Medifast Inc (MED) 2011 Q1 法說會逐字稿

Greetings and welcome to the Medifast, Inc., first quarter 2011 earnings conference call. At this time, all participants are in a listen-only mode. Our brief question-and-answer session will follow the formal presentation.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Katie Turner of ICR. Thank you. You may begin.

Good afternoon, and welcome to Medifast's first quarter fiscal 2011 earnings conference call. On the call with me today are Michael McDevitt, Chief Executive Officer; and Brendan Connors, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ending March 31, 2011, which went out this afternoon at approximately 4.05 PM Eastern time. If you have not received a release, it is available on the investor relations portion of Medifast's website, at www.choosemedifast.com.

This call is being webcast, and a replay will be available on the Company's website. Before we begin, we would like to remind everyone that the 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 the them. Actual results could differ materially from those projected and any forward-looking statements. Medifast assumes no obligation to update any forward-looking projections that may be made in today's release or [calls posted] on their website. Medifast does not comment on issues or items currently or potentially in litigation with adversarial third parties and/or under investigation by appropriate regulatory or law enforcement agencies of the State or Federal government. All forward-looking statements contained herein speak only as of the date of today's call.

With that, I would like to turn the call over to Medifast's CEO, Michael McDevitt.

Thank you, Katie. Good afternoon, everyone, and thank you for joining us.

On today's call I will provide highlights of our first quarter results, and then Brendan will review the financial results for the first quarter in more detail. I will then provide some closing remarks and will then open the call to take your questions.

We continue to exhibit strong top and bottom-line growth in the first quarter of 2011, with our earnings per share growth up 33% outpacing our net revenue growth of 23%. Our continued growth and strong financial results validates consistent growing awareness for Medifast's clinically-tested physician-recommended products with consumers that are looking to achieve weight loss and weight maintenance. We have continued to focus on the balance of driving continued growth while building the infrastructure for scalability in Medifast weight control centers, in our web platforms, for Take Shape for Life and Medifast Direct, as well as adding the necessary resources in both personnel and operations to position the company for great 2011 and beyond.

In the first quarter of 2011, our positive sales results were broad-based across each of our three primary distribution channels, including Take Shape for Life, direct response marketing, and our Medifast weight control centers. Our three primary distribution channels continue to provide a complementary source of personalized support for clients to connect and share Medifast clinically-proven weight loss programs. Revenue in the direct sales channel, Take Shape for Life, increased 25% to $46.8 million in the first quarter of 2011.

In today's environment, trust and personal recommendations are increasingly a significant driver in consumer purchasing decisions, and the Take Shape for Life model of one-on-one interaction continues to excel and resonate with consumers. Medifast consumers and Take Shape for Life clients, who have achieved successful results through Medifast's clinically proven and physician-recommended products, continue to become active Health Coaches. The number of active Health Coaches increased 41%, to approximately 10,000, compared to 7100 in the first quarter of 2010. As a reminder, the number of active Health Coaches represents the number of Health Coaches receiving income from a product sale in the last month of the quarter.

The Company believes the average revenue per Health Coach per month decreased 10%, to $1,600 from $1,775, in the first quarter of 2010. We believe the slight decrease is due to the Health Coaches' anticipation of the new E-Commerce platform, which was successfully launched late in the first quarter, in mid-March, 2011. Prior to a major infrastructure update, it can be common for system and users to take their time becoming comfortable and confident on learning the new system.

Since the launch of the new platform, the company continues to receive tremendous feedback from both Coaches and clients on the simplification of the user interface. The Company is confident the release of the new E-commerce platform will simplify the ordering process for the client, leading to improvement in the revenue for Health Coach statistic.

