Good day, and welcome to the Medifast First Quarter 2021 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Reed Anderson, Investor Relations.
Please go ahead.
Good afternoon, and welcome to Medifast's Q1 2021 Earnings Conference Call. On the call with me today are Dan Shard, Chairman and Chief Executive Officer and Jim Maloney, Chief Financial Officer. By now, everyone should have access to the earnings release for the period ended March 31, 2021 that went out this afternoon at approximately 4:0:5 p. M. Eastern Time.
If you have not received this release, It is available on the Investor Relations portion of Medifast's website at www.medifastinc.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 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 call. All of 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 and Chief Executive Officer, Dan Shard.
Thank you, Reed, and good afternoon to everyone. Thank you for taking time to be with us today. On the call with me today is Jim Maloney, our Chief Financial Officer. I'm going to provide a brief overview of our first And then Jim will run through our financial results in more detail. Following our prepared remarks, we will open up the call to take your questions.
We are proud to report a strong start to 2021 with revenue growth of 91% to nearly $341,000,000 reflecting continued momentum in independent OPTAVIA Coach growth as well as solid gains in coach productivity. The number of active earning OPTAVIA Coaches exceeded 52,000 in the Q1, an increase of 61% over last year and up 19% sequentially. Revenue per active earning OPTAVIA Coach hit a new record of $6,004.54 in the first quarter, an increase of 21% over last year and up 9% sequentially. The accelerating growth we're seeing in new coaches and in per coach productivity is a demonstration of the strength and differentiation of our coach based model And the resonance of a new field led coach training approach that is being rolled across all geographies. This new approach better leverages social media and communication technology platforms to engage prospective clients, Support new clients and support new coaches.
Moving forward, our continued investment in digital tools and in our new fully integrated mobile apps For use in the field, we'll enable deeper connections between coaches and clients, while also creating efficiencies that allow OPTAVIA Coaches to support a greater number Clients, we remain confident in our ability to drive long term sustainable growth and deliver on our mission to offer the world lifelong transformation, Demand for health and wellness products and services is clearly strong right now, With a particularly high addressable market for approaches that leverage healthy habit building over dieting or other weight loss approaches. Our unique coach based model continues to provide a clinically proven solution, especially to those for whom diets Have failed and for those who desire a holistic approach to optimizing their overall health and well-being. Our client centric approach Frees up coaches to focus on finding and supporting new clients and creates a more relentless focus on helping people achieve their health goals rather than recruiting salespeople or managing cash and inventory. Operationally, we continue to focus on enhancing the scalability of our as well as optimizing its performance. We are executing on a series of initiatives to support our repeatable business rhythm as an engine for consistent long term growth.
From a supply chain perspective, we continue to optimize and expand capacity By increasing our network of co manufacturers, we anticipate our work in this space will enable us to manage demand throughout 2021 and expect it to give us $2,000,000,000 of manufacturing capacity with most of this increased capacity in place in the second quarter. Similarly, we're scaling our distribution network through expansion within our current facilities and building on existing 3PL relationships and Partnerships to establish a distribution capacity that tracks with our manufacturing capacity with most of the distribution capacity increase in place by the end of the third quarter. Technology is another key area of focus as we build on our investment over the past 5 years and drive innovation Our innovation lab in Utah has been instrumental in advancing our use of technology to drive growth and efficiency using agile processes to quickly build, Modify and improve digital products that make a real difference. By giving coaches more tools to help manage and engage with clients As well as giving clients easy to access mill planning tools as they embark on the optimal weight 5 in-one plan, We are helping create better outcomes for all.
During the Q1, we offered limited promotions And did not repeat the incremental promotions and programs from last year. Similarly, in the second quarter, we do not plan to offer any of the incremental promotions we executed last year. This decision Promotions we executed last year. This decision has been driven by the continued strength of new field led training programs And the resulting high levels of Coach client engagement and new client acquisition. This is yet another demonstration of the clear delineation between OPTAVIA and traditional direct sales or Direct to consumer businesses.
Our business is built on the foundation of empowering coaches to serve clients by teaching them Healthy habits through our Habits of Health System. We are empowering the community focused on health and wellness, Not a distribution centric recruitment network or an advertising or promotion centric online selling model. And that community focuses on healthy transformation of individual clients above all else. Growth is driven by the effectiveness of the approach and that's a testament to the work of OPTAVIA Coaches and the wider OPTAVIA team. One of the key moments for our in person education with our OPTAVIA Coaches is our annual convention.
