Medifast Inc (MED) 2014 Q4 法說會逐字稿

Good afternoon, and welcome to Medifast's fourth quarter and full year 2014 earnings conference call. On the call with me today, are Michael MacDonald, Chairman and Chief Executive Officer, Meg Sheetz, President and Chief Operating Officer, and Tim Robinson, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ending December 31, 2014, that went out this afternoon at approximately 4:05 PM Eastern time. If you've not received the release, it's available on the Investor Relations portion of Medifast's website at www.MedifastNow.com. This call is being webcast and a replay will be available on the Company's website.

Before we begin, we'd 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 them. Actual results could differ materially from those projected in any forward-looking statements.

Medifast assumes no obligation to update any forward-looking projections that may be made in today's release or on today's call. All the forward-looking statements contained herein speak only of the date of today's call. With that, I'd like to turn the call over to Medifast's Chairman and CEO, Michael MacDonald.

Thank you, Katie. Good afternoon, everyone, and thank you for joining us. I will begin today's call with a brief retrospective look at our business over the last several years, then review our 2014 accomplishments, followed by a discussion of our key strategic initiatives for 2015. Tim will then discuss our financial results for the fourth quarter and full year in more detail before we open up the call to take your questions.

Let's begin with my tenure here at Medifast. When I arrived three years ago, I was excited to be part of an organization with a passion for helping others and a strong history of clinically proven and doctor recommended programs. Our Take Shape for Life business was growing at a double-digit pace. Our Company-owned Medifast Weight Control Centers were in a rapid expansion phase, and we were fighting our way through several legal challenges which have since been resolved.

At that time, we were in a growth mode throughout Medifast. Generating increased revenues was our core focus, with a goal of driving profitability over time. As such, and as many of you recall, our share price was trading as low as $13 per share. Suffice it to say, when you I joined the Company I knew things needed to change if we were going to deliver long-term profitability.

With the help of our Board and key members of management, we put a long-term strategy in place against which we would measure our success, and made a number of difficult but necessary changes to the management team to help drive this plan forward. Together, we took a hard look at our business, and it quickly became apparent that our Company-owned Weight Control Centers growth initiatives while contributing to revenue growth was a significant risk to our new goals. As such, we unified our internal infrastructure that supported our multichannel model in order to become more efficient.

Our one Medifast project aligned product and pricing strategies across channels and standardized our technology platforms where possible to drive down costs. In addition, we expanded our channel offerings for customers and made additional investments to increase Medifast brand awareness.

The results of this program are evidenced by the improved and efficient organization we have today, as well as the EPS growth we've seen, and the stock price that has more than doubled from approximately $13 per share in late 2011 to over $33 as of December 31, 2014. Additionally, our balance sheet is stronger than ever with no debt, and we were able to effectively utilize our cash position to return capital to shareholders through significant share repurchases in 2013 and 2014. Our Board remains committed to its current capital allocation strategy as evidenced by its recent approval to increase our share repurchase authorization by 1 million shares. Tim will provide more details on share repurchases in 2014 in a few minutes.

Looking back, I believe many of our strategies work well and resulted in improved profitability. That said, shifts in industry dynamics, periodic economic challenges, and a cluttered and competitive environment have required us to adjust our strategic approach. Over time, we were able to recognize what worked best for our business and where we needed improvement.

Most notably we have learned to more fully embrace the differentiators in each unique Medifast business model and operate each with its own individual set of goals and priorities. In other words, we learned and have taken the appropriate steps so that Take Shape for Life is laser focused on driving growth health coach growth, and Medifast Direct is focused on end customer acquisition and retention strategies.

With these goals in mind, we have hired two outstanding executives, Mona Ameli and Ken Kopp, to drive growth in each channel. These talented individuals bring extensive experience in their respective fields and have been charged with making the necessary adjustments to operated their business models with more independence than previous strategies allow. We're excited to have Mona and Ken on board and are already seeing the positive results for our customers and our Company.

In all of that outlined, our management team guided by their Board has made significant strides in reaching the goals we set three years ago. While we recognize that there's still work to be done to improve our business over time, we are committed to continuing to set strategic objectives for our team to create enhanced results for our customers, coaches, employees, and shareholders.

