in the year-over-year rate of decline [26][28] Question: Impact of GLP-1 on coaching community - Management indicated that the introduction of GLP-1 medications has created training opportunities rather than controversy, allowing coaches to better support clients on and off these medications [50][55] Question: Monthly cost of GLP-1 and supporting nutritional programs - The monthly cost for the OPTAVIA program is approximately $400, which covers 80% of daily meals, while LifeMD charges less than $20 for their telehealth service [57][59]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $115.7 million, a decrease of 33.8% year-over-year, primarily due to a decrease in the number of active earning OPTAVIA Coaches [20] - The company ended the quarter with approximately 25,400 active earning OPTAVIA Coaches, a decrease of 32.8% from Q1 2024 [20] - Gross profit decreased 33.8% year-over-year to $84.2 million, with a gross profit margin of 72.8%, consistent with the prior year [21] - Net loss for Q1 2025 was $800,000 or $0.07 per share, compared to net income of $8.3 million or $0.76 per diluted share in the prior year [24] Business Line Data and Key Metrics Changes - Average revenue per active earning OPTAVIA Coach for Q1 was $4,556, a year-over-year decrease of 1.4%, showing a moderation compared to a 22% decrease in Q1 2024 [21] - The company reported lower year-over-year declines in coach productivity, driven by increased productivity of newer coach cohorts [16] Market Data and Key Metrics Changes - The company noted that a weaker economy could present consumer demand headwinds, but historically, economic slowdowns have increased coach recruitment as more individuals seek additional income opportunities [17] Company Strategy and Development Direction - The company is focusing on empowering coaches to be more productive and successful, with an emphasis on a holistic solution that includes clinically proven plans and access to weight loss medications through LifeMD [18] - The strategy includes streamlining the coach development path, enhancing tools and insights for coaches, and broadening product offerings to better serve customers [10][12][13] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for growth, citing early positive indicators and a focus on coach-led strategies [18] - The company expects to see a clearer picture of resilience in the business as 2025 progresses, with a focus on delivering signs of a turnaround by the end of the year [18] Other Important Information - The company is currently developing studies to evaluate the efficacy of new product lines and the holistic OPTAVIA model [14] - The financial position remains strong with $164.6 million in cash and no interest-bearing debt as of March 31, 2025 [25] Q&A Session Summary Question: Clarification on second quarter top line guidance - Management explained that the guidance reflects the timing of promotions and that the absence of a planned promotion in Q2 could impact the year-over-year rate of decline [27][30] Question: Impact of GLP-1 medications on coaching community - Management indicated that GLP-1 medications have created training opportunities rather than controversy, as coaches adapt to the new environment [52][56] Question: Monthly cost of GLP-1 and supporting nutritional programs - The monthly cost for the five and one program is approximately $400, which covers 80% of daily meals [59] Question: Changes in company-led marketing and its impact on SG&A - Management confirmed that while there will be some pullback in company-led marketing, it will not be dramatic, and reactivation efforts will continue [46][47]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $115.7 million, a decrease of 33.8% year over year, primarily due to a decrease in the number of active earning OPTAVIA Coaches [18] - The company ended the quarter with approximately 25,400 active earning OPTAVIA Coaches, a decrease of 32.8% from Q1 2024 [18] - Gross profit decreased 33.8% year over year to $84.2 million, with a gross profit margin of 72.8%, consistent with the previous year [19] - Net loss for Q1 2025 was $800,000 or $0.07 per share, compared to net income of $8.3 million or $0.76 per diluted share in the prior year [22] Business Line Data and Key Metrics Changes - Average revenue per active earning OPTAVIA Coach for Q1 was $4,556, a year-over-year decrease of 1.4%, showing a moderation compared to a 22% decrease in Q1 2024 [19] - The company saw lower year-over-year declines in revenue per active earning Coach, driven by increased productivity of newer coach cohorts [15] Market Data and Key Metrics Changes - The company is experiencing a shift in the coaching community due to the introduction of GLP-1 medications, which has created both opportunities and challenges [48][50] - Approximately 50% of OPTAVIA Coaches have supported clients using GLP-1 medications, with 25% having personal experience with these medications [11][54] Company Strategy and Development Direction - The company is focusing on empowering coaches to be more productive and successful, with a strategy that includes streamlining coach development, enhancing tools and insights, and broadening product offerings [9][10][12] - The introduction of the OPTAVIA Ascend line is aimed at those using GLP-1 medications, helping to preserve lean muscle mass [12] - The company plans to reduce company-led marketing costs while emphasizing the importance of the coach community for customer acquisition [14] Management's Comments on Operating Environment and Future Outlook - Management