Medifast Inc Stock

Greetings, and welcome to the Medifast Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steven Zenker, Vice President, Investor Relations. Thank you, sir. You may begin.

Good afternoon, and welcome to Medifast's Second Quarter 2026 Earnings Conference Call.

On the call with me today are Nick Johnson, Chief Executive Officer; and Jim Maloney, Chief Financial Officer.

By now, everyone should have access to the earnings release for the second quarter ended June 30, 2026, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.com.

This call is being webcast and a replay will also be available on the company's website.

Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate, and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance and therefore undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Now I would like to turn the call over to Medifast's Chief Executive Officer, Nick Johnson.

Thanks, Steve, and good afternoon, everyone. It's an honor to be addressing you today in my first earnings call as the CEO of Medifast, and I'm looking forward to conversations with investors over the months and years ahead.

In our second quarter, we continued to see positive indicators in our business, maintaining a trend that began in late 2025. Most notably, revenue has stabilized sequentially over the recent quarters, aided by higher coach productivity, which grew for the third consecutive quarter. This is a key metric for us as positive trends historically have preceded revenue and profitability growth.

Improved coach productivity is also reflected in the growing percentage of active earning coaches reaching Executive Director rank as our field embraces our strategic transition to metabolic health. We anticipate that these positive trends will continue through the remainder of the year, supported by the launch of our new consumer brand, Trilivy. Trilivy is the first step in our 3.0 strategy, which is the biggest shift for Medifast since we launched OPTAVIA in 2017. The strategy is defined by a 10-year roadmap that will allow us to expand our offer to coaches and clients in the context of a comprehensive metabolic health system, while also broadening our geographic and demographic footprints.

We have made substantial progress this year, launching a new brand, a new scientific institute, an enhanced coach compensation structure, and a standardized training system for our coaches. Each is a significant step forward, and together they help form a foundation for us to win in the metabolic health category.

The way we are running the 3.0 organization centers around four core defining characteristics, namely speed, simplicity, scale, and stewardship. We have to move quickly to take advantage of the opportunity that exists in metabolic health, while also returning the business to profitability. This speed imperative is reflected in the launch of a series of new initiatives that we will share more about on this call, but also in setting and maintaining a sustainable pace to our work and finding ways to do more with less.

Simplicity is part of the narrative that underpins our business model and the ease with which we empower coaches to build their businesses. The less complexity our coaches face, the more they can focus on what actually grows their businesses. We have to eliminate what doesn't serve our coaches and clients and optimize the things that do. Scale matters because everything we are building is designed to compound. Each new coach and client fuels our flywheel, while stewardship underlines our commitment to building a business that is consistently profitable and that delivers for years to come.

A key source of fuel for our flywheel is our new consumer brand, Trilivy, which succeeds OPTAVIA as our primary consumer brand. For years, the OPTAVIA brand was known primarily for one outcome, weight loss, which was just a single element of its effectiveness in helping people live a healthier lifestyle. Trilivy reflects the holistic health benefits our system is intended to deliver, a metabolic reset that helps the body work better over time, through three distinct phases: Reset, Refine, and Renew. Our science supports clients from end to end in a clear and compelling way that better aligns the brand with the daily realities of our coaches and clients, today and into the future.

We believe the opportunity is large. More than 90% of U.S. adults and 1.5 billion adults worldwide are metabolically unhealthy. Our study of more than 1,000 adults found nearly 94% are concerned about at least one aspect of their metabolic health. 85% believe metabolic dysfunction can be reversed, and 84% see it as central to overall well-being, but 80% say they do not really understand what metabolic health means. So, there is high public concern, a belief that change is possible, but low understanding of how to do that. Our science-backed, coach-guided system closes that understanding gap. Attention on body composition, lean mass, and muscle preservation has never been higher, as GLP-1 adoption and awareness continues to grow. Our comprehensive metabolic health system offers holistic lifestyle change and behavioral modification through the coaching and structured nutrition that is central to all of our plans.

We continue to engage the GLP-1 market and beyond, supporting people throughout their health journey, whether they're using medication, coming off it, or pursuing metabolic health through non-medication pathways. Our coach-led program builds on more than 45 years of clinical and scientific heritage and is built around metabolic synchronization, our proprietary science that reverses metabolic dysfunction. Our clinically proven plans activate targeted fat burn while preserving lean mass. Our most popular plan reduces visceral fat by 14% while retaining 98% of lean mass over 16 weeks. And in a clinical study, clients working with a coach lost up to 10x more weight and 17x more fat than those trying on their own. That is the structural advantage at the heart of our model, and it sets us apart in a crowded market.

In July, we launched the Medifast Metabolic Health Institute with a mission to advance metabolic health through rigorous research and credible evidence-based education. Led by recognized experts, including a dedicated scientific advisory board, and backed by teams with more than 390 years of collective professional experience, the Institute organizes our work across research, product development, scientific communications, and education. It serves a clear commercial purpose: to strengthen the evidence base behind our programs, continue to substantiate an expanding set of health claims, and establish Medifast as a trusted authority in a field that most of the market is only beginning to understand. We expect that this is how we turn our scientific heritage into a durable, competitive advantage.

We continue to build on our clinically proven science, utilizing our MetaVantage Technology platform with the upcoming launch of our new Reset Fuelings. Each Fueling, like those in our previous Fuelings line, is nutrient-dense and pre-portioned, with high-quality protein, fiber, probiotics, and more than two dozen vitamins and minerals. Added to the new product line are three key ingredients intended to make our products even more effective. This proprietary MetaVantage Technology Reset formula is designed to unlock key metabolic pathways to help support normal fat metabolism, healthy insulin function, and reduced waist circumference.

The new Fuelings anchor our clinically proven Reset 5 and 1 Plan, which activates a targeted fat burn to improve body composition, reducing visceral fat while retaining lean mass. This is our first product line designed to fully utilize our MetaVantage Technology reset formula, and it strengthens our overall market differentiation.

We ran a pilot this spring with certain employees, coaches, and clients, and the feedback was overwhelmingly positive. We look forward to putting these products into the hands of all clients and coaches later this month. In the field, engagement is high, and that's showing in the metrics. Although the number of coaches continues to decline, active earning coach productivity was positive for the third straight quarter, with year-over-year productivity up 41% and sequentially up 20% versus our first quarter. Revenue per active earning coach is now the highest it has been since the second quarter of 2022, and we expect the trend to continue through 2026.

On August 1st, we launched an enhanced compensation plan that significantly sharpens our focus on developing and duplicating Executive Directors. As high-producing coaches, Executive Directors are the single greatest driver of sustainable growth for our business. The design of our new compensation plan was heavily informed by the success of our EDGE program, which confirmed our belief that focusing our field on building Executive Directors empowers stronger leadership development and healthier field performance. The momentum we are seeing today reflects those EDGE results, with the percentage of active earning coaches at the Executive Director rank or above continuing to climb, remaining over our 10% benchmark for a healthy, scalable field organization. This is a big area of focus for us as we move forward, and we believe our enhanced compensation plan builds on this proven foundation and will further accelerate growth over time.

Our client referral program continues to exceed expectations, which is important as we launch the new product line and seek to capitalize on the enthusiasm and energy of the coaches as they lean into the new metabolic health narrative with clients. The renewed energy and excitement from the coach base was on display at our sold-out coach convention in July and was a clear indicator of the strength of coach engagement right now. We used the opportunity to focus coach attention on key initiatives, including Trilivy's new products, the simplified compensation plan, and our new coach-developed Trilivy Coach Hub training platform.

Simplifying the fundamentals of our products and programs, but also the way we talk about them, is a critical component of our collective commitment to bringing the company back to profitability and improving the scalability of our business. The energy at the conference was remarkable, and it's encouraging to see a new generation of coaches engaging with the new brand and the enhanced approach to metabolic health as we seek to Reset, Refine, and Renew lives.

Before I turn it over to Jim for a detailed look at the financials, I want to touch on a few key data points. We met expectations for the quarter on both revenue and earnings. Second quarter revenue was $76 million, in line with the guidance we provided in May. The results reflect higher coach productivity and improved client retention trends, and is consistent with a business whose operating indicators are starting to turn more positive. Our balance sheet remains a source of strength. We ended the quarter with more than $169 million in cash and investments and no debt. Our enterprise value today sits below the value of our cash and investments. The restructuring actions of the past two years reduced our cost base significantly, while preserving the capabilities we need to grow.

During Q2, we launched our Catalyst program with the majority of the execution expected to take place in Q3. The Catalyst program is designed to drive additional cost savings through facility rationalization, AI-related efficiencies, and other means, all while being certain we do not negatively impact our ability to grow. By intensifying our focus on improving profitability, we believe we will be in a stronger financial position to execute our 10-year growth strategy successfully. Our near-term focus is straightforward. We aim to return to profitability by the fourth quarter of 2026. We are executing on both sides of the equation, enhancing initiatives to grow revenue and eliminating cost across the business, and we believe we are on track to deliver it.

All of this comes back to my earlier comments about running this organization on the key tenets of speed, simplicity, scale, and stewardship. We are moving fast without overreaching, simplifying how our coaches build their businesses, and building a model designed to strengthen as the field grows. We have a clear long-term plan built around helping clients achieve optimal metabolic health. It is backed by breakthrough science and delivered through a coach-led model that we believe is a real structural advantage. We are already seeing progress in key areas of our business ahead of the impact of the new brand, products, and training. We have the science, the brand, the products, and the coaches to compete and win in metabolic health, and we have the financial strength to create a platform for growth. There is more to be done, but we have entered the second half of the year with a clear focus on fulfilling both our short- and long-term business objectives.

With that, I'll hand over to Jim to run through the financials.

Thank you, Nick. Good afternoon, everyone. Second quarter 2026 revenue was within our guidance range, and second quarter EPS exceeded our guidance range, supported by a third consecutive quarter of year-over-year coach productivity growth. Revenue for the second quarter was $76.4 million, a decrease of 27.6% versus the year earlier period, primarily due to a decrease in the number of active earning coaches. We ended the quarter with approximately 11,700 active earning coaches, a decrease of 48.7% from the second quarter of 2025. The company continues to see an impact from the rapid adoption of GLP-1 medication across the traditional weight loss category, which is contributing to this decline. In response, we continued our work on building a new coach leadership structure, which includes deprioritizing less productive coaches and developing a network of the most productive Executive Directors organizations. This work resulted in average revenue per active earning coach for the second quarter of $6,529, a year-over-year increase of 41.0%. We now have a clear trend of increasing coach productivity both year-over-year and sequentially.