We intend to remain focused on the investment and advancement of our corporate infrastructure and personnel to increase our consumer reach in new and existing markets; utilizing innovative supports, communication, and marketing strategies, as well as the introduction of new products through added production and manufacturing capacity to support our future growth. In our direct response marketing sales channel, our brand's portion-controlled meal replacements have helped us generate more targeted and effective advertising, leading to 18% sales increase in the first quarter of 2011. On an 18% increase in marketing and advertising spent, we generated a 2.8-to-1 revenue-to-spend ratio during the first quarter of 2011, equal to the ratio in 2010. This also led to strong improvements in direct response to additional operating income for the quarter.

In our Medifast weight control centers and Medifast wholesale position channel, consistent focus on the Medifast clinical research of innovation and personalized support programs continue to meet the needs of clients seeking additional support and accountability. In the first quarter, we generated a 22% revenue increase compared to the prior year period. This was largely due to a 7% same-store sales increase, and a 48% increase in number of corporate clinics, compared to the prior year.

The first quarter of 2011 had a heavy focus on preparation for the expansion of the clinic model, with a large success achieved by the launch of the in-store operating system. We believe the system, which acts as a point-of-sale system, client support, employee training, and a consumer weight loss and health statistics database, will help improve the consumer's experience and program success results, while also increasing the efficiency of the clinic personnel. The system is now being rolled out to all current locations, and will be incorporated into each new clinic being built this year.

We opened one new corporate clinic in the quarter, ending the quarter with 40 corporate clinics in Austin, Dallas, Houston, Orlando, Baltimore, and Washington, D.C.; and 22 franchise centers. In 2011, we continue to expand the infrastructure necessary to allow for scalability of the Medifast Weight Control Center retail model. In addition, we are continuing to focus on improved advertising effectiveness on trends generated through advertising and improved customer lifetime value through value and service; develop a new operating system to enhance customer experience and store operations; as well as the hiring of more experienced clinic personnel.

We continue to plan to open 25 to 30 more centers in fiscal 2011, the majority of which will open in the second half of the year. With this planned expansion, we will also maintain our focus on continued comparable same-store sales growth, as we anticipate 2011 full-year same-store sales growth of 10%, with expectations of our new store and operating system providing continued growth in the future.

We also want to provide you with a brief update of our strategy to continually initiate a number of events and provide opportunities for us to offer additional training to our existing Health Coaches and attract new Health Coaches. As a reminder, in the beginning of 2010, we launched a new series of quarterly-hosted regional events called Take Shape for Life regional events, which are strategically planned based on geography, as well as a complementary event to our leadership functions. These events can best be described as mini-Annual Conventions, and will be held at different locations across the country.

In the first quarter, we hosted seven Take Shape for Life regional events across the country. The regional events attract, on average, 500 Health Coaches. Potential new Health Coaches are focused on training and recruiting new Health Coaches at our regional events. We believe that as our base of Health Coaches continues to grow, the need for increased outreach and training will be critical to our success.

We have also increased focus on our two leadership events -- Go Global this spring for emerging leaders; and Sundance, in the third quarter, for our established leaders. Our Go Global, which took place in April, was a sold out event that left our leaders excited about the future and more prepared to support their clients with a launch of our path to a longer, healthier life training tool. The brochure assists in simplifying the process of a Health Coach teaching their clients the weight loss and weight maintenance phase.

Events like Go Global, which promotes simplification and duplication, should lead to continued improvement in our Coaches' ability to attract new clients and help ensure their success, which in turn leads to continued growth in monthly revenue per Coach. At these events, leaders are taught skills and techniques to help further develop their own team of Health Coaches that they mentor. As our leaders continue to develop their training skills, we will be able to more effectively recruit new Health Coaches. In July, our Take Shape for Life Annual Convention will be held in Orlando, and we will have many new exciting products and training launches for our Health Coaches in attendance.

In the past 31 years, over 20,000 doctors have recommended our products to more than 1 million clients who have lost and maintained their weight. The credibility of our products and the results they produce continues to resonate extremely well with new and existing clients. This credibility, our strong team members, and our superior product offering, create the foundation that supports every channel within the Medifast business model.