Now, I'd like to provide an overview of our key accomplishments from last year. While we anticipated a revenue decline in 2014 in our Medifast weight control business related to a transition to the franchise model, we were clearly disappointed with the declines we experienced in our two largest revenue producing channels. Take Shape for Life revenues decreased 10% to $206.7 million, and Medifast Direct revenues decreased 24% to $57.2 million.

Our teams worked hard all year to identify opportunities to improve the trends and then put in motion specific strategies to reinvigorate growth in these important channel. I'll cover these in a few moments. Throughout 2014, I am pleased, however, they were able to make timely adjustments to our expense base to ensure we continued to generate healthy profitability and cash flow. Tim will take you through the detailed financial results in a few minutes.

2014 was an important year for product innovation at Medifast. We introduced 43 new products in 2014, and most importantly, several new incremental product categories. These new categories, including the Flavors of Home line, healthy snacks, great tasting, high protein maintenance products, and flavor infusers position us well for future growth and an extension of customer lifetime value. We also introduced channel specific products with the launch of the Thrive by Medifast and Optimal Health by Take Shape for Life product lines. These product lines will expand going forward providing a distinctive offering for our Take Shape for Life coaches.

We also introduced important technology tools and apps to help drive customer lifetime value and to better position us for future growth in an evolving consumer marketplace. Additionally, we introduced new BeSlim Club and Medifast Advantage programs in the third quarter to provide a new value focused introductory offer along with ongoing retention benefits to members who receive automatic monthly shipment of product. We know the customers who joined the BeSlim and Medifast Advantage programs tend to be more committed to health and weight loss and have a higher lifetime value. We will continue to provide incentives and motivate our health coaches and customers to take advantage of these important programs.

In a similar vein, we're also pleased to report that beginning in the middle of the fourth quarter, we began to see an increase in auto shipment retention metrics as a result. We also saw a healthy shift in the auto shipment option in our Medifast Direct channel as a larger percent of customers are choosing this convenient alternative.

Moving to our Weight Control Centers, at the end of 2014, we completed our two-year effort to transition away from corporate-owned Weight Control Centers. While the Weight Control Centers will remain at the core of Medifast's overall business, as a Company-owned entity, they were a significant burden on profitability. Medifast Weight Control Centers are more effective in a franchise model where strong entrepreneurial attention is concentrated in the local markets.

With franchise centers in Arizona, California, Louisiana, Maryland, Minnesota, Pennsylvania, Texas, Virginia, and Wisconsin, customers are able to receive counseling and support to effectively lose weight and gain the knowledge to help change their lifestyle. We ended 2014 with 73 franchise locations in operation and look forward to working with our franchise partners to evolve and grow this business model for long-term success.

While naturally growing revenues is an evergreen objective, in 2014 we continued to take measures throughout the year to ensure our profitability and cash flow remained healthy. Our efficient cost structure will be a significant advantage as we grow our revenues in the future. Our employee base was under 600 people at year end and is now under 500 people in March, down from nearly 900 in 2013. We are more efficient and sophisticated in our manufacturing and business operations functions, and I'm confident that we're poised to deliver outstanding quality products and services in a cost efficient manner to our coaches and customers going forward.

Now let's look ahead to our 2015 strategies. As I've outlined, we recognized the need to embrace the key differences and competitive advantages of direct selling and direct response, while continuing to leverage operational and cost synergies where possible. Our 2015 strategies can be summarized in three key focused areas. First, grow and simplify Take Shape for Life. Meg and Mona have refocused the team on improving the health coach journey from the sign-up process, to just in time training, through leadership development. Our efforts have and will continue to focus on providing our coaches with the right messaging, process, and tools to efficiently grow their business and attract others to replicate their experience.

We will ensure that every health coach fully understands the compensation plan and critical pathways to maximize their income opportunity, enhancing their personal success. From internal meetings to field training and events, our messaging will be consistent and clear. Working closely in partnership with our field leaders, Dr. Wayne Anderson and Dan Bell, we will provide a unified and simplified approach that can be easily replicated by part-time individuals joining the business. New health coach sponsoring will be a critical measurement of success while we also work to maintain healthy retention of existing health coaches.

As for simplification, while our initiatives include introducing new online coaching tools, changes in messaging alone can have as positive impact. Our initial simplification efforts this year was our February incentive campaign, each one reach one, which required a health coach to accomplish two simple tasks, to teach behaviors that will help them grow. When sponsoring a new coach with a qualifying BeSlim Club order, we challenge that coach to immediately gain a new client who also places a qualifying BeSlim order. It's easy to understand. We're very pleased that February was our strongest coach acquisition month since mid-2013.

