Medifast(US:MED)2023-05-01 21:37Financial Data and Key Metrics Changes - Revenue decreased 16.4% year-over-year to $349 million, primarily due to a lower number of active earning OPTAVIA Coaches and lower average revenue per active earning OPTAVIA Coach [67] - Gross profit decreased 18.5% year-over-year to $246.4 million, with gross profit margin declining 180 basis points to 70.6% [29] - Net income for Q1 2023 was $40 million or $3.67 per diluted share, compared to $41.8 million or $3.59 per diluted share in the prior year [52] - Cash flows from operations increased 46.7% to $64.1 million during the first quarter [53] Business Line Data and Key Metrics Changes - The number of active earning OPTAVIA Coaches decreased by 8.1% year-over-year to approximately 58,700 [49] - Average revenue per active earning OPTAVIA Coach was $5,945, a year-over-year decline of 9% but an increase from the previous two quarters [49] - SG&A expense decreased 22% year-over-year to $192.9 million, reflecting progress on cost reduction initiatives [68] Market Data and Key Metrics Changes - Customer retention levels have returned to historical norms, but customer acquisition remains challenging due to changes in spending and social media algorithms [11] - The Hispanic market has shown encouraging growth, with new Hispanic coach enrollments up 30% year-over-year [44] Company Strategy and Development Direction - The company aims for 15% annualized revenue growth and a 15% sustainable operating margin by 2025 as part of the 15x25 initiative [10] - Focus on enhancing customer acquisition through coach-led training, programming composition, and unique positioning [37] - Plans to expand into adjacent product categories and explore international markets, particularly in Latin America [22][23] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging operating environment due to macroeconomic factors and competitive landscape changes [34] - The company is optimistic about reestablishing growth and improving customer acquisition through strategic initiatives [15][27] - Future growth initiatives will require time to gain traction, and the company is not providing full-year guidance yet [73] Other Important Information - The company declared a quarterly cash dividend of $1.65 per share, representing a 0.6% increase compared to the prior year [71] - The effective tax rate for Q1 2023 was 25.1%, higher than the previous year's 24% [70] Q&A Session Summary Question: What are the expectations for growth initiatives spending? - Management expects that spending on growth initiatives will be concentrated in the latter half of 2023, with quarterly results likely below the previous year [57] Question: How is the company addressing the pressure on customer acquisition? - Management highlighted the focus on reestablishing coach productivity metrics and customer acquisition through new incentive structures [60] Question: Is the dividend at risk given the EPS guidance? - Management reassured that the dividend is not at risk and that excess cash flows will continue to support it [62] Question: How does the company view the new GLP-1 weight loss drugs? - Management emphasized that coaching remains central to their model and that they are exploring ways to remain relevant alongside these new drugs [64][96] Question: What were the operating cash flow and CapEx numbers for the quarter? - Operating cash flow was $64 million, an increase of 47%, and CapEx was $2 million for the quarter [86]