We are very pleased with our start to the fiscal 2011, and going forward we continue to believe that our vertically-integrated operations and increased capacity will allow us to continually improve the long-term leverage of our business model for increased margin expansion and long-term profitable growth.

Now I would like to turn the call over to our Chief Financial Officer, Brendan Connors, to review our financial results in more detail.

Thanks, Mike.

Net revenue for the 3 months ended March 31, 2011, increased 23%, to $74.3 million, from net revenue of $60.6 million in 2010. Take Shape for Life channel sales accounted for 63% of total revenue, direct-response marketing accounted for 26%, Medifast Weight Control Centers and physicians accounted for 11% of total revenue. Focusing on our sales channel in more detail. Our direct sales channel, Take Shape for Life, experienced revenue growth of 25%, to $46.8 million, compared to the same period last year. Growth in revenues for Take Shape for Life was driven by increased customer product sales as a result of an increase in active Health Coaches.

The number of active Health Coaches increased 41%, to approximately 10,000, compared to 7,100 in the first quarter of 2011. The direct response marketing sales channel revenue increased 18%, to $19.3 million, in part due to an 18% increase in advertising dollars spent. As Medifast continues to experience a more effective advertising message, the more targeted advertising based on extensive analytical research.

As Mike mentioned earlier, we achieved a 2.8-to-1 revenue-to-spend ratio in the first quarter of 2011, equal to revenue-to-spend ratio in 2010. Revenue in the Medifast Weight Control Center and Medifast wholesale position sales channel increased 22%, to $8.2 million. This is due to a 7% increase in comparable store sales for units open greater than 1 year, as well as 44% being opened in the first quarter of 2011, compared to 27% in the first quarter of 2010.

Gross profit for the first quarter of 2011 increased 24%, to $56.7 million, compared to $45.8 million in the first quarter of the prior year. Our gross profit margin increased 80 basis points to 76.3% in the first quarter versus 75.5% in the first quarter of 2010. Gross profit margin improvement is primarily due to decreased shipping costs associated with the second distribution center opened in the third quarter of 2010, in Dallas, Texas, as well as improved labor and overhead absorption on products manufactured in-house.

Selling, general and administrative expenses increased $9.1 million or 24%, to $46.6 million in the first quarter of 2011. As a percent of net sales, selling, general and administrative expenses increased 80 basis points to 62.8%, compared to 62% in the first quarter of 2010.

The largest increases in SG&A expense were related to higher variable expenses, such as Take Shape for Life commission expense -- that's directly related to product sales -- and personnel expense. Take Shape for Life commission expense increased $3.2 million in the first quarter of 2011 due to the 25% increase in sales.

Salaries and benefits increased by approximately $2.7 million as compared to the first quarter of 2010. The increase includes the hiring of additional expertise in critical areas such as the Medifast Weight Control Center support, manufacturing, distribution, call center, and IT, to support the strong growth in fiscal 2011 and beyond. Operating income for the first quarter of 2011 increased 23%, to $10.1 million, compared to $8.2 million in the same period a year ago. Our operating margin of 13.5% was consistent with the same period last year.

Income tax expense increased $600,000, to $3.9 million, to represent an effective tax rate of 38.2%, compared to 40.3% in the first quarter last year. First quarter net income increased 30% to $6.4 million, or $0.44 per diluted share; compared to $4.9 million, or $0.33 per diluted share for the first quarter of 2010.

The company's balance sheet remains strong, with stockholders' equity up $79.5 million, and working capital up $51.2 million as of March 31, 2011. Cash, cash equivalent, and investment securities increased 47%, or $16 million, to $50.4 million as a result of improved operating cash flow.

Now, focusing on a few items as it relates to our financial outlook for the fiscal 2011. We expect the full-year advertising expense to increase by 20% to 25% as compared to 2010, while successfully maintaining a revenue-to-spend ratio of 2.8-to-1. Gross profit margin is expected to improve 50 basis points in fiscal 2011 as compared to the prior year, due to reduced shipping costs and continued manufacturing efficiencies with full-year expectations.