We continue to believe that increases in revenue per active earning coach are an early indicator for future coach growth, which we believe will in turn lead to revenue growth. Gross profit for Q2 2026 decreased 30.3% year-over-year to $53.4 million, driven by lower sales volumes. Gross profit margin for the current quarter was 69.9% compared to 72.6% for the second quarter of 2025, primarily driven by the loss of leverage on fixed costs. SG&A expense was down 25.7% year-over-year to $57.7 million, primarily due to a $12.6 million decrease in coach compensation on lower volume and fewer active earning coaches, a $2.3 million decrease in employee salary and benefit expenses, and a $2 million decrease in company-led marketing costs.

SG&A as a percentage of revenue increased 200 basis points, primarily due to approximately 290 basis points associated to loss of leverage on fixed costs and 60 basis points associated with the launch of the company's new Trilivy reset product line, partially offset by a 190-basis-point reduction related to company-led marketing costs. As Nick mentioned earlier, we launched our Catalyst program during Q2, and we'll have more to share about these cost savings and streamlining initiatives as they ramp up in Q3. We continue to include in our guidance the belief that improvements to get back to profitability will start in Q4 2026, and the Catalyst program will be a large part of how we accomplish that objective.

Loss from operations was $4.3 million in the second quarter of 2026, an increase in losses of $3.3 million versus the year earlier period, as the decline in gross profit was largely offset by lower SG&A. As a percentage of revenue, loss from operations was 5.7% in the second quarter, a 470 basis points change from 1.0% in the year-earlier comparable period. Other income decreased $2.6 million year-over-year to $1.3 million, primarily due to gains on our investment in LifeMD common stock in the year-earlier period. As a reminder, we sold our common stock investment in LifeMD during the second quarter of 2025. The income tax expense for the period was $0.1 million, an effective rate of negative 3.6%, as compared to $0.4 million for the second quarter of 2025, an effective rate of 13.7%.

Due to the existence of a full valuation allowance against its deferred tax assets recorded as of December 31, 2025, the company calculated income tax expense for the current period based on actual results for the quarter. The decrease in the effective tax rate was primarily driven by the increased loss incurred in the June 30, 2026 period and the valuation allowance on the net deferred tax assets. Net loss in the second quarter of 2026 was $3.1 million, or $0.28 per diluted share, compared to a net income of $2.5 million, or $0.22 per share, in the year earlier period.

With respect to our balance sheet, we ended the year with $169.8 million in cash, cash equivalents, and investments, and no debt as of June 30, 2026. Additionally, our working capital, defined as current assets less current liabilities, was $160.5 million as of December 31, 2025.

Now I'll turn to guidance. We are expecting third quarter revenue to range from $60 million to $80 million and loss per share for the quarter to range from $0.15 to $0.65. This excludes any one-time costs associated with the execution of our Catalyst initiatives. While we expect to continue to see the active earning coach count to decline in the short term, we expect to see continued coach productivity growth during the quarter, up both year-over-year and sequentially.

For the full year 2026, we expect revenue to range from $270 million to $300 million, and loss per share between $0.25 and $1.75. Also, we continue to include in our guidance the belief that improvements to get back to profitability will start in Q4 2026, following the launch of our new product line, and we will be targeting improvements in earnings to continue into 2027 and beyond. Finally, we believe that our working capital will be more than $145 million at December 31, 2026.

With that, let me turn the call back to the operator for questions.

[Operator Instructions] Our first question comes from Jim Salera with Stephens Inc.

We're going to start out with some questions around the Catalyst program. I think investors will be encouraged to hear visibility towards profitability in 4Q of '26. We'd love some more detail around, I guess, the initial implementation costs of the Catalyst program, the expected savings, and maybe kind of the cadence of when we should start to see the costs flow through the P&L versus the realization of the savings.

Yes, so Jim, we were very intentional in our prepared remarks to say that there's going to be more to come on the Catalyst program and its savings. What we can say now is we believe there's millions of savings, millions of dollars of savings, but we're not able to quantify it because we're actually working through what we plan to reduce. The focus of Catalyst is to take and simplify the business, but not take costs out that will impact top-line revenues. So, we're still continuing to do certain investments within the top line that we believe will help that. And we're continuing to focus on Executive Directors, but we're not able to give the exact quantifications at this point. We are going to be doing that in our Q3 earnings call.

Okay. If we think about the path to profitability or return to profitability in 4Q, is the Catalyst program the only lever there, or are there some other incremental contributors, whether it be top-line recovery, the new product launch, I don't know if there's any sort of margin change there, but anything that you could help give us kind of the building blocks for that 4Q.

Yes, I mean, we kept our guidance on the top line the same versus last quarter. So, you're seeing that the last three quarters, so Q4 of 2025, was approximately $75 million in revenue. Q1 and Q2 was also approximately $75 million in revenue. And we're targeting anywhere in the range of the guidance range that we gave of $60 million to $80 this upcoming quarter. And when you do the math at the midpoint, say we get to $70 million in revenue in Q3 at the midpoint, we'll have to get close to that number again in Q4 to be at the midpoint of the range. So, that gives you a feel of the top line, and we didn't change the top line at all. And we're feeling more and more confident in that top line. The EPS range that we're providing has actually gotten better. So, when you look at the full year range of what we provided last quarter versus this quarter, even though we are excluding certain one-time charges, which we'll call out in our Q3 earnings call what those were, Q4, when you do the math, will actually, you'll see how it gets better.

Okay. Maybe one more for me. With the launch of the revamped product offering in Trilivy, can you just walk us through coach receptivity to that, how the transition of moving people over from the old OPTAVIA system to the new system is going? And any hiccups or bumps we should think about there? And then I guess once we're kind of fully switched over, maybe some of the incremental opportunities that provides versus the old platform?

Thanks, Jim. I'll take the first part of the question, which is around the receptivity across the field. And then with respect to the specifics of the rollout, margin, anything of that nature, I'll turn it over to our Jim to go over those. Perspective, we saw a tremendous amount of positive reception to the change notably around our ability to develop a metabolic health platform, which goes beyond what we've traditionally been known for inside of the OPTAVIA brand as weight loss. So, number one, an expanded opportunity rooted in metabolic health. Two, we launched a series of initiatives in addition to the new brand. And what we're seeing so far with respect to the coach pre-launch of new Trilivy Fuelings has been very, very positive. We've seen a lot of activity in that space so far.

So, from the sold-out event at our convention a few weeks ago to the uptake of the coach pre-launch, we're seeing that as a good signal of receptivity of the change. We've seen no major hiccups with respect to that change in the evolution of the brand. Instead, we've seen a lot of positivity from our field with respect to the renewed opportunity inside of metabolic health. We do have a plan to roll out those Fuelings across the next quarters. And so, I'll have Jim comment on what that's looking like in addition to any sort of improvement on the margin side.

Yes, I mean, so overall, speaking to 2026, stabilization of our top line will help our margins and then with the impact of what we did in past quarters and moving into Catalyst, that should help with margins. So as we move from a loss in Q2, and we move into focusing on Q4, we do expect better overall margins to our business. And then think about 2027, so we are saying that we're focusing on profitability in 2027 also. And when you think about the last several quarters, what we've talked about, the majority of our margin loss has been due to the loss of leverage of the decline. And we -- as the business stabilizes into 2027 and beyond and starts to grow, that loss of leverage actually starts to become a positive.

So, as we mentioned in our prepared remarks, this increase in productivity per coach in our past history that has led to coach growth, which then has led to revenue growth, so we are expecting that to reoccur. Obviously we're in a different world with GLP-1 medications, but there's nothing, at least at this point, telling us anything differently that we should expect at some point that coach growth will happen and we'll start picking up the leverage points of our fixed cost as the business grows in the out periods.

We have reached the end of our question and answer session. I'd now like to turn the floor back over to Nick Johnson for closing comments.

Thank you everyone for joining us today and for your continued interest in Medifast. As we move through the second half of 2026, our focus remains steadfast on executing our 3.0 strategy and driving the successful rollout of the Trilivy brand. We are energized by the positive momentum in coach productivity and engagement, and are confident that the foundational work we are doing today centering on speed, simplicity, scale, and stewardship is setting the stage for a return to profitability in the fourth quarter. We look forward to updating you on our progress during our next call. Have a great afternoon.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Ladies and gentlemen, greetings, and welcome to the Medifast First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Medifast VP, Investor Relations, Steven Zenker. Please go ahead.

Good afternoon, and welcome to Medifast's First Quarter 2026 Earnings Conference Call.

On the call with me today are Dan Chard, Chairman and Chief Executive Officer; Nick Johnson, President; and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the first quarter ended March 31, 2026, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.com. This call is being webcast, and a replay will also be available on the company's website.

Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them.

Actual results could differ materially from those projected in any forward-looking statements. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Now I would like to turn the call over to Medifast's Chairman and Chief Executive Officer, Dan Chard.

Thanks, Steve, and good afternoon, everyone. We appreciate you joining us today as we share an update on the continued execution of our strategy to transition to serving the metabolic health market. When we spoke to you last quarter, we described the growing focus on metabolic health as a defining shift in our industry and the significant opportunity it presents for Medifast. We saw early signs that our strategy was beginning to translate into measurable progress and the potential to build on that as we moved into 2026.

As we speak today, I'm pleased to report that those early indicators have continued to strengthen. We are seeing further evidence that our business is at the beginning of a period of stabilization and that we are making meaningful progress in delivering tangible traction in the market. We'll go into the numbers in more detail in a moment. But as you'll have no doubt read in the release, although the number of active earning coaches continues to decline, the first quarter saw our first sequential quarterly revenue growth in 3 years, a second consecutive quarter of year-over-year coach productivity gains, strong coach leadership advancement and improved performance in the percentage of coaches acquiring new clients. All of this is indicative of high field engagement and provides encouraging signs that have historically been signals of future growth.

Our sector, including Medifast, has undergone a significant change due to the continuing high rate of adoption of GLP-1 medications, which has disrupted the traditional weight loss market. We have responded by fundamentally repositioning the company, not by abandoning weight loss, but by reframing it to address the metabolic health crisis that is impacting the vast majority of Americans today. That work is now largely complete, and our focus has shifted decisively from transformation to execution.