believes the health and wellness space is evolving rapidly, presenting significant opportunities for the company [5] - The company expects to see a clearer picture of resilience in early positive indicators as 2025 progresses, with a focus on delivering signs of a turnaround by the end of the year [17] - Management acknowledges that economic slowdowns could increase coach recruitment as more individuals seek additional income opportunities [16] Other Important Information - The company has a strong financial position with $164.6 million in cash and no interest-bearing debt as of March 31, 2025 [22] - Guidance for Q2 2025 revenue is expected to range from $85 million to $105 million, with a loss per share ranging from $0.00 to $0.55 [23] Q&A Session Summary Question: Clarification on Q2 top line guidance and sales decline - Management explained that the guidance reflects the timing of promotions and does not necessarily indicate a continued trend of decline [25][27] Question: Impact of GLP-1 medications on coaching community - Management noted that the introduction of GLP-1 medications has created training opportunities rather than controversy, as coaches adapt to the new environment [50][54] Question: Monthly costs associated with GLP-1 and supporting nutritional programs - The monthly cost for the OPTAVIA program is approximately $400, which includes most of the meals for clients [57] Question: Changes in company-led marketing and its impact on SG&A - Management indicated that while there will be some pullback in company-led marketing, it will not be dramatic, and reactivation efforts will continue [44][45]

Financial Performance - Revenue for Q1 2025 was $115,728, a decrease of 33.8% compared to $174,739 in Q1 2024[12] - Gross profit for Q1 2025 was $84,245, down 33.8% from $127,292 in Q1 2024[12] - Net loss for Q1 2025 was $(772), compared to a net income of $8,316 in Q1 2024, representing a significant decline[12][14] - Earnings per share (EPS) for Q1 2025 was $(0.07), compared to $0.76 in Q1 2024[12] - The company reported a comprehensive loss of $(713) for Q1 2025, compared to a comprehensive income of $8,090 in Q1 2024[14] - Net income for the three months ended March 31, 2025 was a loss of $772,000, compared to a net income of $8.3 million for the same period in 2024, indicating a significant decline[35] - Basic and diluted earnings per share (EPS) for the three months ended March 31, 2025 were both $(0.07), down from $0.76 in 2024[35] Assets and Equity - Total assets as of March 31, 2025, were $280,011, a decrease from $284,213 as of December 31, 2024[16] - Total stockholders' equity rose to $210,959 as of March 31, 2025, compared to $210,109 at the end of 2024[17] - Cash and cash equivalents increased to $91,717 as of March 31, 2025, from $90,928 at the end of 2024[18] Cash Flow and Expenses - Operating cash flow for Q1 2025 was $3,406, down from $7,282 in Q1 2024[18] - The company incurred $85,507 in selling, general, and administrative expenses in Q1 2025, down from $119,352 in Q1 2024[12] - Advertising expenses for Q1 2025 were $4.6 million, up from $2.5 million in Q1 2024, representing an increase of 84%[26] - The total share-based compensation expense for the three months ended March 31, 2025 was $1.9 million, down from $2.2 million in the same period of 2024, representing a 11.1% decrease[44] Inventory and Tax - Total inventories as of March 31, 2025 amounted to $39.4 million, a decrease from $42.4 million as of December 31, 2024, reflecting a 7.2% decline[33] - The income tax expense for the three months ended March 31, 2025 was $1.3 million, with an effective tax rate of 246.8%, compared to $3.3 million and 28.2% for the same period in 2024[27] Segment Performance - The OPTAVIA segment reported revenue of $115.728 million for the three months ended March 31, 2025, a decrease of 33.8% compared to $174.739 million for the same period in 2024[66] - Segment net loss for the three months ended March 31, 2025, was $772 thousand, compared to a net income of $8.316 million for the same period in 2024[66] - The cost of sales for the OPTAVIA segment was $31.483 million, down from $47.447 million, reflecting a 33.7% reduction year-over-year[66] - The segment's selling, marketing, and after-sales support expenses were $59.855 million for the three months ended March 31, 2025, down from $87.279 million in 2024, a decrease of 31.4%[66] Lease and Compensation - Operating lease expense remained consistent at $1.2 million for both the three months ended March 31, 2025, and 2024[50] - The total lease payments due as of March 31, 2025, amounted to $15.056 million, with a weighted average remaining lease term of 3 years and a discount rate of 2.20%[52] - The company had $11.9 million of total unrecognized compensation cost related to restricted stock awards as of March 31, 2025, expected to be recognized over a weighted-average period of 2.3 years[46] Financial Reporting and Agreements - The company adopted ASU 2023-07 for segment reporting, effective for interim periods beginning after December 15, 2024, which may enhance financial reporting transparency[28][29] - The company is currently evaluating the impact of adopting ASU 2023-09 on its consolidated financial statements, which is effective for annual periods beginning after December 15, 2024[30] - The Company entered into an agreement to purchase shares of LifeMD for $10 million during the fourth quarter of 2023[58] - The Company had no borrowings under its Amended Credit Agreement as of October 30, 2024, when it was terminated[61]