We anticipate a tax rate of approximately 38% to 39% in fiscal 2011. In the second quarter of 2011, we plan to open six new Medifast Weight Control Centers in new and existing markets, with expectations to open 25 to 30 new corporate centers throughout the year. The company expects the Medifast Weight Control Center same-store sales to increase approximately 10% as a result of the accelerated unit growth in fiscal 2011.

That concludes our financial overview. Now I'd like to the turn the call back over to our CEO, Michael McDevitt.

Thank you, Brendan.

I would like to conclude our prepared remarks by reiterating our confidence and excitement about Medifast's outlook for fiscal 2011. We would now like to open the call up to your questions. Operator?

Thank you. We will now be conducting the question-and-answer session.

(Operator Instructions)

Our first question is from Scot Van Winkle with Canaccord Genuity. Please go ahead with your question.

Hi, thanks. First question, easy one for you, Brendan, what was the other income item on the income statement? I apologize, if you said it, I missed it.

Other income is comprised of interest income from our investments.

Okay, so the -- the 115 --

-- realized gains on investments.

Oh, okay. And then so Take Shape for Life -- the decline for Health Coach was better than I thought coming out of the March 31 call.

You know, Mike, I love if you could expand upon the comments about maybe caution before the changeover. Did you talk to Distributors? Is that what you're hearing from the field leadership? Or, anything you can expand on that?

Yes, of course. The first thing I wasn't to say, I think it's really two-fold in the answer. There's a piece of human behavior and there's also a time of how they are going to be spending their efforts and energy.

First off, human beh -- classic human behavior. When you have something that's very new to individuals coming and the leadership was all aware of when this is coming because they were trained to it -- you have a lot of individuals taking their time to kind of get comfortable with it before they were out there, I guess, confident in speaking to other individuals.

Then you look at how they spend their time and energy. When you spend your time and energy learning something new, it's going to take your time off of that of acquiring customers for a period of time. The great news about that is since the launch of the E-commerce, we have seen tremendous trending from the Take Shape for Life Health Coaches and how they have been able to see how simple this user interface was. So although it might have caused a little just concern and shift of focus from acquiring clients to learning a new system, since it's been live I couldn't speak highly enough of the Take Shape for Life Field Leaders and their efforts.

Any way you can quantify the difference of pre and post?

Not a specific detail. I'll kind of speak to a bit of historically how revenue per Health Coach has looked.

If you look back into 2008 we had average revenue for Health Coach of around that $1,500 a month figure. 2009 we were able to see that number climb significantly up throughout the $1,700 to $2,500. 2010 for the full year, you looked at around $1,675 per month. Of which, in the fourth quarter it was closer on that $1550.

First quarter, we saw that come around that $1600 for the full first quarter, but in the month of March, it was significantly improved even though it was for only half that timeframe and we're seeing trending continue to be strong ever since the launch of that E-commerce stuff. Getting that piece kind of to a number to allow it to be where it was for that $1600, you're going to really see that continue throughout the course of this year and we would love to see for the full year of 2011, up to that $1,600 that it was in the first quarter steep, rise throughout quarter-by-quarter.

Excellent, excellent. And, do you calculate that number on a monthly basis so that -- you know, we can't get to the exact number because we don't have the monthly data, is that right?

We do calculate on a monthly basis, based upon closing act of Health Coach counting end of close at each month.

Great. You know, the website improvement during the quarter -- can you talk about what that did as far as facing the consumer rather than the Take Shape for Life side?

Sure. From the consumer standpoint, for those of you who had, had the chance and opportunity to go on to our -- first I'll talk to direct response side. The abilities for the website as of now is just a much more simplistic user interface in which the number of clicks to go from purchase to close has reduced significantly. The ability for the Company to up-sell new products to the consumer has increased significantly. Consumers now have the ability to build their own variety package as oppose to simply taking standard variety package from the company. So it's just a lot of easier ways for the consumer to go through the process, learn about the process, research products and programs and materials and just have a lot better total user interface.

