Mar 12, 2015
Executives
Michael C. MacDonald - Executive Chairman & Chief Executive Officer Timothy G.
Robinson - Chief Financial Officer & Head-Investor Relations Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
Analysts
Frank A. Camma - Sidoti & Co.
LLC
Operator
Good afternoon and welcome to Medifast 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 p.m. 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 as of the date of today's call.
And with that, I'd like to turn the call over to Medifast's Chairman and CEO, Michael MacDonald.
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
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.
So 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 on a rapid expansion phase, and we're 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'll recall, our share price was trading as low as $13 per share.
Suffice it to say, when I joined the company, I knew things needed to change if we're going to deliver long-term profitability. With the help of our board and key members of management, we've put a long-term strategy in place against which we'd 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 Center growth initiatives, while contributing to revenue growth was a significant risk to our new goals. As such, we unified our internal infrastructure and 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 is 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.
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.
Ted, will provide more details on share repurchases in 2014, in a few minutes. Looking back, I believe many of our strategies worked 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'll able to recognize what work best for our business and where we need an improvement.
Most notably we have learnt 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 learnt and have taken the appropriate steps so that Take Shape For Life is laser focused on driving 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 channels. These talented individuals bring extensive experience in their respective fields and have been charged with making the necessary adjustments to operate their business models with more independence than previous strategies allowed.
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.
And while we recognize that there is still work to be done to improve our business over time, we're committed to continuing the 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 channels. I'll cover these in a few moments.
Throughout 2014, I'm pleased however, that we're able to make timely adjustments to our expense base to ensure we continue 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 health 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 join the BeSlim Club 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 at the beginning of 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 to 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 remain 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 people in 2013. We are more efficient and sophisticated in our manufacturing and business operation 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 recognize 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 to 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 a positive impact.
One of 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 system, 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're 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'll work on enhancing our training curriculum and the delivery mechanism to make sure we offer the right training at the right time during their health coach journey. We're committed to working with all coaches to provide tools that'll help them grow into strong business leaders.
Our second focus area is optimizing Medifast Direct response. An important focus in 2015 is on 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 technology. These elements all contribute to a pleasant and streamlined buying experience.
We have 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 tell 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 email marketing and direct mail also playing prominent roles.
We are closely monitoring our efficiency in optimizing our buys on a weekly basis according to the results from our attribution models. So while we spent significantly less on Med Direct marketing in 2014, we anticipate 2015 being the year where we'll begin to increase our spending in line with the efficiency measurements.
Likewise, we have worked to bring more consistency 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 order shipment program.
As our best offer, this program provides a strong acquisition vehicle, four weeks for the price of three weeks, as well as retention benefits will 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'll begin 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'll continue to test and measure e-commerce improvements, website design changes, mobile experience enhancements and the customer journey flow via email 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 we'll continue to effectively commercialize these products in 2015. Our product marketing and 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 our overall success. Our continued focus on product innovation has long been differentiated for Medifast.
Today, we'll 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 great opportunity, specifically in Take Shape For Life, to participate and take market share in this space.
Lastly, we will leverage 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 5 & 1 Plan, we work to tailor our offerings to meet customer needs.
We've recently completed a study that shows how our plans can be achieved – 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 clinical heritage that Medifast has offered since 1980s.
Let me underscore, 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 the 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've employed stock buybacks as effective use of cash, and we've moved our model to a 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'll 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 would like to turn the call over to our CFO, Tim Robinson, who will discuss 2014 results in more detail and our outlook for 2015.
Timothy G. Robinson - Chief Financial Officer & Head-Investor Relations
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 revenue decreased 11%, $62.3 million from net revenue of $70.3 million in the fourth quarter of the prior. 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. Now, 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 was based on the number of coaches who earned 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. Now, 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 reevaluate this metric for future reportings.
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 revenue 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 corporate-owned 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 was 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 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 was primarily driven by a decrease in Take Shape For Life event success, partially offset by 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 of 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 a $700,000 in extraordinary legal and 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 benefit realized in 2013 related to prior years and the fourth quarter of 2014 impact of an inability to utilize certain tax reductions 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 was $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. The franchise Medifast Weight Control Center 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 continued operations for the fiscal year 2014 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 fiscal 2014 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 $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 was primarily due to the tax benefits realized in 2013 related to prior years.
Our balance sheet remained strong with stockholders equity of $8.5 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 in sales at Medifast corporate Weight Control Centers, the company reevaluated 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. Returning 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%. Our both quarterly and fiscal year guidance exclude 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.
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
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've 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've 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?
Operator
Thank you. Our first question comes from Frank Camma at Sidoti.
Frank A. Camma - Sidoti & Co. LLC
Good afternoon, guys.
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
Good afternoon, Frank.
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
How are you?
Timothy G. Robinson - Chief Financial Officer & Head-Investor Relations
Hi, Frank.
Frank A. Camma - Sidoti & Co. LLC
Good, good. Hey, a couple of 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. But the environment for direct selling in the U.S.
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 head count or the health coach count and two, the actual productivity?
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
Sure. This is Meg.
Frank A. Camma - Sidoti & Co. LLC
Okay. Hi, Meg.
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
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 want 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 the, 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 that are 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, this year we have Each One, Reach One, it just came out. And when you set 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.
So we're actually getting activity out of our health coaches. Not just signing up health coaches, but getting truly active health coaches to join.
And that's been, as the script mentioned, we have the highest sponsoring numbers since mid-2013.
Frank A. Camma - Sidoti & Co. LLC
Great. And that takes a longer period of time to gel, right.
Am I correct about that, as you...?
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
Yes. But I can tell you that just coming off of 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 frontline volume into really building depth are actually feeling a turning point in their income right now.
Frank A. Camma - Sidoti & Co. LLC
Okay.
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
So 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.
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
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.
So 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, and we don't have any serious turnover problems.
Frank A. Camma - Sidoti & Co. LLC
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?
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
Yeah. We're up there – I mean, our overall payout for our network is up there at the top.
So we would be very similar to USANA or Nu Skin or any of the large multilevel firms.
Margaret E. MacDonald-Sheetz - President, Chief Operating Officer & Director
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.
Frank A. Camma - Sidoti & Co. LLC
Okay. Great.
And the only other question I had is just flipping over to the franchise model for a second. Do you expect to franchise more units this year or would you be – would it be a slow growth to that?
I'm just...
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
Frank, our focus right now is really making sure that we're doing a good job supporting our current franchisees. So 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'll probably do that, but 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.
Frank A. Camma - Sidoti & Co. LLC
Sure, that makes sense. Thank you.
Operator
Seeing no further questions. I'd like to turn the conference back over to management for closing remarks.
Michael C. MacDonald - Executive Chairman & Chief Executive Officer
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.
Operator
The conference is now concluded. Thank you for attending today's presentation.
You may now disconnect.