Greetings, and welcome to the Medifast, Inc. First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Katie Turner for opening remarks. Thank you, Ms. Turner, you may begin.

Good afternoon, and welcome to Medifast's First Quarter 2013 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 Timothy Robinson, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ending March 31, 2013 that went out this afternoon at approximately 4:05 p.m. Eastern Time. If you've not received the release, it is 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 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 posted on the call on its website. All of the forward-looking statements contained herein speak only as of the date of this call. And 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. On today's call, I will provide you with an update on our strategic initiatives and discuss areas of our business, where we realized greater efficiencies in an effort to improve Medifast's future growth and profitability long-term. Tim will review the financial results for the first quarter in more detail and discuss the second quarter and full year 2013 revenue and EPS outlook. I will then provide closing remarks, and we'll open up the call to take your questions. In the first quarter, we continued to focus on driving operational excellence throughout our Take Shape for Life, Medifast Direct, Medifast Weight Control Center and Wholesale Physicians sales channels, as well as our Internet support departments, to better position our business for maximum profitability long-term. In the first quarter, we were able to generate an 8% increase in revenue to $96 million while further enhancing our customer experience in each of the sales channels. Our continuous review of our overall cost structure to further leverage our sales enabled us to improve our operating margin 200 basis points and deliver an earnings per share increase of 48% to $0.43 in the first quarter of 2013, ahead of our expectations for revenue in the range of $93 million to $95 million and earnings per diluted share in the range of $0.32 to $0.35. Excluding the $400,000 or $0.03 per diluted share benefit from the lower tax rate versus the first quarter of 2012, earnings per diluted share would have been $0.40 for the first quarter of 2013. Tim will discuss our financials in more detail in a few minutes. In the first quarter, we were pleased with the introduction of our national brand advertising campaign, as we combined the new campaign with…

Thanks, Mike. I'll now review our financial results for the first quarter ended March 31, 2013 in more detail. For the first quarter, net revenue increased 8% to $96 million from revenue of $88.9 million in the first quarter of the prior year. As Mike mentioned, our reported net revenue for the quarter exceeded our guidance of $93 million to $95 million. The Take Shape for Life sales channel accounted for 61.9% of total revenue; Medifast Direct accounted for 23.9%; Medifast Weight Control Centers and Wholesale Physicians accounted for 14.2% of total revenue. Focusing on our sales channels in more detail. Our direct sales channel Take Shape for Life experienced revenue growth of 12% to $59.4 million compared to the same period last year. Take Shape for Life growth was driven by increased customer product sales. As Mike mentioned, Medifast Direct segment revenue increased 2% to $23 million as compared to $22.5 million in the first quarter of 2012. In the first quarter, the Medifast Weight Control Centers and Wholesale Physicians channels revenue increased 2% to $13.7 million, while comparable stores for centers opened greater than 1 year decreased by 15%. As Mike mentioned, we saw a $2.8 million improvement in this segment's operating profit year-over-year. We have 73 Medifast Weight Control Centers in the comparable store base as of March 31, 2013. Gross profit for the first quarter of 2013 increased 8% to $72.4 million compared to $66.8 million in the first quarter of the prior year. Our gross profit margin increased 30 basis points to 75.4% versus 75.1% in the first quarter of 2012. Margin improvement during the quarter is a result of pricing adjustments, including offering fewer customer discounts, partially offset by increased commodity and shipment costs. Selling, general and administrative expenses in the first quarter of…

Thanks, Tim. We believe our multichannel weight loss and weight management business model allows us to benefit from cross-channel synergies and overall, will diversify our go-to-market approach. We're excited about our future growth prospects in each of our 3 sales channels. We will consistently work to make the necessary adjustments to improve our operational efficiencies and overall effectiveness across our distribution channels in 2013. In addition, we continue to believe that our vertically integrated operations and increased capacity will allow us to continue to improve the long-term leverage of our business model to increase margin expansion and long-term profitable growth. In closing, we are pleased with our start to 2013. The Medifast business model has allowed us to realize strong top and bottom line growth, as well as strong cash flow generation. And we remain optimistic about our long-term growth prospects and the team in place to help us achieve our goals. We appreciate your interest in Medifast. With that overview, Tim, Meg and I are be available to take your questions. Operator?

[Operator Instructions] Our first question comes from Scott Van Winkle with Canaccord Genuity.

So a couple of questions. First, on Take Shape for Life, I don't think I've ever seen you guys have an 1,100 active Health Coach growth numbers sequentially before. It was -- and you went through the training, obviously, a lot of things have been done there and made some investments. Was there anything else? I mean, was anything incremental in the Q1 versus years past? Or I assume the way you're measuring the number is still the same. I'm just wondering if there's any other color on that, that big Health Coach growth jumped.

No. I think the adoption of the new training materials that were put out, the Coaches, the leadership is really driving consistency. The other is that use of success from Home Magazine kind of came out into the field in January, February, which was a great tool to help people realize how legitimate the business model we have is, and that was a great addition to the vast tools that we've created to help get more Coaches on board, along with just more clients turning into Health Coaches.

