Good afternoon and welcome to the Medifast First Quarter 2018 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 for opening remarks. Please go ahead.

Good afternoon. Welcome to Medifast first quarter 2018 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 March 31, 2018 that went out this afternoon at approximately 4:05 PM Eastern Time. If you've not received the release, it is available on the Investor Relations portion of Medifast Web site at www.medifastinc.com. This call is being webcast and the replay will be available on the company's Web site. 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 believes, expects, anticipate and other similar expressions generally identifies 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 projection that maybe made in today's release or on today’s call. All the forward-looking statements contained herein speak only as of the date of this call. And with that, I would like to turn the call over to Medifast Chief Executive Officer, Dan Chard.

Thank you, Katie. Good afternoon everyone. We're pleased to discuss our first quarter 2018 results with you today. I will provide a brief overview of our financial and operational business performance. Tim will then review our financial results in more detail and share our 2018 second quarter and full-year guidance. We will then be available to answer any questions. We started off the year with a strong first quarter as the momentum we built throughout 2017 continue to accelerate into the first quarter of 2018. Our corporate team and our field leaders are aligned behind our strategy to extend our unique offer to a growing client population throughout the United States and soon internationally. It is clear that our mission to offer the world lifelong transformation, One Healthy Habit at a Time is resonating in the U.S market. We ended the first quarter with a record of 16,700 active earning OPTAVIA Coaches to support the clients in achieving their health goals. The growth of our OPTAVIA Coach base along with improved revenue per active OPTAVIA Coach combined to deliver financial results that exceeded our expectations for the first quarter. Quarterly year-over-year revenue growth accelerated from a 25% growth in the fourth quarter of 2017 to nearly 40% growth in the first quarter of 2018. This mark the fourth consecutive quarter of year-over-year growth and the fifth consecutive quarter of sequential revenue improvement. The first quarter was also the largest revenue and profit quarter in the history of the company. Our team continues to focus on generating operating efficiencies to maximize profitability as we continue to grow. Gross margin expanded 100 basis points to 75.9% and SG&A cost as a percentage of revenue decreased 170 basis points. These improvements contributed to a record operating margin of 14.9%. Combined, the acceleration in…

Thank you, Dan, and good afternoon, everyone. Before I begin, I want to remind everyone that starting this quarter we’ve changed how we report sales. Going forward, simplifying the line of changes in the way we now manage the business, review operating performance and allocate resources. We previously disclosed entity wide disclosures for sales by channel, OPTAVIA, Medifast Direct, Franchise Medifast Weight Control Centers, and Medifast Wholesale. Through the interchangeability nature of the customers among sales channels, sales migration to OPTAVIA and realignment of the internal operations, we will now be operating and reporting as a single sales channel. This change in our financial reporting structure is a testament to our success in transforming and restructuring the business and a reflection on how the business is managed today. Secondly, I wanted to inform you about an important accounting change we made beginning January 1, 2018. As most of you are aware, the updated Financial Accounting Standards Board revenue recognition standard requires companies review the way they recognize revenue. As required, we've completed our view and adopted a new standard in 2018 on a modified retrospective basis. As a result, on a net basis, we recorded an after-tax transition adjustment to reduce retained earnings as of January 1, 2018 by $2 million. This is comprised of $5.6 million of revenue offset by $3.6 million of inventory costs, commissions expense, shipping cost, credit card fees, and related income taxes. The adoption of this new accounting standard primarily impacts the timing of revenue recognition for product shipments. As product revenue will be recognized upon customer receipt and delivered at the time of shipment. A reconciliation of this is contained within our press release issued this afternoon and in our Form 10-Q filed with the SEC. I will now like to review our financial…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Frank Camma of Sidoti. Please go ahead.

The next question is from Linda Bolton Weiser of DA Davidson. Please go ahead.

The next question is from Douglas M. Lane of Lane Research. Please go ahead.

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

I’d like to thank all you for your interest in Medifast and a particular thanks to our community of OPTAVIA Coaches across the country for everything they did to make this quarter a successful one. We appreciate all of your participation in today's call. And Tim and I look forward to speaking with you again when we report our second quarter 2018 financial results. Have a nice evening.

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