Our next delivery will be to transform our coach sign-up process into a single step, allowing the coach to join and get started right away. Simplification and consistency across our systems, sites, training materials, messaging, communication, will all result in a program that allows our new and existing health coaches to grow and prosper.

Lastly, in Take Shape for Life, we are focusing on leadership development in our field. The journey from health coach to business coach to business leader requires continued leadership development. We have so many talented health coaches who have built impressive businesses and many others who can benefit from understanding how to do the same. We're working on enhancing our training curriculum and the delivery mechanism to make sure we offer the right training at the right time during the health coach journey. We're committed to working with all coaches to provide tools that will help them grow into strong business leaders.

Our second focus area is optimizing Medifast Direct response. An important focus in 2015 is in improving the conversion of customers who visit our sites. Ken, working very closely with our marketing and e-commerce teams, is focusing the Medifast Direct efforts on improving the overall customer experience, including the navigation process, the presentation of offers, clear attribution of spending, and effective use of mobile technologies. These elements all contribute to a pleasant and streamlined buying experience.

We have a made a lot of positive progress with activity designed to build brand awareness and drive more consumers to our website or call center. Our new 2015 campaign, Your Whole World Gets Better, focuses on three inspirational Medifast successes and tells the story in a unique and humorous way about weight loss with Medifast has opened the door to an overall improved outlook on life.

In conjunction with our new agency, we developed new creative assets across all mediums and have worked to optimize our media mix primarily across digital and television with e-mail marketing and direct mail also playing prominent roles. We are closely monitoring our efficiency and optimizing our buys on a weekly basis according to our results from our attribution models. While we spent significantly less on Med Direct marketing in 2014, we anticipate 2015 being a year where we will begin to increase our spending in line with the efficiency measurements. Likewise, we have worked to bring more consistent to our advertising spending as well as our overall messaging.

Further, what I mentioned earlier, we also continue to highlight the benefits of the Medifast Advantage auto shipment program. As our best offer, this program provides a strong acquisition vehicle, four weeks for the price of three. There's always retention benefits that include savings on shipping and rewards for ongoing purchases. Since the launch of this campaign last August, we have seen a significant increase in retention among Medifast Direct customers.

Soon we will also begin the transition away from our current catalog selling approach on our website shopping cart, and move to a more guided selling approach that capitalizes on new kits, bundles, and variety packs. We began to introduce these in the second quarter of 2015 and throughout the year. Lastly, in this focused area, we see opportunity to improve the customer experience across all key elements of acquisition retention and reactivation. We continue test and measure e-commerce improvements, website design changes, mobile experience enhancements, and the customer journey flow, the e-mail marketing to help improve the efficiency of our spending.

Finally, the third focused area is product and program innovation. As I mentioned earlier, 2014 was the biggest new product year in the history of Medifast. We now have a full suite of products to satisfy current and prospective customers and will continue to effectively commercialize these products in 2015. Our product marketing development teams are working on the innovation pipeline for 2016 to 2018 across ingredients, technology, and weight wellness categories. We will capitalize on the feedback gained from consumer research and trend analysis, both of which are integral to product development and overall success.

Our continued focus on product innovation has long been a differentiator for Medifast. Today, we continue to strive to be a leader in weight loss products. That said, the overall healthy living approach remains of equal importance and a keen focus for our business. Consumers are increasingly interested in healthy choices, and as a result, we see a great opportunity specifically in Take Shape for Life to participate and take market share in this space.

Lastly, we will leverage our many programs to appeal to the wide range of weight loss, weight management, and healthy living marketplace opportunities. Across our various weight loss and weight management plans including our popular Five-In-One plan, we work to tailor our offerings to meet customer needs. We recently completed a study that shows how our plans can achieve clinically significant weight loss with excellent retention of lean body mass.

We're also excited that our clinical research will continue to differentiate us in the marketplace. We help individuals with programs such as Medifast for diabetes, Medifast for seniors, Medifast for teens, and Medifast for nursing mothers. In 2015, we'll also work on creating more awareness for these many offerings and leveraging the strong critical heritage that Medifast has offered since 1980.