From the Take Shape for Life perspective, all of that, ditto. Of course, the Take Shape for Life end consumer. At the same time, each of our Health Coaches do use a replicated website that is for them to customize themselves, which allows them to tell their own story, allows them to have their own pictures and personal story. So, it's really a help to get our Health Coaches utilizing much more of a health -- website system, whereas in the past we had spoken to how Take Shape for Life did had a higher percentage of it's orders coming from the call center than net direct. We're seeing that number trend more towards the web since the launch of this new user interface and E-commerce.

Is there any data that you crunched that you can throw our way as far as, you know, band and baskets and things of that nature, since the new website for the direct response site?

Sure. Nothing specific as of right now in the sense when you go live with this new E-commerce platform, our role internally was first do no harm. So, we kind of looked at it as building the infrastructure that allowed us to manipulate the infrastructure after the fact. So when we went live day one, you saw much-better look and feel and of course user interface.

We haven't really started playing with the ability for us to, we think, increase closing rates, decrease abandonment rates and increase average order. That's something, we wanted to first get it live and get it stable. Now that we have the stability, we'll start to work on the manipulation to get numbers up and improved.

Thanks. And last question on the Take Share for Life Business, have you made tweaks to the compensation model or put any promotions in or anything of that nature or has it just been pretty consistent in the first four months of the year?

Conversation very consistent with the -- since the launch of that initial compensation plan so nothing new.

Great. Thank you.

The next question is from Kurt Frederick with Wedbush Securities. Please go ahead with your question.

Hi, good afternoon.

Good afternoon.

I have a question on the recent price increase. Was that really to offset some of the rising shipping costs and raw material costs? Or is that more for profit taking or what is -- what is that?

Yes, what we recently went live with was a price stabilization. Where a lot of times from consumer we hear about when they went to exchange Medifast products or pick their Medifast product, having different products cost different prices just led them to some kind of confusion. So to ease that entire process we went out there and did a price stabilization so now all Medifast products are selling for the same price per box.

That is going to equate in a bit of additional profitability for the business, we think, moving forward. But with the variability we're seeing in commodity rates and shipping rates and gas price rates, nothing as far as we think have we seen a large increase that's going to impact that profit number. So we think it will be done more from the consumer standpoint for ease of the system. Also, I think it also helped overall profitability and gross margin for the full year.

Okay, great. And second on some of the weather things that have happen in recent months -- any of that impacting you?

The only impact of the weather in the recent months would be from our Franchisee in the Alabama area. If he's listening now, our thoughts and prayers go out to him and his employee who witnessed a very difficult time. That will not come into play in the first quarter and we're trying to do everything we possibly can to help him get back on his feet as soon as possible, but as far as overall percentage of revenue for the organization, nothing of significance.

Okay. That's all I have. Thank you.

(Operator Instructions)

The next question is from Chris Krueger with Northland. Please go ahead with your question.

Hi, good afternoon, guys.

Good morning, Chris.

Hi, for the first quarter can you talk a little bit more -- you know, you don't have to be too specific -- but just a month-to-month trend how January looked versus February versus March? I know since your website launched, things changed. I was wondering if January was a rough start with big competitors, with the big programs going on and how things went throughout the quarter.

Really the entire quarter was a positive scenario in Medifast direct response. I think the website additions we did there are going to help that business model. But it was more of a proactive than a reactive scenario there.

From the Take Shape for Life division, we already spoke a bit on that as far as once that site was up and live and the confidence in the field it was done with stability, we saw that business see a very positive trending aspect to it. Medifast Weight control centers for the full year this year will be a second-half story. We're doing a lot of preparation to improve the scalable of that model and get that point of sale system we spoke about earlier in place, going aggressive the second half of the year with roughly about 20 new clinics in the second half of the year. But as far as first quarter, yes, March was by far our overall best but I think that was largely due to Take Shape for Life number we spoke to earlier. Overall trending for the business right now, we're very pleased with everything and the outlook we've got for the rest of the year in front of us.