Nick is going to walk you through the substance of what we're seeing across the business, the science that's driving our differentiation, the evidence from the field that our strategy is working, the tools and programs that are supporting our coach community and the continued work we are doing to position the company for sustainable growth ahead.

Over to you, Nick.

Thank you, Dan, and good afternoon, everyone. As Dan mentioned, we're seeing exciting progress right now, and that's indicative of the focused work of both our coaches and our corporate team members. At the core of this work is our foundational 3.0 strategy, which represents the biggest shift in this company's approach since the introduction of OPTAVIA in 2017.

We've strengthened our clinical and scientific foundation and enhanced our ability to link our underlying science to measurable health outcomes over time. And we have meaningfully realigned our cost structure to the realities of the market, which is anticipated to generate more than $30 million in future savings, helping us work towards retaining profitability even as we tactically invest in long-term growth. We believe the market opportunity is massive. More than 90% of U.S. adults are metabolically unhealthy or in other words, are affected by metabolic dysfunction.

Our online survey conducted with KRC research found that nearly 94% of Americans are concerned about at least one aspect of their metabolic health. 85% believe metabolic dysfunction can be reversed and 84% view metabolic health as central to overall well-being. Yet despite that concern, 80% of Americans report limited understanding of what it truly means to be metabolically healthy. The combination of concern, belief in reversibility and low understanding of how to achieve change represents a huge opportunity that our science-backed coach-guided system is designed to address. At the center of our approach is metabolic synchronization, our breakthrough science that reverses metabolic dysfunction.

Our clinically proven plans create an important shift in the body's metabolism and activate strong and targeted fat burn, leading to improved body composition. Our most popular plan does this through 3 critical pillars: burning bad visceral fat with a 14% reduction in visceral fat demonstrated in just 16 weeks, preserving lean mass with 98% of lean mass retained over that same period and protecting healthy muscle to help restore the body's natural metabolic function. These aren't just weight loss outcomes. They represent body composition changes that support broader upstream metabolic health benefits, helping differentiate us in a crowded market.

Importantly, our clinical research demonstrates that these outcomes are materially enhanced by working with a coach, thanks to our highly personalized and customized approach. Clients on our most popular plan who work with a coach achieve better outcomes, including up to 10x greater weight loss and 17x greater fat loss than those who attempt to do it on their own. We are continuing to build on this scientific foundation and are planning to launch a new comprehensive metabolic system at our next coach convention in July, featuring products that incorporate clinically studied ingredients designed to further advance metabolic health. This represents our first effort to fully leverage our metabolic synchronization science.

We have developed a proprietary ingredient technology for the new product line, which will build on the success of previous products while reinforcing our commitment to improving metabolic health. We recently initiated a pilot with a small group of clients and coaches utilizing the new product line, and I am pleased to say early feedback has been highly encouraging. As a result, we plan to roll out the new system to all our clients and coaches later in the year.

Simplifying how we support clients across every phase of their metabolic health journey is an essential component of our efforts, and we'll be making a number of key announcements in this space at our upcoming coach convention in July. Our new metabolic system is built around 3 phases: reset, refine and renew, giving coaches a clear road map to guide clients from a targeted metabolic reset toward optimal metabolic health. Our highly personalized system gives clients the ability to jump start their progress with both foundational and targeted nutrition, a coach and the introduction of new habits, which are then reinforced and mastered in subsequent phases to support long-term health span and vitality.

Our program is eligible for HSA and FSA reimbursement on select insurance plans, which reflects the importance of metabolic health in today's health care landscape and makes our solution more accessible and affordable for a wider range of clients. For many, weight loss is the fundamental starting point for improving metabolic health, which in turn contributes to meaningful health outcomes in areas such as cardiovascular health, joint health, sleep quality, energy levels, liver health and mental well-being. These metabolic improvements can also support better outcomes in type 2 diabetes and insulin sensitivity.

Empowering our coaches to tell their own stories and those of their clients who have had success losing weight on our program is a key aspect of our value proposition. As clients experience improvements in metabolic functions, these stories become powerful proof points for our metabolic synchronization science. They give coaches a sharper, more compelling story to tell, and we're beginning to see the impact of that in the core metrics that we closely measure.

Historically, coach productivity has been a leading indicator of future growth. The first quarter marked our second consecutive quarter of year-over-year coach productivity gains with an increase of 19% year-over-year and up 16% on a sequential basis. This is markedly higher than last quarter's 6% gain with coach productivity at its highest level in many years. We expect the positive trend to continue throughout the year and a sustained positive trajectory gives us confidence in the direction of the business.

Our EDGE program continues to strengthen the coach leadership foundation of our field. We are seeing consistent year-over-year improvements in the percentage of active earning coaches reaching the Executive Director rank, a historically significant indicator of success. This metric has recently hit levels previously linked to periods of robust growth. Retention at this level remains encouraging.

Moving forward, we aim to maintain and build upon this momentum as the duplication of this core leadership rank is the primary driver of coach business growth. Field engagement continues to build across the board with a focused effort on establishing a repeatable cadence of coach-led product and business opportunity meetings targeting prospective clients and coaches. We've seen significant acceleration in these field meetings with activity levels remaining well above the year ago period.

We also recently completed our coach incentive trip and Go Global event, both of which were well attended and reinforced the energy and excitement around our immediate opportunity. Coaches are leaning in right now with confidence and conviction. We're also seeing our referral engine gain strength. March closed with a record high percentage of new clients coming from referrals, outperforming expectations. Coaches who participate in our referral program are achieving 2x higher client acquisition rates compared to nonparticipating coaches, which tells us that when coaches lean into referral activity, the initiative works. Combined with improving sponsoring activity and a younger tenured coach mix, these dynamics can create a flywheel of momentum that we have seen in prior growth cycles.

With that, I'll turn it back to Dan.

Thanks, Nick. It's exciting to see this energy in the field and the delivery against the progress we have previously said that we expected to see in 2026. Before I hand it over to Jim, I want to reinforce a few points. We remain focused on executing against a clearly defined long-term strategic plan centered on offering our clients optimal metabolic health. That plan is backed by breakthrough science and delivered through a coach-led model that provides a genuine structural advantage in the market.

We're seeing progress already, and that's ahead of a number of key market launch initiatives that will kick off later in the year. We are encouraged by the metrics showing increased coach productivity and by the energy and enthusiasm we see from the coach base, which is showing up in the percent of coaches reaching executive director and above. We believe these are early indicators of an expected turn in the business, and we expect these and other metrics to improve as we move through the year and into next year. And we are managing this business with financial discipline. Our balance sheet remains strong with substantial cash and investments of approximately $169 million, marginally higher than in Q4 and no debt.

This positions us well as the business stabilizes and we reestablish revenue growth. We continue to review our cost base for further opportunities that do not compromise our ability to drive growth. We are reconfirming our full year 2026 guidance today. As we communicated last quarter, we believe improvements toward reattaining profitability will begin in the fourth quarter of 2026, and we are targeting those improvements to continue into 2027 and beyond.

Now I'll turn it over to Jim to review the financials and our outlook.

Thank you, Dan. Good afternoon, everyone. First quarter 2026 results for both revenue and EPS were within our guidance ranges, supported by a second consecutive quarter of year-over-year coach productivity growth. Revenue for the first quarter was $76.0 million, a decrease of 34.3% versus the year earlier period, primarily due to a decrease in the number of active earning coaches. We ended the quarter with approximately 14,000 active earning coaches, a decrease of 44.9% from the first quarter of 2025.

This decline was driven in part by the rapid adoption of GLP-1 medications, which continues to impact the traditional weight loss category. It's also reflective of our continued work to build a new coach leadership structure comprised of the most productive executive director organizations. This work resulted in average revenue per active earning coach for the first quarter of $5,432, a year-over-year increase of 19.2%. This growth reaffirms the green shoot we saw during Q4 2025, with coach productivity continuing to increase both year-over-year and sequentially.

The 19% year-over-year gain is the largest increase for any quarter in 5 years and the sequential quarterly increase of 16% is the highest in 8 years. We continue to believe that increases in revenue per active earning coach are an early indicator for future coach growth, which we believe will, in turn, lead to revenue growth. As a reminder, revenue growth has historically lagged coach productivity by several quarters and productivity gains need to continue in order for revenue growth to occur.

Gross profit for Q1 2026 decreased 38.6% year-over-year to $51.8 million, driven by lower sales volumes. Gross profit margin for the current quarter was 68.1% compared to 72.8% for the first quarter of 2025, primarily driven by the loss of leverage on fixed costs. SG&A expense was down 35.6% year-over-year to $55.1 million, primarily due to a $16.2 million decrease in coach compensation on lower volume, a $5.6 million decrease in company-led marketing-related expenses, a onetime $2.2 million gain on the sale of our Maryland Distribution Center, and a $2 million decrease in employee compensation, resulting from the realignment of the employee base to lower revenue.

SG&A as a percentage of revenue decreased 150 basis points, primarily due to approximately 470 basis points of decreased company-led marketing-related expenses and 240 basis points of one-time gain on the sale of our Maryland Distribution Center building and land, partially offset by 620 basis points of loss of leverage on fixed costs due to lower sales volume.

Loss from operations was $3.3 million in the first quarter of 2026, an increase in losses of $2 million versus the year earlier period as the decline in gross profit was largely offset by lower SG&A. As a percentage of revenue, loss from operations was 4.3% in the first quarter, 320 basis points below the year earlier level. Other income decreased 24.3% year-over-year to $1.4 million, primarily due to unrealized gains on our investment in LifeMD common stock in the year earlier period.

As a reminder, we sold our common stock investment in LifeMD during the second quarter of 2025. Income tax expense for the period was $0.2 million, an effective rate of negative 9.3% as compared to $1.3 million for the first quarter of 2025, an effective rate of 246.8%. Due to the existence of a full valuation allowance against its deferred tax assets recorded as of December 31, 2025, the company calculated income tax expense for the current period based on actual results for the quarter.

As a result, the company's income tax provision for the quarter reflects discrete items, primarily state income taxes. The decrease in the effective tax rate was primarily driven by the increased loss incurred in the March 31, 2026 period, and the valuation allowance on the net deferred tax assets. Net loss in the first quarter of 2026 was $2.1 million or $0.19 per share compared to a net loss of $0.8 million or $0.07 per diluted share in the year earlier period.