The in person gathering was canceled in 2020 Due to the global pandemic, but our virtual OPTAVIA Together Live was extremely successful in bringing together the community in a meaningful way. We've decided to move forward with our in person convention in 2021, and we are confident in our ability to manage Health and safety protocols in compliance with CDC guidelines. Tickets went on sale in the second quarter and quickly sold out. And as a result, we anticipate having just over 12,000 attendees at the event, which will take place at the end of July. The speed at which the convention sold out is another clear indicator of the importance of health and wellness to people right now, especially in light of the pandemic.
We recently announced the results of a consumer study designed to understand nutritional priorities and challenges. The study surveyed over 1400 adults in the United States and found that although 84% of people are prioritizing healthy eating It's much more or more important than they did last time. Many are facing challenges in doing so despite recognizing its importance. Nearly 9 out of 10 survey respondents report that nutrition is important to them. However, 56% say it's difficult to eat healthy, especially at home.
In fact, over half of our respondents agree that being at home more often during the pandemic has enabled them to snack more and or eat less healthy foods and report that the top factor preventing them from healthy eating healthy more often It's often their inability to resist cravings. Education also plays a vital role in overcoming difficulty around eating healthy, With nearly half of all U. S. Adults saying that learning how to establish healthy habits and or learning more about healthy nutrition Our business trends continue to show strength, and we have a high degree of confidence The investment highlights for Medifast Remain the same. First, we are targeting a large and growing market.
In the US, weight loss is over a $20,000,000,000 business growing at approximately 6% a year. Over 70% of the U. S. Population is overweight or obese, growing at 2% a year. Moreover, the pandemic has amplified consumers' focus on health and wellness.
The second area, we have a proven solution. Clinical studies clearly demonstrate the efficacy of a coach supported approach For weight loss success, our OPTAVIA Coaches take a holistic view of health and wellness and are supported by proprietary field led training programs and tools that help them optimize outcomes for each individual client. 3rd, we have built a strong platform With a team that is flexible and agile, providing significant capacity for growth, we've been investing in our infrastructure to support $2,000,000,000 plus business. Finally,
we have
a strong financial position and a demonstrated commitment to stockholder value. During the Q1, we announced a more than 25% increase in our quarterly dividend, repurchased shares And ended the period with over $200,000,000 in cash and no interest bearing debt. Before I turn the call over to Jim, I want to share some comments on our corporate social responsibility. Over the past year, urgent social and environmental challenges Have required companies to reimagine their corporate social responsibility strategy and prioritize the impact they will have on future generations. Medifast's commitment to lifelong transformation is not just a result of the work our OPTAVIA Coaches do, but a result of our active support of the communities in which we live and work.
Medifast's philanthropic program, Healthy Habits for All, empowers generations through education and access to healthy habits. In 2021, we will continue to work with our non profit partner, No Credit Kid Hungry, to provide access to healthy nutrition As 1 in 4 children could face hunger this year because of COVID-nineteen pandemic. At the business at our Baltimore business headquarters, We're collaborating with the Living Classroom Foundation to renovate their kitchen to create space where students receive hands on education about healthy nutrition and create critical healthy habits that can last a lifetime. Although we are just in the early stages of the project, Our team is also developing a kid friendly curriculum based on the habits of health. The goal is to provide students with the knowledge, skills Attitudes that will assist them in making informed decisions and creating healthy habits.
We are dedicated to bring what our independent OPTAVIA Coach is due every day to underserved communities. Let me now turn the call over to Jim Maloney, Who will walk you through the financial results.
Jim? Thank you, Dan. Good afternoon, everyone. Revenue in the Q1 of 2021 increased 90.9 percent to 300 $40,700,000 from $178,500,000 in the Q1 of 2020, reflecting Continued growth in the number of active earning OPTAVIA Coaches and higher per coach productivity, which resulted from more clients participating in our optimal wait 5 in-one plan. We achieved another record quarter of active earning OPTAVIA Coaches ending the quarter with 52,500.
This represents 61% growth as compared to 32,600 Coaches in the same period last year and an 18.8 percent increase from the end of the Q4 of 2020. Average revenue per active earning OPTAVIA Coach for the quarter Set a new record at 6,454 compared to 5,333 for the Q1 of 2020. Our previous high was $6,329 in the Q3 of 2020. Increase in the productivity per active earning OPTAVIA Coach for the quarter was driven by an increase in both the number of Clients supported by each coach as well as an increase in average client spend. As Dan discussed, the growth we're seeing in new coaches And in coach productivity is because of the new approach that better leverages field led coach training With social media and communication technology platforms, during the Q1, we offered limited incentives and promotions Consistent with the prior year, OPTAVIA branded products represented 88.9% of our consumable units sold In the Q1, up from 79% in the prior year period.