Okay, the Take Shape for Life then with the trend you've seen in March and I suppose in April hopefully, is it safe to say, as of now, you expect your overall growth rate to be at a higher rate than it was in the first quarter for that division?

No, there's a lot of moving parts inside that business and I can speak to the fact if you have a Go Global event that occurred in April, the field leaders left that event on fire and very excited about the remainder of the year to roll into conference. We have conference coming in July and national conference for us is always an opportunity to launch new products, new trainings, to help consistently get that revenue growth rate in the second half of the year. We're excited for all the different events and different launches and can't thank the field for their participation in helping us get there.

Last question relates to the number of cities that are making up, I believe, 60% of your growth. I believe last -- end of fourth quarter it was up to nine cities that comprise that chunk of business. Is it still at nine? And, are those cities growing kind of at a similar rate to the group as a whole or are they slowing down a bit or how's that -- ?

Definitely no slowdown in the growth occurring right now. We do have nine so we're proud to show the areas above Washington state and Texas popping up with some of the dots on that map. Of course, we are doing everything we can to continue to improve our ability for our Health Coaches to have distance learning capability, distance training capability.

The majority of our training inside our field occurs with a one-on-one with a paper material from our business in a box, looking to enhance capabilities online through different CDs, audio, DVD tool types. We do plan on, at conference this year, launching some exciting stuff that can help get some more dots on that map and continue to see the growth that's already in those current dots.

All right, that's all I got. Thank you.

Thank you. The next question is from Ryan Thibodeaux with Maple Leaf Partners. Please go ahead with your question.

Good afternoon. Could you go through, again, how you calculate the average revenue per Health Coach?

Revenue per Health Coach is calculated on monthly basis, just taking revenue in that given month divided by the amount of active Health Coaches, done monthly then averaged for the quarter. That's the final revenue per coach, figure of $1600 in the first quarter of 2011.

And a year-ago was -- what was the year ago?

Q1 of last year was $1,775 revenue per coach per month.

So, it's not actually using the ending active Coaches for each period as the average and then across the revenue for that period?

No, it's going to be the most accurate is to do it on a monthly basis and then just take the average for that quarter so we do it on the most accurate basis.

Okay. The other question I had is what are you guys seeing in terms of rising raw materials and input costs as well as shipping cost on an absolute basis and what are you doing to combat that?

We're monitoring that closely, the peak keys are shipping cost of third-party carriers as well as raw material costs for our manufacturing goods in-house. We are closely monitoring that and we are seeing across the board, retail is seeing about 3% to 4% increase of overall intel cost and as Mike just spoke to, the price moving we just did recently is going to help absorb most of those costs in 2011.

With that price stabilization is going to, you know, translate to as far as price increase on an average basis?

If you look at what the volume of each product was prior to you're probably looking at about 3% overall, expectation increase by that price stabilization. Depending upon what the share of product purchases are if it stays equal to what it was last year as far as who's buying which products. That's unknown because of the fact that now all products are equal pricing it could be a variable based on what their preferences are.

Okay, so by and large, 3% to 4% price increase, 3% to 4% cost increase -- I'm not sure how you're increasing your gross margin by 210 basis points quarter-over-quarter.

I'm going to speak now, in terms of 3% to 4% is what our competitors see in the market. However, that can be playing out throughout the year -- so that price increase should result in additional profit building for the next few quarters. Until those raw material commodity prices start impacting us later in the year.

There's also all the other different moving parts as far as included in gross margin from the logistics standpoint with the Dallas distribution center being up, effective and efficient. We're continuing to see leverage in both the efficiency of how products are shipped to the consumer at the end, which will be different than just the commodity price increase piece.

Our next question is from Josh Goldberg with G2 Investment Partners. Please go ahead with your question.