With respect to our balance sheet, we ended the year with $168.9 million in cash, cash equivalents and investments and no debt as of March 31, 2026. Additionally, our working capital, defined as current assets less current liabilities, was $160.4 million as of March 31, 2026.

Now I'll turn to guidance. We are expecting second quarter revenue to range from $60 million to $80 million and loss per share for the quarter to range from $0.50 to $1. We expect to see continued coach productivity growth during the quarter, up both year-over-year and sequentially. For the full year 2026, we expect revenue to range from $270 million to $300 million and loss per share between $1.55 and $2.75.

Also included in our guidance is that we believe improvements to get back to profitability will start in Q4 2026, following the launch of our new product line, and we will be targeting improvements in earnings to continue into 2027 and beyond. Finally, we believe that our working capital will be more than $140 million at December 31, 2026.

With that, let me turn the call back to the operator for questions.

[Operator Instructions] The first question comes from the line of Jim Salera from Stephens Inc.

I wanted to start off with the $30 million in cost savings. I know you guys have made a lot of progress over the last several years as the business has changed in both the structure of the company and some of the product lineup. Can you just give us a sense for where that's going to come from COGS and SG&A? And then kind of maybe a steady state, how we should think about gross margin once we start to pivot back towards earnings growth in 4Q and moving forward?

Jim, this is Dan. I'm going to have Jim answer that question. But as we move into the more technical aspect of the financial questions that come in, I just want to just highlight what you've heard in our prepared remarks is reflective not only of our progress in the financial cost structure, but also, we're very encouraged by the trajectory of some of these key underlying metrics and not just the metrics, but the consistency, particularly around coach productivity, second consecutive quarter and now that's actually the seventh month where we've seen that improvement.

And we see that also translating into top line improvement. This is the first time, as you know, in quite some time that we've seen sequential revenue growth, and that's been driven by improved coach effectiveness and acquiring new clients, and that's been one of the key challenges we've had in a GLP-1 environment, and we're starting to see our coaches break through. And I think the other thing that we just want everyone to understand from an investment standpoint is the transition model where weight management was a primary benefit to one where the optimal metabolic health is a primary benefit with weight management as a key component is beginning to take hold.

And our focus, first, certainly, we have more work to do, but our focus remains on this disciplined execution, particularly around the critical initiatives in the back half of the year as we continue to move in that direction. And one of them is what you're referencing, which is the changes in the cost structure to help us get back on that path to profitability.

I'll let Jim comment specifically on that question around the cost improvement.

Yes. So Jim, thanks for the question. So when you think of the -- our prepared remarks when we talk about the path to profitability, and that's starting in Q4, we believe we're going to start seeing improvement in the full period in gross margins, and you'll see that -- I'm sorry, in the second half of the year, but more towards the last quarter. And then you'll start seeing the same thing within SG&A.

So we took action last year in December. So it's starting to come through in certain budget line items as we look at our full P&L to make certain that we can get back to profitability by starting in Q4 2026. But then go into 2027. That's what we're focusing on. When you think of our margins, you mentioned gross margin or the breakout of it. I can't really give you specific guidance on that. But I would say that we are expecting in the back half of this year for our gross margin to get better, and within the SG&A line items, we're expecting us to be able to start overcoming some of the loss on leverage as we go into Q4. So hopefully, that helps.

Yes. That's great. Shifting more to Dan's point on the coach productivity improvement. Are you able to share any details with some of the new or newest members that have come into the program given this greater focus on metabolic health, do you see their tenure with the program being more consistent? Being longer over the period while they're on the program relative to people in the past who may have been kind of yo-yo on and off? Do you have any kind of early results that you could share on that?

Yes. Nick is here, and I think he's going to have the closest perspective with coaches, and I think he'll be able to give you the answer to you.

Go ahead, Nick.

Thanks, Jim, for the question. So the good thing about the new coach draft classes is that there is no pre-GLP-1 world for them. They are very steeped in what's going on in the marketplace. So they only know this GLP-1 world that we live in. And what we see and the reason why that tenure mix is important because newer coaches tend to drive a lot of productivity. With respect to the client metrics, we did mention this in the prepared remarks, a note around the referral program. And we do see a lot of encouraging activity coming out of that referral program.

People -- coaches who are engaged in that program are experiencing higher acquisition rates. And I can say that the other metrics that support a client's journey are seeing improvement. So we're encouraged by what we're seeing so far in the client referral program.

Historically, you've talked about that coach productivity improvement as being the first step to kind of indicate a new growth cycle. And then subsequent to that, you'll start to see the actual number of coaches return to growth. As we size up the back half of the year, do you have any sense for if it's possible that maybe in conjunction with some of the improving profitability in 4Q, we'd see the absolute number of coaches start to improve?

So I'll start off with that one, Jim, and then I'll pass it over to our Jim to talk about kind of the back half of the year. So productivity tends to be that leading indicator in our business. The growth of the business comes predominantly through 2 metrics. One is growing productivity or volume per coach and then expanding the channel number of coaches who are active and participating in the business. So we do tend to see that sequence of events, right, coach productivity first, leading to the expansion of the channel.

So while we said in the prepared remarks that the continuation of that growing coach productivity is essential for revenue growth is because we tend to basically create those future draft classes of those higher producing coaches in -- coming from those client draft classes. So we are anticipating good things coming from the productivity numbers. It tends to be a leading indicator, and then we can expect the channel to expand at least that's what historically has happened.

And then, Jim, if you want to do any -- make any comments on the back half?

Yes. So we're not going to give exact guidance on when we anticipate Coach growth to come back. What we can tell you, Jim, is when you think about our financials, Q4, we were based -- Q4 of 2025, we were basically at $75 million of revenue. Q1, we were at $76 million in revenue. So it's sequential growth even though small, but we haven't seen that in 3 years, any sequential growth. And then if you look at our guidance, -- if you look at the midpoint, it's at $70 million of revenue. And when you think about that, that's 3 quarters of relatively flatness to stabilization.

And with the coach productivity, the increase of 19% and sequentially growing at 16% for the quarter. That gives us comfort that, that coach growth will be coming. We're not exactly going to predict exactly which quarter. But based on history, that's what we're basing it on. We believe that, that's going to happen, and that's going to happen in a short period of time.

We take the next question from the line of Doug Lane from Water Tower Research.

The 19% growth in coach productivity is impressive. And I just wanted to drill down on what's really driving that? Are the coaches selling more products per customer or they have more customers per coach? I mean what's really driving the increase in productivity of that magnitude?

Yes. Great question. It's not -- to answer the question specifically, it's not being driven by spikes in average order sizes. So we are seeing average order sizes remain more or less consistent with historical averages. So coach productivity then comes down to an increasing number of clients per coach. That's driving that productivity and also their length of stay.

So that is an important inflection point. And so hopefully, if that momentum keeps building, that's what you're looking for to drive the return to coach growth. And of course, the timing of that is unpredictable, I guess, is what your message has been on this call, which makes sense. One thing I wanted to ask you about on this transition to the metabolic health is messaging. I mean weight loss is easy. The scale goes down, the clothes fit better.

How do you message metabolic health in a GLP-1 environment?

Yes. I think it's critical that we call out that distinction because to your point, the generic weight loss is pretty much commoditized at this point with GLP-1s. And even before that, it's the quality of the weight that's being lost that is a differentiation for our offer. And so where our value proposition comes in is we're not focused just on the number on the scale. There are so many other numbers and indicators that are important.

When we talk about the science of metabolic synchronization, we specifically address the quality of the weight loss that one is experiencing, number one, a 14% reduction in bad visceral fat in 16 weeks. That's bad fat in the wrong places. So we're being specific in terms of the type of weight that we're losing. We're wanting to lose the bad fat in the wrong places. We're also wanting to preserve lean mass. So 98% preservation of lean mass in 16 weeks is critical and protecting lean muscle.

We believe that the focus on metabolic health and the focus on the quality of the weight being lost will be a defining point in the future because to your point, losing weight is easy. But once you get specific in terms of the quality of the weight that you're losing, you really want to zoom in and focus on that because if you're losing too much lean muscle in particular, you would say that the quality of that weight loss was not there, and it leads to other problems down the road metabolically.

Well, we've read a lot about the GLP-1 weight loss being unhealthy for us. Has there been any additional science towards that end? It's such a new phenomenon, and it's so widespread. I just wondered if that science is still evolving on the unhealthiness of the rapid weight loss with the antagonists.

Well, I think that the GLP-1 only solution, a pharmacological approach that suppresses appetite is one dimensional in terms of the problem that is very, very complex to resolve. We believe that what we see going forward is that there needs to be a comprehensive solution to installing eventually a healthy lifestyle. That comprehensive approach is what we're talking about with the evolution of our program. We do view our program as a comprehensive metabolic health system that is comprised of 3 distinct phases: one, reset; two, refine; and three, renew.

The goal of the reset phase, which we're going to be talking more about at our convention in October comes down to resetting one's metabolic set point. Reduction of bad visceral fat, improving body composition, focusing on lean mass preservation and protecting healthy muscle that sets someone up for the refined stage, which is all about improving your body composition. So there's a lot of room, and it's a big, big market.

Ladies and gentlemen, as there are no further questions from the participants, I would now hand the conference over to Dan Chard for any closing comments.

Thanks. And before we close, I just want to take a few minutes to share a few final thoughts. As I mentioned on last quarter's call, I informed the Board earlier this year that I plan to step down as Chief Executive Officer effective June 1. I've led this company now for close to 10 years, and it's been one of the great privileges of my career. But as I transition, this isn't the end of my relationship with Medifast. I'm engaged as CEO through the end of May and will continue to serve as Chairman of the Board following the transition.

I'm looking forward to continuing to help this great company as we drive this exciting new path forward in metabolic health. I do want to extend my thanks and my best wishes to all of the Medifast team, but especially to Nick Johnson. Nick has been instrumental in shaping and executing the strategy that we talked about today, and I have every confidence in his ability to lead this company into the next chapter. All of the team at Medifast, past, present and at all levels have been incredible to work with over the years, and I'm grateful for their partnership and expertise.

Finally, thank you to everyone on this call for your time today and for your interest in Medifast during my tenure here. This is a company that's building something meaningful, and I'm excited to see that continue over the months and the years to come.