Consistent with business and brand strategy, The company decided to sunset the Medifast branded product line by the end of the Q2 of 2021. Gross profit for the Q1 of 2021 increased 83.8 percent to $248,500,000 compared to $135,200,000 in the prior year period. Gross profit as a percentage of revenue was 73%, down 280 basis points compared to 75.8% In the Q1 of 2020, the decrease in gross profit as a percentage of revenue was due to the acceleration of demand In OPTAVIA branded products that led to the increase in the company's use of co manufacturers and the increased need to provide expedited shipments of our products to keep the customer experience at acceptable levels in advance of our fulfillment capacity Being fully online, both of these items increased costs. Additionally, gross profit as a percentage of revenue decreased due to Inventory write offs related to the sunset of Medifast branded product line. With the anticipated acceleration In demand of OPTAVIA Branded Products, we expect pressure on gross margin in Q2 2021 As we project the need to continue expedited shipments as we add additional distribution capacity over the next several months.
Additionally, throughout 2021, we plan to continue to use a higher level of co manufacturers In response to anticipated future demand, to protect our overall profit margins in the short term, we will continue to focus and manage our costs, While investing in supply chain and technology for our long term growth objectives. We believe gross profit margin as a Percentage of revenue will improve in the longer term as we enhance our distribution network, reduce freight costs by shortening shipping lanes And gain productivity improvements in our manufacturing processes as we scale our business over the next 12 months. SG and A for the Q1 of 2021 increased $84,000,000 to $195,700,000 compared to $111,700,000 for the Q1 of 2020. The increase was primarily due to Higher OPTAVIA commissions expense, increased salary and benefits related expenses for employees and increased Credit card fees resulting from higher sales. SG and A as a percentage of revenue decreased 510 basis points year over year to 57.5 percent versus 62.6 percent in the Q1 of 2020.
Income from operations increased $29,300,000 to $52,800,000 From $23,500,000 in the prior year period, primarily as a result of increased gross profit, Partially offset by increased SG and A expenses, income from operations as a percentage of revenue was 15.5% For the quarter, an increase of 2 30 basis points from the year ago period. The effective tax rate was 22.3% For the Q1 of 2021 compared to 21.8% in last year's Q1. Net income in the Q1 of 2021 was $41,100,000 or $3.46 Per diluted share based on approximately 11,900,000 shares of common stock outstanding. This compares to net income of $18,500,000 or $1.56 per diluted share based on Approximately 11,800,000 shares of common stock outstanding for the same period in the prior year. Our balance sheet remains very strong with cash, Cash equivalents and investment securities of $212,900,000 as of March 31, 2021, Compared to $174,500,000 at December 31, 2020, the company remains free of interest bearing debt and believes it is well positioned to execute its growth strategy.
On April 13, 2021, We entered into a $125,000,000 line of credit that strengthens our financial position by providing additional liquidity and flexibility. Let me spend some additional time talking about capital allocation. We've consistently taken a balanced approach to allocating capital. 1st, prioritizing internal growth needs such as capital expenditures To expand capacity, in addition, our strong financial performance over the past several years has driven significant free cash Flow growth, and we've typically returned more than 60% of this annually to stockholders through dividends and stock repurchases. We expect to continue with this approach in the future.
However, the mix is likely going to shift to higher levels of stock repurchases simply because The dividend has increased significantly to a point where the yield is very attractive relative to peers or broader market averages. That end, in the Q1, we spent $7,500,000 buying back our stock. There are approximately 2,300,000 shares remaining under our current stock repurchase authorization, So you should expect to see repurchase activity continue in the future. On March 18, our Board of Directors declared a quarterly Cash dividend of $16,900,000 or $1.42 per share, which is payable on May 6 To stockholders of record, on March 30, 2021, we've increased our quarterly dividend rate by over 25% in the past which you should interpret as a sign of confidence in our outlook for the future. Regarding our capital investments to support growth, over the next 24 months, we expect that our capital Now turning to our guidance.