Let me underscore that as we execute on these strategies, we will maintain strong financial discipline. As I mentioned earlier, with the leadership of our Board and the improved executive leadership team, Medifast has demonstrated ability to deliver profit growth and strong cash flow. Our balance sheet is completely free of debt. We have managed our capital appropriations efficiently. We have employed stock buybacks as effective use of cash, and we have moved our model to position where all business units are now profitable with healthy margins. Importantly, we're confident in our ability to execute on our growth initiatives without significant capital investment.

In 2015, we will continue to work on longer term initiatives such as international partnerships and other expansion opportunities. We will bring a renewed focus on our core businesses with our successful execution initiatives I covered, Take Shape for Life growth and simplicity, Medifast Direct optimization, and product program innovation, I am confident we will lead Medifast forward toward even greater growth and returns in the years ahead. With that, I'd like to turn the call over to our CFO, Tim Robinson, who will discuss 2014 results in more detail, and our outlook for 2015.

Thank you, Mike. As Mike discussed and announced, we completed our transition of the Medifast Weight Control Center business to a franchise-only model in December of 2014. We ended the year with 73 franchise centers in operation compared to 41 centers at the end of 2013. As a result, the financial information I reference today will focus on our results from continuing operations. Please note, for 2014 discontinued operations had revenues of $22.5 million, with a loss from discontinued operations net of tax of $7.8 million or $0.62 loss per diluted share.

Now I'll review our performance for the fourth quarter and the year ended December 31, 2014, in more detail. In the fourth quarter, net revenues decreased 11%, to $62.3 million from net revenue of $70.3 million in the fourth quarter of the prior year. The Take Shape for Life sales channel accounted for approximately 73% of revenue. The Medifast Direct channel accounted for 19%, the Medifast franchise Weight Control Centers accounted for 6%, and the Medifast wholesale channel accounted for 2% of total revenues.

Focusing on our sales channels in more detail, revenue in our direct sales channel, Take Shape for Life, decreased approximately 12% to $45.7 million, compared to the same period last year. The decrease in revenue for this channel was primarily driven by a decrease in the number of health coaches along with a decline in the revenue per health coach. We ended the fourth quarter with approximately 9,300 active health coaches, and the average revenue per health coach per month during the quarter was $1,401.

As you know, the historical measurement of active health coaches is based on number of coaches who earn compensation in the last month of each quarter. Compensation is computed weekly. Therefore, the number of weekly pay periods per month does impact the active coach count. September and December of 2014, included only four weekly pay periods, while the last month of each quarter in both calendar years 2012 and 2013 included five pay periods making the comparison difficult. We estimate the impact of the fifth pay period to be approximately 600 coaches. We will re-evaluate this metric for future reporting.

Take Shape for Life commissions expense in the fourth quarter of 2014 decreased $3.2 million or 15% as compared to the fourth quarter 2013. Our Medifast Direct segment revenues decreased 19% to $11.4 million, as compared to $14 million in the fourth quarter of 2013. While still a decline, this marks the second consecutive quarterly improvement in the rate of decline.

Overall advertising expense increased $200,000 versus the prior-year fourth quarter. Our team continued to focus on efficiency improvements and balancing sales and marketing expense in an effort to drive profitability. Revenue in the franchise Medifast Weight Control Center channel increased to $3.8 million from $3.6 million or an increase of 6% as compared to last year.

This increase was driven by the conversion of corporate0owned Medifast Weight Control Centers to franchise centers, partially offset by a 10% decline in revenues from all other franchise centers. There was an average of 65 franchise centers per month in operation during the fourth quarter of 2014 compared to 38 centers last year, and there were 73 franchise centers in operation as of December 31, 2014, compared to 41 centers in 2013.

Wholesale channel revenue which is comprised of revenue from physicians and other wholesale partners, increased 40% to $1.4 million compared to $1 million last year. The increase in this channel is driven by incremental resources focused on the growth of the channel. Gross profit for the fourth quarter of 2014 was $45 million, compared to $51.9 million in the fourth quarter of the prior year. Our gross profit margin decreased 170 basis points to 72.2% versus 73.9% in the fourth quarter of 2013. The decrease in gross profit margin was the result of sales mix and increased product cost, driven primarily by a reduction in manufacturing volumes.

