Good afternoon and welcome to the Medifast fourth quarter and full year 2016 earnings conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Katie Turner. Please go ahead.

Good afternoon. Welcome to Medifast's fourth quarter and fiscal year 2016 earnings conference call. On the call with me today are Daniel Chard, Chief Executive Officer and Timothy Robinson, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ending December 31, 2016 that went out this afternoon at approximately 4:05 P.M. Eastern Time. If you have 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 I 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 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 forward-looking statements contained herein speak only as of the date of today's call. And with that, I would like to turn the call over to Medifast's CEO Dan Chard.

Thank you Katie. Good afternoon everyone. We are pleased to be with you today to discuss our fourth quarter and full year 2016 financial results. I will provide a brief overview of our financial results, discuss our recent business performance and provide an update on my first few months at Medifast. Tim will then review our financial results in more detail and share our guidance for he first quarter and full year of 2017. Finally, Tim and I will be available to answer your questions. I have spent much of the past several months getting to know our talented field and corporate teams. I am excited about the company's future direction and believe that we have a significant opportunity to grow our business domestically and expand internationally. In 2016, we made solid progress on our key initiatives and also began setting the stage for accelerated growth in 2017 and beyond. We are pleased to report the return to growth on both top and bottom line in 2016. Revenue of $274.5 million was in line with our expectations. Income from continuing operations was $1.49 per share, while adjusted earnings from continuing operations was a $1.89 per share, which is at the high end of our expectations for the year. In line with this performance, we announced a 28% increase in our quarterly dividend last December. Going forward, our focus will be to accelerate our topline revenue growth with continued improvement in profitability. The company is in the fortunate position of being surrounded by powerful macro trends that we believe will support our long-term growth. We have a large addressable market in the U.S. and internationally as people increasingly focus on adopting healthier lifestyle, including but not limited to, weight management. We responded to these trends by creating a compelling highly effective…

Thank you Dan and good afternoon everyone. 2016 was a pivotal year for us as we returned to revenue and profitability growth and positioned the company for future growth. Before I go through the details, I just want to remind everybody that the financial information I share here today will reference our results from continuing operation. In the fourth quarter, net revenue increased approximately 2% to $62.5 million from net revenue of $61.3 million in the fourth quarter of last year. The Take Shape for Life business unit accounted for approximately 82.8% revenue. The Medifast Direct business unit accounted for 10.9%. Franchise Medifast Weight Control Center business unit accounted for 5.8%. And the Medifast Wholesale business unit accounted for 0.5% of net revenue. Revenue in Take Shape for Life increased 8% to $51.8 million from $48 million in the fourth quarter of the prior year. We are pleased to have our fifth consecutive quarter of positive year-over-year revenue growth at Take Shape for Life. There were approximately 12,500 active health coaches in the fourth quarter compared to 11,900 health coaches in the same period last year. Average revenue per active earning health coach for the quarter increased to $4,158 as compared to $4,039 in the fourth quarter of last year. We believe that our increased emphasis on key Take Shape for Life strategies, the increased engagement level of our field leaders and the operational improvements in health coach experience and lastly the increased resources added to the Take Shape for Life team are having a cumulative impact that translated into momentum and will in turn drive sustainable growth. Our Medifast Direct business unit revenue decreased 27% to $6.8 million as compared to $9.3 million in the fourth quarter of 2015. Dan articulated the challenges in this business unit and a…

[Operator Instructions]. The first question comes from Frank Camma with Sidoti. Please go ahead.

Good afternoon guys.

Hi Frank.

Hi Frank.

Yes. You did call out, Dan, a couple issues with the end of the quarter or during the quarter that one of the things I have always felt was surprising about Medifast is that your business is a lot less seasonal than some of the other commercial weight loss providers, granted Direct is not a big piece of the business any more but my point is obviously it looks like it's become more seasonal. But you said some of the items you weren't able to our ship. I just wonder if you could just talk about that a little bit more? Like did you see a catch-up later? Like you built the inventory and then of course did you then ship those in Q1 of this year? I am just trying to figure that out?

No. Frank, those were related to the new product that we launched. So we weren't out of stock of all the products. What really was happening, we build up a lot of energy around the launch of OPTAVIA 13 products, the 13 products that we launched at the convention last year. The demand was higher than anticipated and very quickly we ran out of stock. So a lot of the purchasing was incremental during that period of time. So it didn't come back once we had those products back in stock. But it did dampen some of the excitement that we have built up to it. Since then, as I mentioned, we looked at how we calculate the enthusiasm and demand that's coming out for these new products. We have just launched 20 marks the couple of weeks ago in Atlanta and we have made those adjustments. So it didn't come back. But we have made the adjustments. So I am sure that we don't have that kind of operational slowdown again.

Okay. And can you talk about like the average sales per health coach since it was really strong all year long? So is that related to that issue too where you kind of had a buildup and then the excitement tapered off? Or is that a totally separate issue? I am just trying to figure it out, when you look at it on a sequential basis?

On a sequential basis, sequentially we were up 6.5% in productivity per health coach in the third quarter. We were up just shy of 2% in the fourth quarter. So it had to have some impact on productivity. It had an impact on our sponsoring rate and bringing in new coaches. As Dan mentioned, I think the excitement buildup from convention, we had a lot of momentum coming out here. We just had a little bit of a damper on the momentum when we couldn't deliver the new products that were really we centered all the excitement around.

And then, I don't know if you mentioned this, but did you see productivity then pick back up in Q1 as you would expect this year? Are you able to talk about that?

Yes. Let me give you a little insight to that. I think that coming out of the end of the year, that slowdown continued a little bit into January. So what we can say is that we are seeing that reverse. After Go Global, which just happened in February, we launched 20 new products. We have plenty of inventory. But also the event was like a really good event and we are seeing pretty sharp uplift in sponsorship of new coaches and we are seeing a pretty sharp uptick now in revenues starting in the third week of February. So we think those corrections we put in place, we are clearly noticing a change.

Okay. My last question relates to Take Shape for Life business model. Since you mentioned your goal longer term is to double over the next three years. And I understand that's just a goal. So when we look at the build this year, should we rely more on growth in active health coach versus productivity? Is that kind of the way when you did your guidance? Is that how you looked at it?

Yes. That is the way we are looking at it and we are focused on continuing to maintain or improve productivity. But our focus is on building and transitioning people, increasing our sponsoring races, transitioning our new health coaches to business coaches and then to business leader. So we are looking for both growth in the number of health coaches, but also progression in our overall leadership pipeline.

Okay. Great. Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Dan Chard for any closing remarks.

Thanks for your questions and participation in today's call. We look forward to speaking with you again when we report our first quarter of 2017 financial results and have a nice evening.

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