We believe we are in a much better position to provide guidance than we were over the past 4 quarters. So with that, for the full year 2021, we expect revenue in the range of 1 point $4,000,000,000 to $1,475,000,000 and diluted EPS to be in the range of $12.69 to $14.14 Our guidance also assumes a 23% to 24% effective tax rate. As discussed, we are expecting pressure on gross margin in Q2 2021 As we anticipate the need to continue expedited shipments as we add additional distribution capacity over the next several months. Additionally, we will continue to use a higher level of co manufacturers in the coming months due to the accelerated demand in OPTAVIA Branded Products. Finally, as Dan discussed, in Q3 this year, we are planning for a return of an in person convention.
The convention costs will be recorded in Q3 2021. In closing, 1st quarter results were Strong and we remain confident in our business model and are well positioned to capitalize on the opportunities that lie ahead. With that, let me turn the call over for questions. Operator?
We will now begin the question and answer session. Our first question comes from Doug Lane with Lane Research. Please go
ahead. Yes. Hi. Good afternoon, everybody. Dan, I have to say the return to growth here happened a lot quicker than Certainly, I was anticipating.
But the question is, I haven't seen this kind of growth Before the second half of twenty eighteen, it's really almost hyper growth in my mind. And there were some issues following that period of hyper growth with your infrastructure that I know you've managed through and you've talked about added capacity, you've talked about expanded distribution, but What can you how can you assure us that the growth just isn't too fast here and that you've got the infrastructure and the management wherewithal To manage through it at these kind of rates.
Yes, Doug, thanks for the question. I think if you go back 2 years to 2018, we were in the midst of a lot of investments, which we have continued to make a priority, Both on the technology side and for the last several years also on the supply chain side. So, we're in a good position to have systems that scale with our growth In every aspect of our business. So our technology scales, space in the cloud, it's easily expandable. We have a significant network of co manufacturers and of 3PL Partnerships.
We have partners who help us with our client support and services And we've brought on a significant amount of talent to help us manage as we move forward. So We believe that we have our operations and our operational plan and infrastructure in place and ready to deliver not Just for 2021, but well beyond 2021.
Okay, fair enough. And you certainly have seen those changes, I have to say. I know you didn't talk about international much and Given the rapid growth in the U. S, it's obviously still and probably going to be for a while a small part of your business, but it's important I think Longer term, so can you just give us an update on Hong Kong and Singapore? And is there any thought of expanding beyond those markets in the foreseeable future?
Sure. I mean, as you know and we've said this in the past, we don't break out the numbers by market. So those numbers We reported include Hong Kong and Singapore. You're right, they remain less than 10% of our overall revenue base, which we Stated as our threshold for when we'll start reporting those, but the Asia Pacific markets, meaning those Hong Kong and Singapore have continued to develop and grow at rates that we think is consistent with what We should expect going forward and as we continue to refine and add all the capability that we'll continue to focus on, We're building an expandable model that will allow us to go into all areas of the world ultimately That have the same health challenges that we're talking about. If you remember, Doug, we opened up Distribution center in Hong Kong to provide better service, and we did that last year, as well as opening up call centers in Colombia And in the Philippines.
So those are two great examples of infrastructure that we're building, not just to support the U. S. Growth, To your earlier question, but also to support the long term growth abroad.
Okay, great. That's good color. Thanks, Dan.
Thank you, Doug.
Our next question comes from Linda Bolton Weiser with D. A. Davidson. Please go ahead.
Hi. So congratulations on such strong growth. So I guess I was curious if you could Quantify some of the impacts on gross margin in the quarter, at least the inventory write off, could you quantify that and maybe the expedited shipping item?
Sure. This is Jim. So the Medifast Branded products write off was approximately 70 basis points in the quarter and the expedited shipments It was about 30 basis points in the quarter. There was So the premium shipments were about $1,000,000 and the write off It was
approximately $2,500,000
Okay, great. Thank you. And then your coach growth is spectacular and you talked about Some of the reasons that is and productivity is really rising again too. Can you talk about how you think about productivity? I know you always say kind of when you're modeling it, just assume it stays flat going forward, but it might be actually taking another spurt of growth.
Is there any natural ceiling to productivity per Coach? Or how do you think about that really long term in terms of the maximum possibility of productivity?