Okay. Now I don't know if this is something you track, I'm sure you certainly have the data, but -- so you're spending kind of brand building on the marketing side to drive your people to this kind of one Medifast website. Has there been any noticeable increase in people coming in to Take Shape for Life through your website rather than through another Health Coach?

I think the most -- I think the -- from a business perspective, particularly [indiscernible], it's obviously, relationship-based business. So I would say that there's obviously many, many more opportunities for people to build their relationships one-on-one than there are through any type of leads program that we could offer.

Okay. And that kind of parlays into my next question, which is, I understand the change in the advertising spend ratio. I guess, what I don't understand is why you'd apply that across your entire revenue base. Take Shape for Life is a one-on-one business. Advertising really doesn't drive that segment. So I'm kind of wondering what your thinking was there. I mean, if you want to get off the specific spend to direct response, I would get that. I think you should be just reporting an advertising figure every quarter and let us figure out what revenue we want to apply it against.

Scott, from -- basically, if you look at our advertising spend, it primarily drives the business that is upside to Take Shape for Life. So we're looking at that very closely and trying to evaluate what the right mix is between branding because, as you know, Medifast brand is only in the 20s of brand awareness. So we're trying to balance building the brand up and then also doing what we need to do, call to action advertising, to drive activity over the Med Direct website. And we're looking at that balance. So we'll make adjustments as we go forward because we could, at some point, spend a little too much on branding and have to take that back to spend more on call to action if we see we're not driving enough revenue. So that's really the balance we're looking at. And if you look at the non-Take Shape for Life revenues, that's really what we're trying to drive with the advertising.

Okay. And then last question, I won't monopolize the call here. Tim, do you have some numbers -- and if you said this in the call, I apologize, I got a little distracted in the middle with another report. But do you have the numbers as if that Monday after Easter was your Friday shipping day as to what the sales growth in Take Shape for Life and direct response would've looked like?

Well, we know that the last few days of revenue in the first quarter were better than what we expected. So we think some of the revenue pulled in, people accelerated their orders, shifted their orders up a little bit in the first quarter. So we -- I don't have the exact numbers, but we definitely saw a little bit of a push there at the end that we weren't anticipating. You can see some of the auto ship orders that were scheduled for that weekend. We can kind of see that activity moved up a day or two. So it seems like people -- some people, at least, put some of their orders in, in advance or moved their orders up in advance of the holidays.

Got you. So it was -- it might have still been a detriment that holiday shift, but it wasn't as big as you thought?

No, it wasn't as big.

That's correct. It was there, but it definitely was a little lighter than we thought.

[Operator Instructions] Our next question comes from the line of Michael Halen with Sidoti & Company. Michael Halen - Sidoti & Company, LLC: Okay, so in terms of the Medix Weight Control Centers opens, were there any openings in the quarter? And can you let us know how many you think might be open this year?

Well, on the Medix openings, they're going to happen in the back half of the year, Mike. And they're still -- we don't know totally what the number is going to be because there's a couple of corporate centers that they're going to open and then there's places where they go into clinics, they're going to make sort of mini-centers. And we don't have -- we haven't finalized that information yet. We're pleased with the progress they're making. In fact, they're bringing a couple of employees up here for the next month to actually be trained in our center programs and things like that. So once we -- what we'll do from a public disclosure standpoint is once we announce the opening of the first center, we'll announce further plans for this year. Michael Halen - Sidoti & Company, LLC: Okay. And then in terms of branding and advertising, and correct me if I'm wrong, but I think you mentioned in the past that you expected to spend a little more heavily in the first quarter. And if that's the case, will some spending shift back into Med Direct during the rest of the year, or do you expect to continue to shift spending out of Med Direct into some of the branding initiatives?

We're looking at that right now. We've clearly shifted money into the branding initiatives because we want to try to build a long-term business, while also trying to get short-term results. So we're balancing long-term strategy versus short-term, but we will look at that. If we see that -- we feel that the pool advertising from direct response will get us a better return, our team will look at that and we'll balance the spending between the brand and the direct response. Obviously, TV advertising is committed through the first half of the year. You don't just shut off television in the short-term, but we have tremendous flexibility through the back 6 months to look at that as we're seeing the revenue come in over the second quarter.

Our next question comes from Kurt Frederick with Wedbush Securities.

I was just wondering if you could talk a little bit about the cash. It looks like you have close to $5 a share in cash, no debt. I'm just wondering what your plans are for that.

That's a good position, Kurt, I think. [indiscernible] But -- now the intention is for us -- in the second half of the year, we will be looking to do share buybacks. That's -- that will clearly happen. We still have that. But we're also looking at potential -- other strategic moves that we could potentially make, and that's basically what we're looking at. So we're evaluating our options, and we'll be coming forward with a strategy in the second half on that.

Okay. Are there any share buybacks in the guidance?

No.

No.

And then maybe we can talk a little bit about the Weight Control Centers. It look like in the corporate centers, usually, there's a big swing as far as the same-store sales. And I was wondering if you could talk a little bit about that and any changes you've made in the centers and kind of like the plans going forward as to any changes you may be putting in, in the near-term.