Thanks, and have a good evening.

Thank you. Ladies and gentlemen, the conference of Medifast has now concluded. Thank you for your participation. You may now disconnect your lines.

Greetings, and welcome to the Medifast Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steven Zenker, Vice President, Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to Medifast's Fourth Quarter 2025 Earnings Conference Call.

On the call with me today are Dan Chard, Chairman and Chief Executive Officer; Nick Johnson, President; and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the fourth quarter ended December 31, 2025, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast's website at www.medifastinc.com. This call is being webcast, and a replay will also be available on the company's website.

Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance, and therefore, undue reliance should not be placed on them.

Actual results could differ materially from those projected in any forward-looking statements. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Now I would like to turn the call over to Medifast's Chairman and Chief Executive Officer, Dan Chard.

Thank you, Steve, and good afternoon, everyone. We appreciate you joining us today as we discuss our fourth quarter and full year 2025 results and as we share an update on the progress we're making building the next chapter of Medifast.

Before I get into performance and strategy, I do want to briefly acknowledge a leadership update we communicated in January. I recently informed the Board that I plan to step down as Chief Executive Officer, effective June 1, 2026. I've led this company for close to 10 years now, and it's no exaggeration to say that it has been one of the great privileges of my career. This decision was made thoughtfully and deliberately as part of a planned transition that I have been talking to the Board about over recent months. I will continue to serve as Chairman following the transition and will be fully engaged as CEO through the end of May as we execute against our priorities and support a smooth intentional handoff.

As part of the transition, the Board appointed Nick Johnson as President of Medifast with the expectation that he will assume the CEO role following my departure. Nick has been a central leader in the work we've done over the past several years, strengthening our coach-led model, helping reposition the company around metabolic health and working in tandem with our independent coaches to build the operational discipline required to sustain change. He has been with us on recent earnings calls, and you'll have the opportunity to hear from him today about the progress we're seeing with the field and how that's translating into early and measurable progress.

What made my decision easier is my absolute conviction in the direction that Medifast is heading, the strength of our leadership team and the path we are on as a metabolic health company. Over the past 2 years, Medifast has been in a period of transformation. We've navigated fundamental disruption in the weight loss industry, driven by rapid adoption of GLP-1 medications and shifting consumer expectations. During the second half of 2025, we made a series of intentional choices to reposition the company, not to abandon weight loss as a concept, but to put it in the right context under the broader umbrella of metabolic health.

At a fundamental level, many of the health challenges people struggle with today stem from poor metabolic health, often referred to as metabolic dysfunction. That dysfunction often shows up downstream as a whole set of symptoms. Weight gain is certainly one of the most visible of those, but it's far from the only health challenge. The problem is if we only focus on the symptoms, we are not fixing what's driving them. Improvement requires restoring metabolic health itself. At the center of our work in this space is a scientific approach we refer to as metabolic synchronization. Rather than just helping people with short-term weight loss, the science behind our clinically supported system works with the body to help reset key metabolic processes that have fallen out of balance over time. That approach allows us to reverse metabolic dysfunction and help create conditions for improvement in body composition, energy and overall health.

To better understand how Americans view metabolic health, we partnered with KRC Research on a national survey that found that nearly 94% of American adults expressed concern about at least one aspect of metabolic health. Importantly, 85% of respondents believe metabolic dysfunction can be reversed and 84% view it as central to overall health and well-being. That combination of widespread concern and belief in reversibility highlights a large underserved market and reinforces our view on why a clinically proven coach-led approach is well positioned to meet it. Clinical results show that our metabolic synchronization approach reverses metabolic dysfunction and can deliver a targeted metabolic reset of key metabolic processes that improves body composition in meaningful ways.

Specifically, during a 16-week clinical study, participants using our 5-in-1 metabolic plan reduced harmful visceral fat by 14% while retaining 98% of lean mass and experienced clinically significant weight loss. These outcomes impact metabolic health going beyond just weight loss. We're actively leveraging our metabolic synchronization science platform to develop a new product line designed to further support reduction of bad visceral fat and improve body composition, metabolic efficiency and overall health. These products will utilize a proprietary formula of clinically studied ingredients and are designed to support metabolic health.

In parallel, we are simplifying how we support clients across every phase of their metabolic health journey. While most clients will begin in a targeted reset phase, the science of metabolic synchronization now provides a clear road map to guide and support them through additional phases that aid in achieving optimal metabolic health. We'll share more as we move through the year, but this innovation is a direct extension of the foundation we've built. Rebuilding our core offer has taken time. But today, we believe that process is largely complete. That does not mean that our work is finished, but we believe the foundational elements we needed to move forward are now in place. We have a clear science-driven strategy that is supported by clinical research. We have strengthened our clinical and scientific foundation, and we've positioned the company to expand our claims over time.

We have revitalized and simplified key parts of our commercial model and leadership systems in the coach-driven field structure. And we have taken disciplined steps to align our cost structure and operations with the realities of the market while preserving the resources we need to invest in growth. So as we enter 2026, we are moving from transformation to execution. And in the fourth quarter, we started to see early evidence that our strategy is impacting key metrics. This includes the emergence of a green shoot in coach productivity, along with bright spots developing across the business. While these early performance metrics are yet to have appreciable impact on our revenue, we believe they are nonetheless early signs of the improving performance of our coaches in support of our efforts to get back to growth and profitability.

This quarter marks the first time since mid-2022 that quarterly coach productivity turned positive on a year-over-year basis, up 6% in the fourth quarter over the prior year. That's a meaningful milestone because productivity performance like this has historically been a leading indicator of broader improvement in client acquisition and coach growth. We are seeing a sharp increase in coach-led product and business opportunity meetings with activity in January showing a significant rise compared to the same period last year. This is a clear sign of the energy and excitement that our coach base is bringing into 2026. We've talked about the importance of coach productivity and the associated positive metrics like these in previous earnings calls and the role that they could play in future growth. Their emergence now is consistent with the idea that the foundational work of the past 2 years is translating into measurable progress against our transformation objectives.

While we continue to expect a decline in the overall active earning coach count through most of the current year, another positive early trend that we expect to see soon is a more favorable mix in coach tenure as a higher proportion of new coaches come in and longer tenured, less productive coaches transition off as part of the coach life cycle. This should create a younger tenured coach base, which is a sweet spot for productivity and the sponsoring of new coaches. We saw this in prior cycles, including in 2016 and 2017, and we are expecting to see some shift in the current year. Importantly, in this current environment, productivity is not being driven by price or business promotions, but by the new positioning of our coach-led program as a metabolic health solution, complemented with new tools and behavior changes inside our coach base as they focus on the new business opportunity around the large and growing metabolic health market.

Nick is now going to share more detail on what we're seeing from coaches and how programs, including Premier+, EDGE and our client referral activity are set up to drive coach productivity and engagement and how the metabolic health story is energizing our coach base in a way we have not seen in some time.

Thank you, Dan, and good afternoon, everyone. I'm grateful for the opportunity to continue working closely with Dan and the Board throughout this transition. I joined the company in 2018, and I've been deeply involved in the work to reposition the company over the last several years. My focus now is on executing this transition to a metabolic health company, particularly in the field where our strategy becomes real. Our coach-led model remains Medifast's greatest strength, and the data reinforces that belief.

By working with a coach, clients are capable of achieving significantly better metabolic health outcomes, losing up to 10x more weight and 17x more fat on our flagship 5 & 1 metabolic health plan compared to those attempting to lose weight on their own. That difference underscores why we continue to invest in the coach experience and why we believe our model provides us with a real structural advantage in a crowded market. In a world where many solutions are increasingly virtual or transactional, our model is built on human connection, accountability and community, and we believe that matters now more than ever.

As Dan referenced, we're seeing early signs of improved productivity, and we're pairing that with targeted actions designed to make productivity sustainable. Premier+ and EDGE are both central to our work here. Premier+ has enabled us to simplify our offer, and we expect it to strengthen client acquisition and retention, making it easier for clients to start our program, understand the value and stay engaged in their metabolic transformation beyond month 1. EDGE is a program that incentivizes the duplication of highly productive coaches by rewarding the behaviors that drive client acquisition, coach sponsoring and leadership development.

In the fourth quarter, we achieved a double-digit percentage of active earning coaches reaching the important coach business leadership rank of Executive Director, the highest percentage since mid-2023. And the retention rate of those coaches hitting that rank for the following 2 months was the highest since 2022. This matters because duplication of this core rank is what ultimately grows their businesses. The more we can find ways to help new coaches reach this important rank, the more we expect we will be able to stabilize then scale the business. In addition, building on that, we're seeing higher engagement and activity levels in the field. As Dan mentioned earlier, coach-led opportunity meetings and training activity have increased significantly across the nation. Our optimal metabolic health story and the science behind it is giving coaches a sharper focus and stronger confidence in delivering meaningful value to their clients.

We've invested in equipping them to share our breakthrough metabolic synchronization science responsibly and consistently through efforts like our annual scientific symposium as well as continuing education for our coaches. All of that is translating into more frequent and effective conversations, better follow-through and a larger investment in in-person events across the country. We're also seeing signals that the word-of-mouth engine is strengthening. We've introduced an expanded referral-oriented activity, and we're seeing indications that a higher share of clients are recommending the program to prospective clients.

There are also indicators that sponsoring is improving. And when you combine that with a younger tenured coach mix, it can create a flywheel of momentum. Historically, when productivity improvement was sustained, we have typically seen active earning coach trends improve within the following 6 to 9 months. Delivering on that is what we are focused on for 2026.

With that, I'll turn it back to Dan.

Thanks, Nick. Before I hand over to Jim, I want to emphasize 2 points. First, we are staying consistent. We are not pivoting our strategy. We are executing on what we've been building, moving upstream to address metabolic dysfunction with a clinically proven system built on science and a coach-led model that differentiates us. Second, we are focused on disciplined execution on retaining profitability. We are deepening our leadership in metabolic health through ongoing research and a new product line being developed with our metabolic science at the center. And both Nick and I will share more at the appropriate time as we move through the year.

We will continue strengthening and simplifying the coach and client experience and we will maintain cost discipline and protect our financial flexibility so we can invest in the areas that matter most. Our balance sheet remains strong, and our operating model is tightly aligned to the market realities we're operating in today. We have more work to do, but we're encouraged by the early indicators we're seeing. And as a result, we're confident in the direction we're headed. Now I'll turn it over to Jim to review the financials and our outlook.