Yes, this is Dan, Linda. Thanks for asking the question. I think the we look at The things that we do that we kind of would characterize as innovative or innovation in the support of our coaches As things that have create upward pressure or upward lift to productivity. So In the case of this last several quarters, what you can see is A training protocol or program that's being initiated across all geographies That leverages technology in some more efficient ways. So think about that as Increasing the number of clients that can be attracted to OPTAVIA By a single coach, largely leveraging communication tools and social media platforms And as well as
a training Approach
that allows each coach to train more effectively and more efficiently new coaches and that's using Mainly large communication technologies like a Zoom platform And applying a more efficient way of bringing in and training larger number of new coaches. So Those are the 2 kind of accelerators that you're seeing in the current quarter and in the last, say, the last two quarters prior to. In terms of the future, in this quarter, we just launched our first two apps. I've been talking about this for Quite a while, we launched an app for clients, which primarily gives them the ability to access Tools to help them with their healthy eating. So, this is a recipe database and ways to help them Deliver on that lean and green meal is so fundamental to learning the habit of healthy eating.
So we believe that's going to help coaches support more clients. And then equally important is What we're calling our OPTAVIA Connect app, which also launched in the Q2 and that gives access To metrics and some additional functionality to allow Coaches to support more clients by making their time more efficient. So those are some kind of future looking Kind of upward supporting productivity tools that we have just launched. So Again, the rest of our answer is kind of the same. We don't try to project forward.
This is innovation and investment for us And then we watch very closely, at what's working and how to improve it. And as we have done that over the last 5 years, we've seen Productivity pretty consistently, year over year increase and to your point, we've now Achieved a new high point and in essence, we're also launching Technologies that have not yet been reflected in the post productivity number.
Okay. And then Sort of as we're kind of progressing through the different phases of the pandemic here, I know that There's been some belief out there that direct sellers have benefited from people staying at home and having more time to Spend on things like coaching other people, but yet you've said that it's really some of your company specific drivers. And I guess seeing this high growth In a point when the pandemic is when we're starting to reopen kind of proves that a little. Do you have any update in terms of your belief about what's going on relative The pandemic in terms of how sustainable this strong coach growth is even when we get more reopened?
Yes. I mean, you've been following us since we have implemented this coach centric model and started refocusing the entire company's efforts Around building and supporting coaches. So as you know, our growth started well in advance of the pandemic. I mean, we grew 66 percent in 2018, 42% in 2019 and then the pandemic year or 31%. Now we're starting off this New Year With significant growth, we believe that there hasn't been A lot of benefit to us from the pandemic.
But what we do see is that the addressable market that we focus on It's very significant. It's a $20,000,000,000 market and is reflective Of the challenges that we've been focusing on for the last 5 years, which is that over 2 thirds Americans are either overweight or obese. Most of those have tried dieting and have failed doing it. And most of those are interested still in having support in creating a health transformation. And what we're really seeing is that our coach centric model is resonating against that very large population.
And we've done the research to recognize that that same dynamic goes well beyond our country. So we believe we have many years of opportunity by focusing on that addressable and growing market.
Thanks. And then, I don't know if you've heard or seen, but Beachbody will be coming public Through a merger with a SPAC here in a couple of months or so. And they're planning on really investing pretty heavily to drive growth and Having actually negative EBITDA in 2021, just so do you feel that as a direct seller of kind of wellness and I know it's a different kind of product and everything, but do you think that could be a threat to you as they really ramp up and try to go for kind of a land grab of market share?
Yes, I'm not in a great position to comment on other companies. What I can say is that our approach in terms of how we use Coaches to be at the center of our model, supported by our products and supported by our community It's very unique and I haven't seen anyone else who is doing that or Who's able to do that? Although I have to say there are plenty of companies out there who are trying to focus on the health and wellness space. So We'll continue to do what we do best and continue our investment in our operational infrastructure And we believe that we are highly differentiated even among the direct selling Community or the direct to consumer community in terms of how our coaches work with clients And the fact that our coaches are for the most part previously Clients and we're very so we're very client centric or focused company that uses coaches to service those clients. So I think there's a lot of differentiation between us and other companies who are out there trying to focus In the same area, so we feel confident in our future.
Great. And then last one for me. Jim, do you have a operating cash flow number and CapEx
Sure. So, yes, the operating Cash flow is, so net cash flow provided by operating activities is $65,300,000 and CapEx spend was $4,600,000 in the quarter.
And do you have a projection for CapEx for the year since you said you were going to spend a little bit more?
Yes. At this point, we're We're not going to be providing guidance on that other than saying it's going to be higher as we invest in our Fulfillment capabilities and our technology this year. So it will be higher, but we weren't going to be providing guidance at this point in time.
Okay. Thank you very much.
Thanks, Linda. Thanks.
Our next question comes from Sebastian Barbero with Jefferies. Please go ahead.