Hey, guys. Nice results. I had a couple of quick questions. One is -- is it fair to assume that obviously with the $1,600 average revenue per month per coach for the quarter, that the month of March, it was above that number?

Yes. With the month of March being the largest -- the month of March was specifically above $1,600.

Okay. Is there any way you can quantify how much it was March over last March in terms of decline or increase, that number specifically? Just a sense of how much we can have it go back up now.

Not specifically, what we really just report on is the end quarter number, which we mentioned $1,600 versus last year in the first quarter was at $1,775 figure. We are confident that the overall year we can continue to see that number that was in the first quarter $1,600 -- we do expect to see a rise in that for the remainder of the year.

Okay. And the number of coaches coming in at 10,000 -- is there any kind of expectation that, that number will also grow every quarter?

We are anticipating a total number of coaches acquired throughout the year net to be equal or greater than it was last year. Training is showing that to be accurate as of right now but no expectations have been put on a quarter-by-quarter sequential growth rate in the Health Coach number.

Okay, great. Couple of other things.

One is on your direct response business, up 17.5 or so court year-over-year and you talked about how you're going to keep the spending at 20% to 25%, if you could just give us some sense. Do you think the top model will grow at that rate? For the next three quarters, that's why you're keeping advertising expense? Was there some weakness earlier on in the quarter and now it's picked up? Can you talk to us more about that business?

Yes, sure. We do have -- we have been very pleased thus far with direct response business and response rate from the consumers to the advertising dollar spent. The month of March with the E-commerce platform going live, that timeframe, we did pull back our advertising spend just due to the unknown and sometimes something like that going live and what that can do. Since it's gone live, everything has been smooth, very stable as we spoke to earlier. And, anticipations for the year maintain -- we will continue to see that 2.8-to-1 return and we want to continue to see our advertising spend grow by about that 20% for the year.

Thank you. The next question is from Mark Gaskill with MKJ financial group.

Congratulations on the great quarter. I have a couple of questions.

On your projections for what you're looking for in 2011 on your increase in same-store sales, what's in your numbers in terms of breakdown between the mix of volume versus price increasing? I know we have been talking about this but if you've got a projection out there for a 10% rise in same-store sales, what -- how are you calculating that out?

And the other is, since you've obviously now moved into Texas and Washington, is there anything internal for the company as far as part of the structure for looking at increased penetration to other metropolitan areas in other states? Are you looking at something as you go forward on an annual basis as far as the expansion? Thank you.

Of course. As far as the figure we put forth in the 10% same-store sales growth, that was our prediction prior to the beginning of the year and we do believe that, that will be achieved largely through the operational efficiencies we're looking to launch inside the clinics to make it, more sustainable better terms of success from the consumer standpoint. The point of sale system, which we think will be a great addition to help improve the efficiency of the staff there as well as help decline sales be more successful long term, we think that will be a large driver of that 10%. The price increase was not taken into account and during that time frame when we launch that 10% number.

When you look at the different metropolitan areas, we are anticipating growth in metropolitan areas of the clinics channel. We're looking at those as of right now and when we go live with the additional 30 clinics this year, we will be breaking into some specific new markets, which we're not going to discuss the detail as of right now but most are signed up or ready to be signed.

With the Health Coaches and looking to expand the Health Coaches, getting new dots on the map as we call it, we are very excited about having more of an E-commerce web platform type of a training that will allow for distance learning for our Health Coaches. Because sometimes it can be difficult for that one-on-one-type training with print materials. We do believe the upgrade of our online training site -- hopefully launching that this year in conference -- we're working very closely with a lot of out Health Coach leaders to make sure that can occur and now we're very confident that we will launch in that timeframe.

There are no further question in queue. I would like to turn the call over to Michael McDevitt for closing remarks.

Thank you very much for your participation today. We look forward to sharing our progress with you in our second quarter results for 2011 conference call. I appreciate it.

This concludes the teleconference. You may disconnect your lines. Thank you for your participation.