Thank you, Dan. Good afternoon, everyone. Fourth quarter 2025 revenue was within our guidance range with revenue per active earning coach showing year-over-year growth for the first time since Q2 of 2022 and reaching its highest level since Q3 of 2024. Our fourth quarter loss per share was $1.65. The loss per share is impacted by a $12.1 million noncash valuation allowance we recorded against our deferred tax assets in the current quarter, which on a per share basis represented $1.10 of the $1.65 loss.

The loss per share before the noncash deferred tax valuation allowance was $0.55, which was better than the guidance range we provided. Revenue for the fourth quarter was $75.1 million, a decrease of 36.9% versus the year earlier period, primarily driven by a decrease in the number of active earning coaches. We ended the quarter with approximately 16,100 active earning coaches, a decrease of 40.6% from the fourth quarter of 2024. This decline was driven in part by the rapid adoption of GLP-1 medications, which continues to impact the traditional weight loss category. It's also reflective of the work we have been doing to build a new coach leadership structure comprised of the most productive executive director organizations described by Nick.

Accelerating the exit of less productive and less profitable coaches contributed to average revenue per active earning coach for the fourth quarter reaching $4,664, a year-over-year increase of 6.2%. This represents a much anticipated green shoot during the current quarter with coach productivity turning positive both year-over-year and sequentially. As we have discussed previously, we view increases in revenue per active earning coach as an early indicator for future coach growth, which we believe will in turn lead to revenue growth. As a reminder, revenue growth is expected to take several quarters to materialize and productivity per coach needs to sustain in order for revenue growth to occur.

Gross profit for Q4 2025 decreased 40.9% year-over-year to $52.1 million, driven by lower sales volumes. Gross profit margin decreased 470 basis points to 69.4%, primarily driven by the loss of leverage on fixed costs of 420 basis points and a onetime restructuring charge of 40 basis points. SG&A expense for Q4 2025 was down 31.5% year-over-year to $59.9 million, primarily due to an $18.6 million decrease in coach compensation, a $5.8 million decrease in company-led marketing-related expenses and a $4.2 million decrease resulting from the realignment of the employee base to lower revenue levels, partially offset by a $1.9 million increase due to a onetime restructuring charge and a $1.6 million increase in coach event costs.

Q4 2025 SG&A as a percentage of revenue increased 630 basis points from last year, primarily reflecting 370 basis points of loss of leverage on fixed costs, a 300 basis point increase for higher coach event costs and a 250 basis point increase due to a onetime restructuring charge, partially offset by 440 basis points of reduced company-led marketing-related expenses. During Q4 2025, we executed a restructuring across all of our business functions and further scaled back our marketing spend with targeted future savings of over $30 million. These restructured costs, along with other initiatives, are incorporated in our 2026 guidance.

Loss from operations was $7.8 million in the fourth quarter of 2025 compared to income from operations of $0.7 million for the year earlier period, driven by lower gross profit, partially offset by lower SG&A. As a percentage of revenue, loss from operations was 10.4% in the fourth quarter compared to income from operations of 0.6% for the year earlier period. Other income increased 151.1% year-over-year to $1.4 million, primarily due to unrealized losses on our investment in LifeMD common stock in Q4 2024 that did not recur in the fourth quarter of 2025.

Income tax expense was $11.7 million for the fourth quarter, an effective tax rate of negative 183.9% as compared to $0.5 million, an effective tax rate of 37.3% recorded in the prior year's fourth quarter. As I alluded to earlier, we recorded a $12.1 million noncash valuation allowance against our deferred assets in the current quarter, which was equal to our ending deferred tax asset balance. We assess deferred tax assets for realizability on a quarterly basis and the current quarter's analysis warranted the establishment of the valuation allowance. Net loss in the fourth quarter of 2025 was $18.1 million or $1.65 per diluted share compared to net income of $0.8 million or $0.07 per diluted share in the year earlier period. The $12.1 million valuation allowance represents $1.10 of the loss on a per share basis. The loss per share before the noncash deferred tax valuation allowance was $0.55.

With respect to our balance sheet, we ended the year with $167.3 million in cash, cash equivalents and investment securities and no debt. Additionally, our working capital, defined as current assets less current liabilities, was $158.7 million as of December 31, 2025. Now I'll turn to guidance. We are expecting our first quarter revenue to range from $65 million to $80 million and our loss per share for the quarter to range from $0.15 to $0.70 per share. We expect to see continued coach productivity growth during the quarter, up both year-over-year and sequentially. With our confidence level up regarding visibility for the entire upcoming year as we focus on metabolic health, we are reinstituting annual guidance.

For the full year 2026, we expect to make significant headway on our efforts to get back to profitability with revenue of $270 million to $300 million and loss per share between $1.55 and $2.75. Also included in our guidance is that we believe improvements to get back to profitability will start in Q4 2026, following the launch of our new product line, and we will be targeting improvements in earnings to continue into 2027 and beyond. Finally, we believe our working capital will be more than $140 million at December 31, 2026.

With that, let me turn the call back to the operator for questions.

[Operator Instructions] The first question is from Jim Salera from Stephens Inc.

I want to start off by asking about the coach productivity and how we should think about the sequencing of that into 2026. Particularly, can you give us any detail around the guests or the consumers that are matched up with these coaches? You mentioned you noticed a younger composition of coach, but does that also apply to the consumers that are tethered to the coach? Can you offer any insight in how we see that progressing through '26?

Sure, Jim. Thanks for the question. This is Dan. Yes, you're focused on the right area. This is one of the big changes from where we've been in the last few years. As we indicated in our prepared remarks, this is the first time since mid-2022 that we've seen a year-over-year improvement in productivity, and it's an improvement over where we've been over the last several quarters as well. So it's reflective of our coaches -- actually 2 things happening.

Our coach is telling a new story focused on metabolic health, which is resonating in an environment where weight loss has been largely a story that's changed to focus -- be focused on GLP-1 weight loss. So as we've said, metabolic health goes beyond just weight loss. So we're seeing a new type of customer coming in who's looking for a different kind of health benefit. And we've seen that new client be tied to this -- as we said, this new story. This is largely a function of our coaches now being largely retrained and able to tell this metabolic health story, and we're seeing that expected improvement. And we anticipate that, that as we get the story continues to build and we introduce new products in the back half of this year, that productivity level should be -- or we expect that to be sustained and even improve.

The other thing that is a big part of this new quarter that we're reporting on is some very significant improvements on our cost structure. As Jim said, we were able to restructure the business to be more reflective of where we are as a company and pulled approximately $30 million out, which we anticipate to be reflected both a little bit in the fourth quarter of last year and moving into this current year.

If I think about the sequencing of the top line, particularly against the backdrop of the $270 million to $300 million that you gave for the full year. If my math is correct, at the midpoint, 1Q is down like 37%, but the midpoint for the full year is only down around 27%. So that would imply improving generally throughout the year. Is it possible that we can get to a point where revenues are flat or maybe even modestly positive by 4Q? Or is it more of kind of a gradual improvement, but we should still exit the year with productivity positive, but absolute top line year-over-year still negative?

Yes. I mean we're not -- obviously, Jim, we're not giving quarterly guidance. When you think back in 2022, we took away full year guidance at that point because we were disrupted by the introduction of GLP-1 medications, and we needed the flexibility as a company to invest in certain areas to make sure we were getting to the path forward the company needed to.

Now that we landed on metabolic health, and we're past, I'll call it, the transformation stage and more on the execution, we're able to provide longer-term guidance. So we're happy to share the annual guidance as we did today. And you should think of that as that we're more confident in the movement into metabolic health. With the information that we have provided investors, you would think of the way you're thinking of it. So it's not unreasonable to think that when you look at a top line basis of our company, that things are going to stabilize, and that would be the anticipation.

If you look at the customers that have used GLP-1 either in the past or maybe currently actively using it, can you just offer any thoughts around how the new lineup and some of the new product innovation that you talked about and it sounds like coming this year as well is going to match up with kind of that change in the composition of the consumer base? And also, any thoughts you can offer around the fill format rolling out this year and anything that you've kind of modeled into impacts from that?

Yes, I'll take the first part of this question, and then I'll have Nick Johnson, who's also here with us, comment on what they're seeing in the field. But what we're seeing now is this -- what we refer to as the off-ramp or people who are coming off GLP-1 drugs is getting significantly larger because that's -- because I think there's a recent study that showed after 2 years, roughly 2/3 of GLP-1 patients transition off for a variety of reasons. It also shows that they regain the weight and in some cases, gain more than what they -- where they started back after being on GLP-1 drugs.

So we're seeing that large inflow of clients inside of the group that our coaches are now able to attract. I think we have roughly 1/4 of our patients either have or are on GLP-1 drugs. But I'll let Nick comment on where our coaches are having success in attracting both those who have never used as well as those who have used or are current users or who have used in the past.

Thanks, Dan. Jim, as Dan was mentioning, the story in the field around metabolic health and specifically about what's to come. I think it's important for us to talk about some of those foundational pillars of our proprietary science metabolic synchronization, which focuses on a 14% reduction in visceral fat and 98% preservation of lean mass and then protecting healthy muscle. And when you think about that off-ramp group, and you think about the body composition, specifically around the type of weight that's being lost and you think about a healthy portion of that weight loss coming from lean mass, lean muscle, it's on consumers' minds.

So when you think about what's coming with new plan, new program and system in the back half of the year, you can be thinking about solving for some of those outages, which are on people's minds today. And just to further articulate the point, our field are very excited about what's to come because they understand it's the quality of the weight that's coming off, where it's coming off, the type of dangerous visceral fat that's coming off as opposed to the type of weight that you want to maintain, specifically lean mass.

There are no further questions at this time. I would like to turn the floor back over to Dan Chard for closing comments.

I'd like to thank you all for joining the call today. We appreciate your continued interest in Medifast and the thoughtful dialogue that we've had this afternoon. We remain focused, as Jim said, on executing the transition to a more differentiated metabolic health company. We feel like we're well on our way to doing that and to strengthening our coach community and positioning the business for sustainable long-term performance.

We look forward to updating you on our progress in the quarters ahead, and we thank you again for being with us today.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the Medifast Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Zenker, Vice President of Investor Relations. Thank you, sir. You may begin.