Hi, team. Thanks for taking my question and congrats on the quarter. Dan, my first question, I was wondering if you could comment on the general market dynamics and consumers' propensity to lose weight. Obviously, your guide implies ongoing momentum In coming quarters, but is it your sense the dieting season this year is extending beyond historical standards Or is it manifest that is meaningfully outperforming the industry?
Yes. Thanks, Sebastian, for that question. What we believe is We're very focused on being a solution for people who aren't looking for diets or another diet, But are looking for health and wellness. And I think what we see is that Along with January being the traditional diet season, it's also the time when People start setting goals, and many of those are health and wellness goals. So I'd say that, we're we believe there is a move away From kind of traditional dieting, which is why it's harder and harder to kind of impact by taking that approach.
But there's a move towards health and wellness solutions. And so further, we believe that our approach 2 offering that health and wellness by teaching healthy habits, the first one being healthy eating, which results in weight loss, Is alive and very healthy and in terms of the number of people, if you will, who are looking for that solution. And so we believe that we stand out in terms of our ability to Deliver effectively on that need. So we'll never do well With people who are looking for a diet because that's our program goes beyond Weight loss and it's not about just reducing your eating, it's about learning a new habit. We think that's we think we're adequately differentiated, which again, and I think we've talked about this in the past, which is why our Year from a revenue standpoint doesn't have Q1 typically as the biggest.
Well, Q1 is For us, since we've adopted this model and focused on coach centric approach, Q1 is not the biggest Quarter of the year, our Q4 is bigger than our Q1. So this just happens to be when we kick off the year. And so a strong Q1 Has traditionally translated into a strong year for us, which is, I think, reflected in the guidance that Jim kind of called out earlier.
Got it. Can you talk Jim, can you talk to growth trends to A and Q2? I think in the past 2 to 3 earnings calls, You mentioned the performance of the 1st month of the quarter.
I'm sorry, could you repeat that? You wrote down the promo.
Yes. Sorry, I was wondering if you could comment to Growth trends to date in Q2?
Yes. I mean, The growth trends in the What I'll call the month of April, we're included in the annual guidance. We're basically when we think it's very important like sort of like what we did with the In person convention that we're calling out when we see a large expenditure Or something that we think that helps you model, we'll call those out, but we're basically going to He's staying with full year guidance. What I would say is the full year guidance reflects Our confidence in the future And the other thing to take a look at is what we did recently with the dividend And that should provide you some confidence also.
Okay. And then you mentioned you recently Launch your coach and client facing apps. Should we think that there is an opportunity to monetize these?
Yes, that's something that we've asked ourselves and thought about. It would require us To make some changes on our side, but the reality is, we think that the opportunity It is much more important in terms of getting offering this as Tools for clients and coaches and to stay focused on what we do best from a revenue standpoint, which is Longer tied to the food support that we sell. So yes, we considered it. We have decided at this point that we won't do it, but again largely because we want to have these apps available to as many Coaches and clients as possible. And we feel like we will benefit in the long run by having that maximizing our penetration by not
Got it. And then last one from me. Your growth Comfortably outpacing your long term target. I was wondering if you could provide Some color as to when you could expect this delay in shipping to come down and then for your products
Yes. I mean, that's part of the reason I gave a little bit of additional color on, I think you actually asked the question last time Whether the relief in the supply chain would be a straight line or whether it would come earlier. And In my comments earlier, the manufacturing capacity for $2,000,000,000 Will be achieved in the next 2 months, and the fulfillment capacity $42,000,000,000 will follow shortly after that. So we've had Both co manufacturing and additional fulfillment support coming online as recently as this week. And so we're seeing that provide greater capacity, but within So we feel confident that we're heading in the right direction, but we're not kind of complete yet as you can as you're pointing out.
We still have Some longer shippings than are typical for us, but we're doing all the right things to Make sure that that's not a long term issue and that it's just a short term headwind for us.
Thank you and congrats again.
Thank you.
This concludes our question and answer session. I would like turn the conference back over to Dan Shard, CEO for any closing remarks.
Well, I'd like to conclude by thanking everyone On the call for joining us, as you can see, we have a lot of enthusiasm and belief As we look forward to the rest of 2021, special thanks to each of our investors for their confidence In both our model and our future and also a big thanks to our OPTAVIA Coaches who now number above 50,000 Across our 3 geographies and that's I don't think lost on any of them or on you that that's been a goal of ours For the last two and a half years to achieve that 50,000 mark. So thank you and look forward to Reporting our next quarter in a few months here. Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.