Yes, what we're seeing is similar to what Weight Watchers and some other people have seen is they're seeing a little bit more difficulty in the retail environment. That's the nice thing about having 61% of revenue in Take Shape for Life, that's a higher relationship business and it's not as affected by some of the slowdowns in the retail. But in our centers and even in our franchise of centers, we're seeing some impact of economic factors on discretionary spending. So basically, what we're trying to do, and it's working very, very well, is we're trying to get the current clients to be on the program longer, and we have a lot of focus on making sure clients who have strong relationships with us stay a longer period of time and stay on the program longer. That's been a big focus. And we also have a focus on making sure we're getting the right advertising mix and the right operational effectiveness in each center to improve the same-store revenue sales. So we're very, very focused on that right now. And operationally, that's a major priority for us, but we're thrilled with the -- despite a little bit of the toughness in revenue and the center business, we are very, very excited about the $2-plus million improvement in the profit in our centers. So we've been working very hard also to make sure we have the right level of resources, that we're focused on improving the profitability as we transition our center model. As I said, when you transition from company-owned to the franchise center model, that is a transition, as you stop building your own centers, you've got to work with partners and get them going. And there is a gap there between when you're going to get accelerating revenue.

Okay. And can you talk about the change in profitability? Where is the bulk of that coming from?

We've seen a very good focus on our SG&A in our centers. So we've done a very good job of making sure we're looking at the hours centers are open, the manpower that is in the centers, looking at how effectively we're doing our programs and the time spent with each of the people who comes into a center. So I think operationally is where we're getting improved productivity and cost reduction.

Okay. And then just last question is on the franchise centers. I think you said 5 to 7 for 2013. I guess, one, is that correct? And two, does that include anything for the Medix?

No. That does not include Medix at all. That's just the franchise in North America, Kurt. And we're working closely -- remember, over the last 30 days was when we really started going out and trying to attract new franchisees because we had to create the infrastructure internally, we had to do a franchise in a box model and do things where we can provide the necessary support because we're converting the company, as I said, we have to make this conversion from a company that did their own locations to now providing support to partners. And we're doing a good job. A lot of deliverables are ready to go for people to start looking at acquiring Medifast franchises, and we're getting to a good state of implementation. And I think you'll see that between now and the end of the year.

And our next question comes from Chris Krueger with Northland Capital Markets.

Just a follow-on, on the Weight Control Center question. Accounts are down 16%. Was that pretty much across-the-board throughout all markets in the country? Are there any glaring weak spots where you might have to change things [indiscernible]?

There were some markets that -- as an example, in Texas, was a market and case where -- remember that infamous quarter where we spent $37 million to get $34 million, which I wasn't very happy about? I think that was my first one. Well, we spent a ton of money a year ago in the beginning of the year in the Texas market, and what happened this year, we spent less money, so we had somewhat of a decline in revenue, but we actually overspent dramatically in that market in the year before. And they're still doing well in that market, it's just a matter of what level do you want the spending to be. And they are the kinds of things we're looking at in this market because even when we talk to some of our franchisees who spend quite a bit of money -- I mean, they spend quite a bit of money on advertisements between 15% and 24% depending on their location, they're saying that advertising in some areas is not been very effective in bringing in new clients right now. So we're very carefully balancing that as we look at what we're doing and get feedback from our partners and making sure we're really -- in a way, I mean, we're really looking to try to optimize our profitability while we're still growing our revenue, but not making -- not overspending in areas where we're not going to get a return.

Okay. And on Take Shape for Life, any update on potential emerging markets. I know you've always said 6 or 7 that were the leading markets in the U.S. Any other ones starting to come through?

We're starting a 5-city tour right now with Dr. A. I'm leaving -- we have events. Maggie, you can talk about the 5 cities.

We have 5 cities we're going into. So we have Chicago, Minneapolis, Charlotte, Salt Lake City and Denver that we'll be going into this summer. So we have different dates, about every other weekend, between now and our convention to start opening. And we've already had and seeded these markets with different types of marketing-related event communications to build coaching there. And we've partnered with our leaders, which is really the tremendous thing is they're driving it, we're supporting it. So our field is driving the expansion into these markets, which we're extremely excited about.

Okay. I'm in Minneapolis, what would I look for to see evidence of that?

We will be in Minneapolis. I'm actually going there myself so you can look forward to seeing me there with Dr. A. I'm probably not as good-looking as Dr. A, but I'll be there -- I think the date is -- let me just check it...

Or we can send you the date, how about that?

Sure.

Minneapolis is on the 21st of June.

Yes, 21st of June.

21st, 22nd.

[Operator Instructions] Okay, at this time, I'd like to turn the floor back over to management for closing remarks.

We appreciate your participation today, and we look forward to speaking with many of you during the upcoming investor conferences. But we want to thank you, by the way, for your support of Medifast, and we very much appreciate it. Thank you very much.

Thank you. Ladies and gentlemen, this concludes our teleconference. You may disconnect your lines at this time. Thank you, all, for your participation.