Good afternoon, and welcome to Medifast's Third Quarter 2025 Earnings Conference Call. On the call with me today are Dan Chard, Chairman and Chief Executive Officer; and Jim Maloney, Chief Financial Officer.

By now, everyone should have access to the earnings release for the third quarter ended September 30, 2025, that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of Medifast website at www.medifastinc.com. This call is being webcast, and a replay will also be available on the company's website.

Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate and other similar expressions generally identify forward-looking statements.

These statements do not guarantee future performance and therefore, undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast assumes no obligation to update any forward-looking statements that may be made in today's release or call.

Now I would like to turn the call over to Medifast's Chairman and Chief Executive Officer, Dan Chard.

Thank you, Steve, and good afternoon, everyone. We appreciate you joining us today as we discuss our third quarter results and share an update on our progress.

This is an important year for Medifast one where the work we've done to transform the business is beginning to align more clearly with the opportunity we see in front of us.

The weight loss and wellness industry has undergone fundamental change in a very short time. The rapid growth in consumer understanding and usage of GLP-1 medications has reshaped much of the public conversation around obesity and health, introducing millions of people to a tool for appetite control that leads to weight loss.

While these medications are truly groundbreaking, they are not a complete solution to long-term health unless they are paired with lifestyle modifications. Further, most weight challenges are rooted in poor metabolic health, also called metabolic dysfunction, which medication alone does not fully correct. A lifestyle approach that builds healthy habits and protects lean muscle mass during weight loss is essential to improving metabolic health. Since many people discontinue medication, the absence of these fundamental changes often leads to weight regain. For most people, the most durable path forward comes from addressing the underlying metabolic issues, not relying on medication alone.

Data across multiple studies paint a consistent picture, up to 40% of the weight loss while on GLP-1 medications comes from lean mass, including muscle. 74% of those on the medications discontinue them within a year and the majority regain much of the weight they lost once they stop.

For many, this leads to a cycle of temporary success followed by intense frustration. The opportunity for Medifast is to help break that cycle to empower people not just to lose weight, but to learn how to keep it off and most importantly, to improve their metabolic health in the process, leading to a body that uses energy more efficiently, preserves muscle and functions the way it was designed to.

There is a significant opportunity in front of us to deliver a reset that helps the body work as it was meant to. More than 90% of U.S. adults are metabolically unhealthy. This represents not only a vast health challenge, but also a once-in-a-generation opportunity to redefine what wellness looks like. Our mission and our growth strategy are centered on meeting that need.

Our clinically study plan is designed to address the underlying causes of metabolic dysfunction, reducing bad visceral fat, retaining lean mass and protecting healthy muscle and helping improve overall body composition. We don't believe success should be measured just by pounds lost, but by how much healthier a person's body becomes in the process.

We recently announced clinical research findings led by our scientific and clinical affairs team using a science focused on metabolic synchronization, a breakthrough approach that reverses metabolic dysfunction with a targeted reset.

Our most recent clinical analysis uncovered findings that revealed that our comprehensive plan delivers strong and targeted fat burn resulting in not only weight loss, but also improved body composition. At 16 weeks, clients on our plan retained 98% of their lean mass, reduced visceral fat by 14% and showed measurable improvement in body composition while losing weight and protecting muscle. This reduction in visceral fat, the bad fat driving metabolic dysfunction, along with strong muscle preservation are key indicators of improved metabolic health.

Whether a client is using a GLP-1 medication, transitioning off 1 or not using one at all, our program provides a foundation for overall metabolic health and well-being. This is not just a short-term fix, but a comprehensive system that is specifically designed to help people live a healthier life.

At the center of our approach is the human connection provided by our incredible coaches. These coaches play a vital role in translating the underlying science that powers our approach into real-world results that help people make a real difference in their approach to health.

Coach's understanding of the benefits and shortcomings of GLP-1 medications continues to build all the time. Currently, 61% of our coaches have already worked with clients who are using GLP-1 medications and 22% of our client base reports either using or having tried a GLP-1 medication in the past year. That gives us invaluable insight into how these medications are being used and how our approach can complement them.

Medications alone are simply not enough in our view. Clinical data shows that clients who work with a coach lose 10x more weight and 17x more fat than those who go it alone. That's certainly not a coincidence. Our coaches guide clients through the important behavioral and nutritional lifestyle changes needed to maintain their progress on their health journey.

The coach has helped people stay accountable, navigate challenges and build the healthy lifestyle habits that lead to lasting results. Coaching is what makes the difference between temporary change and long-term transformation.

We're evolving Medifast from being seen primarily as a weight loss company to one that is recognized as a leader in the broader field of metabolic health. It's a shift to a far larger and more durable market as we move from helping people not only lose weight, but also helping them live metabolically healthier lives.

Looking ahead, the company plans to launch significant product innovations using the science of metabolic synchronization and incorporating next-generation ingredients for metabolic enhancement. Initial feedback from the field of coaches has shown encouraging results and we expect to bring this new product line to market next year.

This new product line builds on the strength of our existing programs, and we believe it will further differentiate Medifast in the marketplace. Our aim is not just to respond to the rise of GLP-1s, but to define what the next generation of metabolic health solutions will look like combining clinical credibility, human connection and healthy results.

To deliver further on our ambitions in the metabolic health space, we're moving forward on several fronts. Our coach leaders have already been trained on the new clinical data and they are now cascading that knowledge throughout their organizations. This training will continue into 2026 as coaches learn to reach new types of clients, people who are focused not just on weight loss but also on their overall metabolic health.

We are seeing continued momentum in our work to support our coaches and clients. The new Premier+ pricing and auto ship program has simplified our value proposition, creating a more consistent experience for both coaches and clients. It offers immediate savings, predictable pricing and a straightforward path to loyalty, making it easier for coaches to attract and retain clients. While it's still early, we're encouraged by the initial response which has shown an uptick in baseline client retention beyond the first month.

We've also continued to strengthen the leadership foundation of our field through our EDGE leadership development program. EDGE combines incentives, best practices and recognition tools to help coaches grow their businesses with purpose and structure. The program was built in partnership with field leaders ensuring it reflects real-world experience. It's designed to make early success achievable and sustainable, helping new coaches find their footing and build confidence and enabling our experienced coaches to scale their impact.

In a world where technology increasingly replaces human interaction, our greatest strength remains the power of personal connection and we're continuing to focus on how we take full advantage of our highly personalized solutions. Both Premier+ and EDGE are important components of our commercial model and we expect these to play a central role in continuing to improve coach productivity and stability as we move into 2026. In the third quarter, productivity among active coaches continue to show signs of stability.

We're also continuing to invest in our digital platforms to make the coaching and client experience even more seamless. Enhancements to our app and reporting tools are providing better visibility into client progress and coach performance, giving our field more actionable insights and allowing them to focus where they can make the biggest impact.

Regarding our third quarter results. Revenue of $89 million for our third quarter was at the high end of our guidance range and EPS came in within our guidance range. Active earning coach productivity for the quarter of $4,585 was down just 2% year-over-year, continuing a trend of moderating declines. Sequentially, coach productivity was down 1%.

As we look ahead, our strategy remains clear. We're building Medifast as a science-backed coach guided system for promoting long-term metabolic health. The trends shaping this industry from medical intervention to lifestyle integration point towards the need for exactly what we offer, a system that helps people improve their metabolic function by getting rid of the bad fat, preserving lean mass and protecting their muscle, ultimately, empowering them to healthier results over time. We've already taken important steps to position the business for this future.

Our transformation is not theoretical. It's visible in the way our coaches are working and the science behind our products and in the foundation we're laying for the next phase of growth.

We have more work to do, but we're confident in our direction. We have a strong balance sheet, no debt, and more than $170 million in cash and investments. We have a passionate coach community that continues to adapt and lead, and we have a comprehensive program, plan and product that are scientifically validated and aligned with where we believe consumer demand is headed.

We're a company that has been built on ongoing innovation and that is always thinking about the next chapter. We expect that the foundation we're building today will redefine what health looks like for the years to come. By combining our science, our coaches and our community, we are positioning Medifast to become the trusted partner for millions of people seeking to improve metabolic health. We're building for long-term sustainable growth, and we're doing that with discipline and conviction.

Now I'll turn it over to Jim to review the finances and our outlook for the next quarter.

Thank you, Dan. Good afternoon, everyone. As Dan mentioned earlier, third quarter 2025 results for both revenue and EPS were at the high end of our guidance ranges. Revenue for the third quarter was $89.4 million, a decrease of 36.2% versus the year earlier period, primarily due to a decrease in the number of active earning OPTAVIA coaches.

We ended the quarter with approximately 19,500 active earning OPTAVIA coaches, a decrease of 35% from the third quarter of 2024. Average revenue per active earning OPTAVIA coach for the third quarter was $4,585, a year-over-year decrease of 1.9%, primarily driven by continued pressure on client acquisition. We continue to see moderating year-over-year declines in this key metric.

Gross profit decreased 41.2% year-over-year to $62.2 million driven by lower sales volumes, partially offset by lower cost of sales. Gross profit margin for the current quarter was 69.5% which decreased 590 basis points compared to the year earlier period, attributable to 450 basis points of loss of leverage on fixed costs and 180 basis points of a reserve for the reformulation of the Essential product line.

As Dan mentioned, we expect to introduce a new product line next year which is intended to improve upon the effectiveness of our current essential product line in addressing overall metabolic health. These new products will replace the current Essential line of fuelings that are part of many of our current plans.

SG&A expense was down 36% year-over-year to $66.2 million primarily due to a $19.7 million decrease in coach compensation on fewer active earning coaches and lower volumes. Additionally, SG&A expenses in the current quarter reflected decreases of $5.6 million related to company-led marketing compared to 2024 as well as $2.9 million for the company's convention costs and $2 million for the company's collaboration with LifeMD that did not recur in the current quarter.

SG&A as a percentage of revenue increased 20 basis points, primarily due to approximately 520 basis points associated with the loss of leverage on fixed cost and other smaller increases, partially offset by a 360 basis point reduction related to company-led marketing and 210 basis points for the company's convention cost incurred in the prior year's comparable period that did not recur in the third quarter of 2025.

Loss from operations was $4.1 million in the third quarter of 2025 compared to income from operations of $2.1 million in the prior year comparable period. As a percentage of revenue, loss from operations was 4.6% in the third quarter compared to income from operations of 1.5% in the prior year period.