Selling, general, and administrative expenses from continuing operations in the fourth quarter of 2014 were $40.8 million versus $41.9 million in the fourth quarter of last year, a decrease of $1.1 million. As a percentage of net revenue, our selling, general, and administrative expenses were 66%, up from 60% in the fourth quarter of 2013. 2014 selling, general, and administrative expenses included $2 million accrual for a franchise loan default guaranteed by Medifast, and $1 million in extraordinary legal and advisory expenses resulting from recent 13D filings. Excluding these items, SG&A as a percentage of sales was 61% in the fourth quarter of 2014.

Sales and marketing expense decreased $300,000 in the fourth quarter of 2014 as compared to the fourth quarter of 2013. This is primarily driven by a decrease in Take Shape for Life event expense, partially offset by a $200,000 increase in our advertising expense. Fourth quarter income from operations was $4.2 million or 6.7% of net revenue, compared to $10 million or 14.3% of net revenue in the fourth quarter of 2013. Adjusted income from operations for the quarter was $7.2 million or 11.5% of net revenue.

Fourth quarter income from continuing operations which is net of other income and taxes was $2.6 million or $0.21 per diluted share based on approximately 12.2 million shares outstanding, compared to $7.2 million or $0.53 per diluted share for the comparable quarter last year, based on approximately 13.6 million shares outstanding. Adjusted income from continuing operations in the fourth quarter of 2014 was $4.6 million or $0.38 per diluted share compared to the same $7.2 million or $0.53 per diluted share in the fourth quarter of 2013. Adjusted income from continuing operations excludes a $1.3 million accrual for a franchise loan default guaranteed by Medifast, and $700,000 in extraordinary legal advisory expenses resulting from 13D filings.

Adjusted income from continuing operations is a non-GAAP financial measure. Please refer to the financial tables in today's press release for a reconciliation of all non-GAAP financial measures. Our effective tax rate was 37.9% compared to 26.3% in the fourth quarter of 2013. The increase in the effective tax rate in 2014 over 2013 was a result of tax benefits realized in 2013 related to prior years, and the fourth quarter of 2013 impact of an inability to utilize certain tax deductions in the period.

Turning to our full year results, net revenue from continuing operations decreased 12% to $285.3 million for the fiscal year ended December 31, 2014, compared to $324.1 million in 2013. Take Shape for Life revenues in 2014 were $206.7 million compared to $228.7 million in 2013. Medifast Direct revenue was $57.2 million as compared to $75.5 million in 2013. Franchise Medifast Weight Control Centers revenue was $15.4 million as compared to $15.3 million in 2013, and lastly, Medifast wholesale revenue was $6 million in 2014 compared to $4.6 million in 2013.

Income from continuing operations for the FY14 was $21 million or $1.65 per diluted share based on approximately 12.8 million shares outstanding, compared to $27.1 million or $1.96 per diluted share for the comparable period last year, based on approximately 13.8 million shares outstanding. Adjusted income from continuing operations for FY14 was $24.1 million or $1.89 per diluted share compared to the same $27.1 million or $1.96 per diluted share in 2013. Adjusted income from continuing operations excludes the net of tax items of $1.3 million accrual for franchise loan default guaranteed by Medifast and the $1.8 million in extraordinary legal and advisory expenses resulting from 13D filings.

Our effective tax rate for 2014 was 33.6%, compared to 30.5% in 2013. The increase in effective tax rate for 2014 is primarily due to the tax benefits realized in 2013 related to prior years. Our balance sheet remains strong with stockholders' equity at $80.5 million and working capital of $55 million as of December 31, 2014.

Our cash, cash equivalents, and investment securities for the fourth quarter of 2014 decreased to $52.6 million compared to $67.8 million at December 31, 2013. The decrease reflects the full year impact of repurchasing 1.1 million shares of stock during 2014 for approximately $34 million. Including the recent addition to our stock buyback authorization Mike referred to earlier, we have 1.2 million shares authorized for repurchase as of December 31, 2014.

As a result of the closure and sale of the Medifast corporate Weight Control Centers, the Company re-evaluated the segment results being reported. The consolidated operating profit of the Company is reviewed by the chief operating decision maker as a single segment, and sales are reviewed at the channel level. As a result, we'll no longer provide segment disclosure other than sales per channel which is representative of how the business is run today.

Turning to our guidance, we expect first quarter net revenue from continuing operations to be in the range of $70 million to $73 million, and earnings per diluted share from continuing operations to be in the range of $0.33 to $0.35 per diluted share. We expect full year 2015 net revenue from continuing operations to be in the range of $285 million to $300 million, and earnings per diluted share from continuing operations are expected to be in the range of $1.85 to $1.95 per diluted share.

Our guidance includes our expectation that the effective tax rate will be in the range of 33% to 34%. Both quarterly and fiscal year guidance excludes any potential future expenses resulting from 13D filings. That concludes our financial overview. Now, I'd like to turn the call back over to our Chairman and CEO, Mike MacDonald.

Thanks, Tim. In summary, we expect our 2015 initiatives and the restructuring of our business operations to enable us to realize improved results. The actions we've taken to date and additions we made to our management team have made us a stronger organization. Today, we believe we have the right strategy and people in place to help optimize and grow our sales channels for years to come.

We appreciate the efforts of our team at all levels and expect that with their help and the actions we have taken we will drive growth across our Take Shape for Life, Medifast Direct, franchise Weight Control Centers, and Medifast wholesale channels. We appreciate your interest and support of Medifast. With that business review, Tim, Meg, and I are available to take your questions. Operator?

Thank you. (Operator Instructions)

Our first question comes from Frank Camma at Sidoti.

Good afternoon, guys.

Good afternoon, Frank.

How are you?

Hi, Frank.

Good, good. A couple questions, mostly on the Take Shape for Life, you spoke about the number of things you're doing there for improvement, obviously changing out or improving management and some of the other items. The environment for direct selling in the US has been pretty challenged especially last year. I just wonder if you could talk about maybe what specifically has impacted two things for you, in particular, one being the headcount or the health coach count, and two, the actual productivity.

Sure. This is Meg.

Hi, Meg.

Last year I think the biggest impact to us was that our coaches, although with great effort, did not adapt the behaviors that aligned with where we wanted them to go for the integrated compensation structure, the new compensation plan. I would say the compensation plan is a very effective comp plan. We could do a better job at helping them train and really find, what we're calling, a duplication model pathway to really making sure that every single person can explain the comp plan in an effective way, defining it as activities per health coach, what activities do I have to do, how much per hour does that make me, what rank would I be achieving?

That is where we feel like we did not effectively contribute last year, and we are excited that this year we have each one reach one. It just came out. Your second one which is activity level of health coaches, the each one reach one program that we just launched for the month of February has had tremendous impact in Take Shape for Life because it requires a health coach to bring in someone who then has to bring in someone who has a BeSlim Club order. We're actually getting activity out of our health coaches, not just signing up health coaches but getting truly active health coaches to join. That's been, as the script mentioned, we have the highest sponsoring numbers since mid-2013.

That takes a longer period of time to gel, right? Am I correct about that?

Yes, but I can tell you that just coming off an incentive trip we had this past weekend, many of our leaders who spent a majority of last year really trying to move from high front line volume into really building depth are actually feeling a turning point in their income right now. That's an extremely important measure for us is that our leadership is feeling like they're making more money because they've built the organizational structure that gets the most out of our compensation plan.

The other thing, Frank, this is Mike, is we still have very strong stability in our networks. We have strong leadership, the same leaders. We haven't really experienced turnover in that. Basically for us, it's not like a lot of the network is broken or anything, it's really more or less reinvigorating the network and getting it to grow again and its health coaches, but the good news is our retention is very good. We don't have any serious turnover problems.

That is good. If you looked at your payout, I don't think you talked about this, but you look at your effective payout per health coach, how does that stack up to some of the other opportunities that are out there for these people?

We're up there. Our overall payout for our network is up there at the top. We would be very similar to USANA or Nu Skin or any of the large multilevel firms.

From an individual perspective, like as far as being in Take Shape for Life as a coach, the comp per health coach is very high. They can make more money per order in Take Shape for Life than they can make in many other direct selling companies.

Okay. Great. The only other question I had, just flipping over to the franchise model for a second, do you expect to franchise more units this year, or would it be a slow growth to that?

Frank, our focus right now is really making sure that we're doing a good job supporting our current franchisees. What we're going to try to do is help them be as successful as possible and really focus on them, and if any of them decide they want to grow, we will probably do that. Starting new people in the environment, I think, probably is not the right thing to do. It's really focusing on the people that we have.

Sure. That makes sense. Thank you.

(Operator Instructions)

Seeing no further questions, I'd like to turn the conference back over to management for closing remarks.

Thanks for your participation in today's call. We look forward to providing you with an update on our business when we report results for the first quarter. Have a great evening.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.