Other income increased $2 million year-over-year to $1.4 million, primarily due to a loss on the company's investment in LifeMD's common stock during the corresponding period in 2024. As you may recall, we sold the investment in the second quarter 2025.

The effective tax rate was 14.9% for the third quarter of 2025 compared to 28.5% in the prior year period. The change in the effective tax rate for the 3 months ended September 30, 2025, was primarily driven by a decrease in the tax benefit of research and development tax credits which represented 115.3% of the change, partially offset by an increase of 85.6% from the impact of state taxes. These percentages were magnified by the near breakeven pretax position in the current year.

Net loss in the third quarter of 2025 was $2.3 million or $0.21 loss per diluted share compared to net income of $1.1 million or $0.10 per share in the year-earlier period.

Our financial position remains strong with $173.5 million in cash, cash equivalents and investments and no interest-bearing debt as of September 30, 2025.

Now I'll turn to guidance. We are expecting fourth quarter revenue to range from $65 million to $80 million and a loss per share for the quarter ranging from $0.70 to $1.25.

With that, let me turn the call back to the operator for questions.

[Operator Instructions] Our first question comes from Jim Salera with Stephens.

I wanted to first start with the shifting focus towards metabolic dysfunction and how integrating that messaging with the coaches is going to work. Can you just maybe walk us through the process to make sure that you have consistent messaging among the coaches and that they're all kind of trained up on the new go-to-market or strategy around communicating the kind of holistic view that you guys are taking to weight loss moving forward?

Sure, Jim. Let me also start out by adding that Nick Johnson, our Chief Field Operations Officer and President of OPTAVIA has joined us as well. So I'll make a couple of comments, and then I'll let him talk about what we're doing to make sure that the coaches across the entire country are trained and understand what this new story around metabolic health is.

I'll start out by saying that most weight loss challenges and 9 out of 10 of the leading health challenges, for the country are rooted in for metabolic health or sometimes refer to as metabolic dysfunction. Our coaches are aware of this. So it starts out by partially an awareness.

But what we've done, probably in the most significant way we ever have is conducted a study partially tied to previous research that we have done, but also taking a deeper dive into the clinical studies to show exactly what our program does with metabolic health and how it is able to reverse metabolic dysfunction. And here's how it links to weight loss.

And the -- we talked a little bit about some of these claims or the results of our study in the last call, but I'll just cover them again. The first and significant one is our program targets the bad fat or often referred to as visceral fat and that's the fat around the belly and inside and around vital organs. And it reduces that fat at a clinically significant level. It maintains lean mass and 98% during weight loss. It protects muscle and improves body composition. And you've heard us talk about the other part of our research that shows that when a coach gets involved and helping somebody on the program, the clients are able to lose 10x more weight and 17x more fat. So those are new claims that we've shared with our coaches.

The important part of what they're doing now is the targeting, which is -- it's fairly expansive. 90% of Americans have -- are metabolically unhealthy or experience metabolic dysfunction. And with our research, this clinical research and an understanding of how we can reverse that, they have an interesting and highly relevant new story.

And it's becoming increasingly relevant even in the face of this world where GLP-1 drugs have had such an impact on people trying them, which is basically our program is differentiated in that we maintain 98% of lean body mass, whereas GLP-1 drugs often result in as much as 40% of the weight loss being from lean mass and high levels of discontinuation, 74% on of patients discontinued use within a year of GLP-1 drugs and 2/3 of the weight is regained. So those are the -- that's kind of the problem solution, if you will.

Now I'll let Nick talk a little bit about how we are training leaders and how that leadership base now is in the process of training the field. So I'll turn some time over to Nick to do that.

So recently, we met with all of our leaders at a better retreat, our annual leadership retreat that took place in Sundance, Utah. All of those lines of business across our business were actually represented. So with all those leaders of the different lines of business now informed trained and understand where we're going in the direction the metabolic synchronization of proprietary science that addresses neuro versus metabolic dysfunction.

From now until the end of the year, those messages, those trainings will continue to be disseminated. And so by the end of the year, we expect to have all of the different coaches all the way down to our core rank of Executive Director trained and steeped in this direction. So we ensure that we are across the network singing from the same song sheet, so to speak.

Great. That's very helpful. Can you speak to just the EDGE program and maybe the incentive structure as again, you kind of expand the aperture and the focus of what coaches are going to be communicating to potential clients. And I would imagine that kind of broadens the range of potential clients they can talk to.

Yes, it's another good one for Nick. So Nick, why don't you take that one as well?

Sure thing. So as we've talked about in the past, the EDGE program is designed around really 3 activities, and they're all based on the same core rank Executive Director. It's for creation of new executive directors, duplication of those directors and then multiplication of those executive directors. So the EDGE program is designed to change the rank composition of the business.

Now keep in mind that those executive directors have approximately $6,000 in revenue per Executive Director. They're highly, highly productive. So when we see the rank composition of the business start to shift in a more positive direction, revenue and therefore, productivity go up as the rain composition improves.

So we'll continue to focus on the EDGE program, like we said in the past, focusing on becoming and duplicating and multiplying those executive directors. And what we discussed at the Sundance leadership retreat is how we will continue to execute the EDGE program, which will then yield that higher productive coach rank and then fill out the different generations within the pay structure for our top leaders.

Okay. That's helpful. Maybe shifting gears a little bit, Jim, just a couple of questions on the guidance and then some of the results in the quarter. Maybe for starters, it looks like you closed the gap between the decline in SG&A and the decline in the top line. Those are much more kind of aligned than in previous quarters. And I appreciate you gave some detail around just maybe some onetime expenses there. But could you just give us some color around -- is there a way we should think about if the top line is down X percent, SG&A should underperform that by 100 basis points, 200 basis points, just as we think about kind of modeling that on a go-forward basis?

Yes. I mean, as you mentioned, one of the charges in Q3 was an approximate $1.5 million charge for the reformulation of our essential line. So we made the decision in Q3 of 2025. So we took that charge. We believe that's going to be a onetime item.

We also mentioned regarding within gross margin that we had a loss of leverage of fixed costs. And what we're -- what we have done. And what we continue to do is make sure that our balance sheet remains strong for the foreseeable future. So we ended the quarter with $170 million in cash and investments. And we're rightsizing the business. We did some actions in October, so last month to rightsize the business to make sure that as we return to growth, the margins will improve.

And when you look at our guidance, you mentioned guidance, and we are seeing pressure continue into Q4 with the guidance that we provided. So as I mentioned before on our call, with the way our business works and the way we get back to growth, looking at our metrics, our expectations are that it starts with client acquisition and client retention. And based on the history when we get growth in revenue per active earning coach and a sustained improvement in revenue per active earning coach the growth of it.

Typically, we see about 6 to 9 months after that, we typically see coach growth. And obviously, once we get back to coach growth is when you get back to revenue growth, probably within a quarter or 2 from that coach growth. And we've been mentioning to investors, and I believe we mentioned it on our last call, that we're anticipating that to happen in 2025.

So we are anticipating that to happen in Q4, but at a minimum, getting back to revenue per active earning coach growth, we believe, will happen at least in the next 6 months. So we're expecting it to happen in Q4 and that will be the first green shoot of stabilization for the company and a path forward to get back to growth. So we're anticipating that happened in Q4, but at a minimum in the next 6 months.

Okay. And maybe on the top line, can you just speak to any outside of, obviously, GLP-1 kind of well-covered trends just broader economic softness and softness we've seen in the consumer. Just any commentary you can offer on how that's been impacting likelihood of consumers to add an incremental monthly expense like OPTAVIA into their budget?

One of the things we continue to see, Jim, and this is not something that's new, but consumers prioritize their health. And this is a health issue that's been with us for quite some time and is not relenting. So we have high satisfaction with those clients who choose to engage in our program as evidenced by their high repeat.

And I think we always are looking at what you're asking about, which is does a challenged economy affect consumer spending. I think certainly, the answer is yes. But we continue to see consumers prioritizing the spend on health over other things.

So I think we feel optimistic about where we are. I think we have change the value equation to be even more significant with these additional kind of insights into just how our program affects the end consumer. And we see our coaches getting better and better at operating in this current environment. As I said in the prepared remarks, we have now over 60% of our coaches who are supporting at least one client was either on or who has been on a GLP-1 drug and 22% of our client base, either using or having used GLP-1 drugs.

So we see our program as valuable in the current environment and relevant for people who are using -- and using a GLP-1 drug and want a lifestyle program who want to do it without a GLP-1 drug because they don't want to or have a negative reaction to the medication or increasingly people who are transitioning off and want to make sure that they can maintain the health of the gain.

And now there's one more reason for those who want to get really the root of some of these symptoms of metabolic dysfunction and really focus on the source of the challenge and achieve this lifelong transformation that our coach has been talking about for quite some time.

Got it. And then maybe just one housekeeping question. Jim, I think you had mentioned when you were kind of breaking down the SG&A expenses that you guys were cycling. There's a $2 million -- I think you said $2 million for collaboration with LifeMD. I just want to make sure, is that something that was a onetime expense last year that we're lapping or are you guys sunsetting the LifeMD partnership and that's like on a go-forward basis that's coming out of SG&A?

No, the collaboration is ongoing. What that is, is that was the last in 2024, that $2 million was the last bit of amortization. If you remember, at the beginning of our collaboration, we invested $10 million into LifeMD as part of the collaboration. And that $2 million in Q3 of 2024 represented the last bit of the amortization. So we took the $8 million prior to that. So you won't see that any longer.

We have reached the end of our question-and-answer session. There are no further questions at this time. I would now like to turn the floor back over to Dan Chard for closing comments.

Thanks, everybody, for joining the call today. This continues to be a period of meaningful transformation, as you could hear for the company. And we're evolving with purpose to become a science-backed coach-led leader in metabolic health.

Our approach built around the science of metabolic synchronization enables us to target better health rather than just weight loss, reducing visceral fat while preserving lean mass. We're very encouraged by the progress that we're making from the stabilization of coach productivity to advancing new product innovation and digital tools.

We remain confident in our strategy, supported by strong balance sheet and a dedicated coach community focused on long-term client success. I look forward to sharing even more when we present at the Stephens Annual Investment Conference in November 19 in Nashville. Thanks again for joining us today and for your continued interest in Medifast.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.